CNH Industrial Capital’s retail originations rose in the second quarter due to strong consumer demand, even as base interest rates remained elevated.
CNH Industrial Capital reported retail originations of $2.8 billion in Q2, up 13.5% year over year, according to the company’s earnings release. The financial services arm of equipment manufacturer CNH Industrial originates loans for CNH’s CASE Construction Equipment and New Holland Construction products as well as the company’s CASE IH, New Holland and Steyr agricultural products.
“We had interest rates increasing all over the world,” Oddone Incisa, chief financial officer and president of financial services at CNH Industrial, said during today’s earnings call. “We tend to match our funding with our receivables, so we are increasing the price and the cost for customers of our financing, but we’re probably not doing it at full pace.”
CNH Industrial Capital’s managed portfolio increased to $26 billion in Q2, up 23.2% YoY, according to the earnings release. The company’s portfolio mix was 59% retail transactions, 36% wholesale transactions and 5% operating leases.
“The growth of the portfolio is a mix of nominal growth, because we have higher prices of the equipment, and also some increase in penetration, so we are financing more of the equipment to retail capital customers,” Incisa said. “We also had some growth in the dealer inventories over the last month, so we had volume growth in there as well.”
The 30-plus day delinquency rate landed at 1.8% in Q2, up 40 basis points (bps) quarter over quarter and 30 bps YoY. The rise in delinquencies was a result of a concentration of late payments in Brazil, Incisa said.
Construction sales up 19% YoY
CNH Industrial construction sales in Q2 were $1.1 billion, up 19.4% YoY, while year-to-date construction sales at the end of Q2 were $1.9 billion, up 12.9% YoY, according to the earnings release. The growth of the construction segment is due to strength in the North American and light-duty construction markets, CNH Chief Executive Scott Wine said during the earnings call.
“Construction continues to benefit from strength in the North American market, especially for light equipment,” he said. “We are leaning into the customer synergies we have with our ag distribution network to create incremental construction sales opportunities with our New Holland brand.”
CNH opened a new assembly facility in Italy on June 27 to expand the company’s production capacity for mini excavators and mini loaders, which will soon enter the North American market, Wine said.
North American industry volume was up 9% YoY for light-duty and up 4% YoY for heavy-duty construction equipment in Q2, according to the presentation.
Year-to-date ag sales up 9% YoY
CNH Industrial agricultural sales in Q2 were $4.9 billion, up 3.6% YoY, while year-to-date sales landed at $8.8 billion, up 8.9% YoY, according to the earnings release.
The slower ag sales were the result of two key factors, Wine said: “shaky” Q2 demand in South America, particularly Brazil, and delayed shipments of the company’s new Patriot sprayer.
North American industry volume was up 21% YoY in Q2 for tractors greater than 140 horsepower but down 8% YoY for tractors less than 140 horsepower, according to the presentation. North American industry volume for combines was up 27% YoY.