CNH Industrial bets on strong market to counter worst supply chain situation

11:42 am Friday, July 30th, 2021

By Giulio Piovaccari

MILAN (Reuters) -Italian-American vehicle maker CNH Industrial on Friday raised its revenue and free cash flow forecasts for this year, confident an industry cyclical upturn would help it offset a severe impact from supply chain constraints.

“It’s the worst supply chain situation I’ve seen in my career,” Chief Executive Scott Wine told analysts. “I recently equated our tireless efforts to manage this crazy supply chain situation to a game of whack-a-mole.”

The maker of farm machinery, Iveco commercial vehicles, construction equipment and powertrains said it now estimated an impact from raw material cost increases, freight costs and other supply chain bottlenecks worth around $1 billion in 2021.

The CEO however said a “robust environment” contributed to expand CNH’s order books and to an “excellent” performance across all its main businesses in the second quarter of this year and that it was poised for a “noteworthy second half”.

The group now sees its sales from industrial activities to grow by 24%-28% this year versus a previous forecast of between 14%-18%. Free cash flow is seen in excess of $1 billion, from a previous forecast of $0.6 billion-$1.0 billion.

The outlook improvement came as CNH said its adjusted operating earnings (EBIT) of industrial activities stood at $699 million in the second quarter, versus a $58 million loss a year earlier. That compares with a $496 million forecast in an analyst poll compiled by Reuters.

Sales at the group’s industrial activities rose 65% in the April-June period to $8.49 billion, topping a $7.06 billion analyst forecast.

Milan-listed shares in CNH turned positive to rise as much as 1.7% after results were published. By 1515 GMT they were up 0.1%.

CNH, controlled by Exor, the holding company of Italy’s Agnelli family, last month announced a $2.1 billion deal to buy U.S.-based Raven Industries to bolster its agricultural equipment business, as it prepares to spin off its truck, bus and engine operations.

Asked whether he saw interference from potential rival bidders, Wine said he believed CNH was the “right owner” for Raven.

“We think that we’re going to bring this home and quite confident,” he said, adding he saw no impediments to complete the deal – expected to be finalised in the fourth quarter – “in a timely fashion”.

(Reporting by Giulio Piovaccari; Editing by Edmund Blair and Jane Merriman)