CNH Industrial N.V. Reports Third Quarter 2024 Results

Third quarter consolidated revenue declined 22% on lower industry demand

Third quarter diluted EPS at $0.24

Results reflect continued execution of cost savings initiatives partially offsetting the market headwinds

Full year 2024 guidance lowered to reflect continued weak end markets and elevated channel inventory levels

Basildon, UK - November 7, 2024 - CNH Industrial N.V. (NYSE: CNH) today reported results for the three months ended September 30, 2024, with net income of $310 million and diluted earnings per share of $0.24 compared with net income of $540 million and diluted earnings per share of $0.40 for the three months ended September 30, 2023(7). Consolidated revenues were $4.65 billion (down 22% compared to Q3 2023) and Net sales of Industrial Activities were $4.00 billion (down 25% compared to Q3 2023). Net cash provided by operating activities was $791 million and Industrial Free Cash Flow absorption was $180 million in Q3 2024.

“With the current challenging market conditions facing farmers across the globe, CNH is implementing decisions to advance our transformation journey. We have focused on making the Company’s operations more efficient and on being more responsive to our customers’ needs. But dealer inventories remain elevated and will require additional efforts to align with retail demand. As we further adjust production levels while making investments in technology and quality-improving processes, we are positioning ourselves for the long term and cementing our leading position in the industry. We look forward to sharing more details of our strategy at our investor day on May 8, 2025.”

Gerrit Marx, Chief Executive Officer

2024 Third Quarter Results

(all amounts $ million, comparison vs Q3 2023 - unless otherwise stated)

Please note that in this and in the following tables and commentary, prior periods have been revised to reflect an immaterial correction to the financial statements. See note 7 for further details and a reconciliation to previously reported amounts.

The decline in Net sales of Industrial Activities is mainly due to lower shipments on decreased industry demand and reduced dealer inventory requirements.

Adjusted net income was $304 million with adjusted diluted earnings per share of $0.24. In comparison, in Q3 2023, adjusted net income was $540 million with adjusted diluted earnings per share of $0.40. The decrease in adjusted net income is primarily due to the lower shipment volumes in Agriculture and Construction.

Income tax expense was $75 million ($171 million in Q3 2023), and the effective tax rate (ETR) was 20.8% (25.8% in Q3 2023) with an adjusted ETR(3) of 20.7% for the third quarter (25.7% in Q3 2023). The Company forecasts full year 2024 adjusted ETR to be in the range of 22-24%(6).

Cash flow provided by operating activities in the quarter was $791 million ($232 million provided in Q3 2023). Free cash flow of Industrial Activities was an outflow of $180 million, consistent with the seasonality of working capital in the third quarter.

In North America, industry volume was down 18% year-over-year in the third quarter for tractors under 140 HP and was down 17% for tractors over 140 HP; combines were down 29%. In Europe, Middle East and Africa (EMEA), tractor and combine demand was down 20% and 50%, respectively. South America tractor and combine demand was down 12% and 32%, respectively, continuing the negative trend of previous quarters. Asia Pacific tractor demand was up 1%, while combine demand was down 33%.

Agriculture net sales decreased for the quarter by 24% to $3.31 billion, primarily due to lower shipment volumes on decreased industry demand, dealer inventory unit requirements across all regions and unfavorable net price realization due to enhanced retail actions.

Adjusted EBIT decreased to $336 million ($642 million in Q3 2023) driven by the lower industry volumes, partially offset by improved purchasing and manufacturing costs, and a continued reduction in SG&A expenses. R&D investments accounted for 6.0% of sales (5.5% in Q3 2023). Adjusted EBIT margin was 10.2% (14.6% in Q3 2023). The comparative prior quarter results have been revised to reflect an immaterial correction of $30 million for the accounting treatment related to highly inflationary accounting for our unconsolidated affiliate in Türkiye, TürkTraktör ve Ziraat Makineleri A.S.

Global industry volume for construction equipment increased 1% year-over-year in the third quarter for Heavy construction equipment; Light construction equipment was down 9%. Aggregated demand decreased 16% in EMEA and 7% in North America, but increased 11% in South America and 3% in Asia Pacific.

Construction net sales decreased for the quarter by 28% to $687 million, due to lower volumes driven mainly by a decrease in market demand across all regions.

Adjusted EBIT decreased to $40 million ($60 million in Q3 2023) as a result of lower volumes and unfavorable net price realization, partially offset by improved product costs, better plant efficiencies and lower SG&A expenses. Adjusted EBIT margin was 5.8% (6.3% in Q3 2023).

Revenues of Financial Services increased 1% due to favorable volumes in all regions except EMEA and higher yields in North America; partially offset by decreased yields in South America due to product mix, and lower used equipment sales due to decreased operating lease maturities.

Net income was $78 million in the third quarter of 2024, a decrease of $8 million compared to the same quarter of 2023, primarily due to increased risk costs driven by higher delinquencies in South America, partially offset by higher volumes and interest margin improvements in most regions.

The managed portfolio (including unconsolidated joint ventures) was $29.0 billion as of September 30, 2024 (of which retail was 67% and wholesale was 33%), up $2.2 billion compared to September 30, 2023 (up $2.2 billion on a constant currency basis).

At September 30, 2024, the receivables balance greater than 30 days past due as a percentage of receivables was down sequentially to 2.2%, however was elevated from prior year (1.6% as of September 30, 2023) due to economic and environmental factors, specifically in South America.

2024 Outlook
The Company’s forecast of continued weak industry retail demand in both the agriculture and construction equipment markets, coupled with elevated dealer inventories is requiring lower production levels. CNH will further reduce production output to manage channel inventory while continuing its efforts to improve through-cycle margins with its successful cost reduction programs. Due to the lower productions levels, the Company is revising its segment net sales and margins and its EPS results. In addition, because of the adverse net working capital impact from lowering production levels, the Company is lowering its Industrial Free Cash Flow forecast. The updated Agriculture adjusted EBIT margin and adjusted diluted EPS outlook also reflect the revision for highly inflationary accounting.

CNH is updating its 2024 outlook as follows:

• Agriculture segment net sales(5) down between 22% and 23% year-over-year including currency translation effects (from down 15% to 20% previously)
• Agriculture segment adjusted EBIT margin between 10.5% and 11.5% (from between 13.0% and 14.0% previously); around 70 bps of the change relates to the accounting revision
• Construction segment net sales(5) down between 21% and 22% year-over-year including currency translation effects (from down 15% to 20% previously)
• Construction segment adjusted EBIT margin between 5.0% and 6.0% (unchanged)
• Free Cash Flow of Industrial Activities(6) an outflow of between $100 million to $300 million, down from the previous guidance of an inflow between $700 to $900 million, mainly due to decreased equipment deliveries and the lower production levels
• Adjusted diluted EPS(6) between $1.05 to $1.15 (from between $1.30 to $1.40 previously); around $0.08 of the change relates to the accounting revision

CNH will host an Investor Day on Thursday, May 8, 2025, to review its strategic initiatives and targets. The event will be held at the New York Stock Exchange and will be webcast on the CNH website. Additional details will be provided closer to the event date.

Results for the Nine Months Ended September 30, 2024

(all amounts $ million, comparison vs YTD Q3 2023 - unless otherwise stated)

Notes
CNH reports quarterly and annual consolidated financial results under U.S. GAAP and annual consolidated financial results under EU-IFRS. The tables and discussion related to the financial results of the Company and its segments shown in this press release are prepared in accordance with U.S. GAAP.

1. c.c. means at constant currency.
2. Comparison vs. December 31, 2023
3. This item is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Information” section of this press release for information regarding non-GAAP financial measures. Refer to the specific table in the “Other Supplemental Financial Information” section of this press release for the reconciliation between the non-GAAP financial measure and the most comparable GAAP financial measure.
4. Certain financial information in this report has been presented by geographic area. Our geographical regions are: (a) North America; (b) Europe, Middle East and Africa (“EMEA”); (c) South America and (d) Asia Pacific. The geographic designations have the following meanings: 
   1. North America: United States, Canada, and Mexico;
   2. Europe, Middle East, and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Türkiye, Uzbekistan, Pakistan, the African continent, and the Middle East;
   3. South America: Central and South America, and the Caribbean Islands; and
   4. Asia Pacific: Continental Asia (including the India subcontinent), Indonesia and Oceania.
5. Net sales reflecting the exchange rate of 1.09 EUR/USD.
6. The Company is unable to provide this reconciliation without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence, the financial impact, and the periods in which the adjustments may be recognized. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
7. In connection with the preparation of our condensed consolidated financial statements for the three months ended September 30, 2024, we have revised prior periods’ results to reflect an immaterial correction for the accounting treatment related to highly inflationary accounting for our unconsolidated affiliate in Türkiye. CNH owns 37.5% of TürkTraktör ve Ziraat Makineleri A.S. (TTRAK.IS) and accounts for its ownership stake under the equity method. The functional currency of Türkiye-based TürkTraktör is the Turkish lira, and the Türkiye economy was deemed highly inflationary in 2022. CNH has determined that its translation criteria from Turkish lira into CNH’s functional currency of U.S. dollars resulted in an overstatement of CNH’s Equity in income of unconsolidated subsidiaries and affiliates by $96 million in 2023 and by $67 million in the first half of 2024. We have revised our GAAP and Non-GAAP results for all prior periods presented herein. See the supplemental financial information section below for a reconciliation of adjustments to prior reported results.

Non-GAAP Financial Information
CNH monitors its operations through the use of several non-GAAP financial measures. CNH’s management believes that these non-GAAP financial measures provide useful and relevant information regarding its operating results and enhance the readers’ ability to assess CNH’s financial performance and financial position. Management uses these non-GAAP measures to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions as they provide additional transparency with respect to our core operations. These non-GAAP financial measures have no standardized meaning under U.S. GAAP and are unlikely to be comparable to other similarly titled measures used by other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with U.S. GAAP.

CNH’s non-GAAP financial measures are defined as follows:

• Adjusted EBIT of Industrial Activities under U.S. GAAP is defined as net income (loss) before the following items: Income taxes, Financial Services’ results, Industrial Activities’ interest expenses, net, foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. In particular, non-recurring items are specifically disclosed items that management considers rare or discrete events that are infrequent in nature and not reflective of on-going operational activities.
• Adjusted EBIT Margin of Industrial Activities: is computed by dividing Adjusted EBIT of Industrial Activities by Net Sales of Industrial Activities.
• Adjusted Net Income (Loss): is defined as net income (loss), less restructuring charges and non-recurring items, after tax.
• Adjusted Diluted EPS: is computed by dividing Adjusted Net Income (loss) attributable to CNH Industrial N.V. by a weighted average number of common shares outstanding during the period that takes into consideration potential common shares outstanding deriving from the CNH share-based payment awards, when inclusion is not anti-dilutive. When we provide guidance for adjusted diluted EPS, we do not provide guidance on an earnings per share basis because the GAAP measure will include potentially significant items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end.
• Adjusted Income Tax (Expense) Benefit: is defined as income taxes less the tax effect of restructuring expenses and non-recurring items, and non-recurring tax charges or benefits.
• Adjusted Effective Tax Rate (Adjusted ETR): is computed by dividing a) adjusted income taxes by b) income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates, less restructuring expenses and non-recurring items.
• Net Cash (Debt) and Net Cash (Debt) of Industrial Activities: Net Cash (Debt) is defined as total debt less intersegment notes receivable, cash and cash equivalents, restricted cash, other current financial assets (primarily current securities, short-term deposits and investments towards high-credit rating counterparties) and derivative hedging debt. CNH provides the reconciliation of Net Cash (Debt) to Total (Debt), which is the most directly comparable measure included in the consolidated balance sheets. Due to different sources of cash flows used for the repayment of the debt between Industrial Activities and Financial Services (by cash from operations for Industrial Activities and by collection of financing receivables for Financial Services), management separately evaluates the cash flow performance of Industrial Activities using Net Cash (Debt) of Industrial Activities.
• Free Cash Flow of Industrial Activities (or Industrial Free Cash Flow): refers to Industrial Activities only, and is computed as consolidated cash flow from operating activities less: cash flow from operating activities of Financial Services; investments of Industrial Activities in assets sold under operating leases, property, plant and equipment and intangible assets; change in derivatives hedging debt of Industrial Activities; as well as other changes and intersegment eliminations.
• Change excl. FX or Constant Currency: CNH discusses the fluctuations in revenues on a constant currency basis by applying the prior year average exchange rates to current year’s revenues expressed in local currency in order to eliminate the impact of foreign exchange rate fluctuations.