CNH construction profits down –71.2%

Operating profits on CNH's construction equipment sales fell -71.2% in 2008 to US$ 116 million, compared to US$ 412 million in 2007. Sales were down -11.1% to US$ 4.46 billion, from US$ 5.02 billion in 2007. This reduced the operating margin from 8.2% in 2007 to just 2.6%.

Commenting on the final quarter of the year, CNH president and CEO Harold Boyanovsky said, "Sales of construction equipment were lower in than fourth quarter 2007 as global markets declined precipitously, leading us to substantially reduce production."

CNH sells construction equipment under both the Case and New Holland Construction brands.

2009 outlook

The results were accompanied by a weak outlook for 2009. A company statement said, "We expect the weakness in global construction equipment industry sales to continue into 2009, with industry retail in its sales down a further -15% to -20%, compared with full year 2008. We anticipate that light equipment markets where CNH has a stronger presence will decline by more than heavy equipment markets."

It went on to say that government stimulus packages around the world could start to have a positive impact in late 2009 and early 2010, but that conditions would remain difficult in the early part of this year.

"For the first quarter of 2009, CNH expects global construction equipment industry retail sales to be down approximately -35% to -40% compared with the first quarter of 2008. We expect unit sales of light construction equipment to be down -45%."

CNH is forecasting the biggest declines in Western Europe and Latin America.

But as a company, CNH enjoyed a good 2008. Booming sales of agricultural equipment more than offset the decline in construction machinery, and it saw overall revenues rise +16% to US$ 17.4 billion. Although it took some restructuring charges during the course of the year, its diluted earnings per share were up +47% to US$ 2.36.