CNH Global's CEO Discusses Q1 2012 Results - Earnings Call Transcript

CNH Global N.V. (CNH)

Q1 2012 Earnings Call

April 25, 2012 08:00 a.m. ET

Executives

Manfred Markevitch – Head of Investor Relations

Richard J. Tobin – President and Chief Executive Officer

Camillo Rossotto – Chief Financial Officer

Andrea Paulis – Treasurer

Analysts

Henry Kirn – UBS

Michael Cox – Piper Jaffray

Ann Duignan – JPMorgan

Andrew Obin – Bank of America

Monica Bosio – Banca IMI

Martino De Ambroggi – Equita SIM SpA

Larry De Maria – William Blair & Company

Ashish Gupta – CLSA

Presentation

Operator

Good morning ladies and gentlemen and welcome to today’s CNH Global 2012 Conference Call. For your information today’s conference is being recorded.

At this time, I would like to turn the call over to Mr. Manfred Markevitch, Head of CNH Investor Relations. Please go ahead.

Manfred Markevitch

Thank you, Arnica. Good morning and good afternoon everyone. We would like to welcome you to the CNH 2012 first quarter conference call. Let me make a brief introduction. I would like to remind everybody, you can refer to page three of our presentation, which was distributed earlier today and posted on the Internet regarding certain forward-looking statements. Also all information that will be used in the conference call today is available on our website at www.cnh.com.

Today, we will have the presentation followed by a short Q&A session. We are pleased to have our President and CEO, Rich Tobin; our CFO, Camillo Rossotto; and our Treasurer, Andrea Paulis with us on the call today. We would like to begin with a brief presentation and with that I will hand over the call to Rich Tobin.

Richard Tobin

Thank you, Manfred. Before Camillo goes through the bulk of the explanations [ph] on the financials I’ll make some opening comments. Clearly it’s been a strong quarter by CNH, so commercial industrial execution was satisfactory, product availability during the quarter was good which you’ll see in some of the slides on inventory both dealer and company inventory. So we were able to supply our customers with product that they’ve needed. You all know that we’ve had at least in Europe and North America a little bit of an early start to the season, so that’s driven some volume demand earlier than historically that we’ve ever seen which is generally in the Q2, Q3 period. So overall we think that we are adequately positioned to meet demand in Q2. We’ve got some information in terms of where we stand on backlogs and the like. So, overall, a good start to the year operationally and we’ll go from there.

I know that many of you are going to ask questions about [inaudible] or talking about guidance going forward as you can see from the press release and the presentation. We are reaffirming guidance that we’ve given on January 27th. We’ll revisit our guidance as we discussed in January, in July after the second quarter principally because historically that’s the way we do it, but in principle we’d like to get an idea of what the impact of the heavier demand in Q1, what that means in the second half of the year. We still have as you all know a bit of a difficult economic environment in Europe and we want to see how that plays out and we have a clear understanding as our backlogs proceed over the year there.

I know many of you are going ask the question about upgrading guidance, we’re not going do so on today’s call but we’re more than willing to take on the questions of what we see in the individual markets.

And finally, in this – a lot of the speculation about some certain announces made about our major shareholder dealing with the CNH listed position, I mean that’s really a question that we would defer to our Industrial Call which is scheduled later today, it’s not the matter for CNH to address that particular subject.

Overall, quite pleased with the performance of the quarter, I think that both commercial operations in terms of volume and price realization have done as expected and industrially the performance has been quite good as you can see by the amount of output and the beneficiary of the industrial absorption that we realized during the quarter.

With that, I’ll hand it over to Camillo and he’ll take us through the bulk of the financial presentation.

Camillo Rossotto

Thanks Rich, good morning everybody. Starting on slide four, as you’ve seen from our earlier this morning, revenues were up 22% during the quarter, $4.6 billion, $3.6 billion of Ag business and $1 billion of construction equipment. The equipment operation operating profit is up $160 million to $406 million in the quarter, that’s a 65% increase and the margin is now at 8.8%, 2.3 percentage points above same quarter last year. The Ag business has achieved double digit profitability in the quarter at 10.3% and we recorded 19% incremental margin versus last year.

The equipment operation net cash of $2.2 billion is down $400 million from where it was at year end, and that’s basically driven by seasonal working capital changes that we will comment on when we get to that part of the presentation.

Net income $269 million, that’s $1.11 per share diluted before restructuring that compared to $0.63 and $0.57 respectively in the same quarter for over last year.

Slide five, I think the only highlights here which I would like to underline is the favorable performance of not only the equipment operation but also financial services where net income was up 35% versus Q1 of the last year, about $19 million on the back of better cost of funding and portfolio performance.

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