CNH Industrial Annual General Meeting. Addresses from the Chairman Sergio Marchionne and the CEO Richard Tobin

Transcription

1 CNH Industrial Annual General Meeting Addresses from the Chairman Sergio Marchionne and the CEO Richard Tobin Schiphol-Rijk 13 April 2018

2 2 Mr. Marchionne Dear Shareholders, The solid results we attained in 2017 are a tribute to the full engagement of everyone in our organization in executing a strategy aimed at positioning CNH Industrial among the leaders in every industry sector in which we compete. Across our business segments, we are continuing to invest in the technologies that will secure our future; while further solidifying the capital structure of the Group. Our key accomplishments in 2017 included: improving consolidated revenues by 10% and net revenues for Industrial Activities by 11%, increasing trading profit by 15% and reducing net industrial debt by nearly half. These results reflect solid performance across all segments and increased activity levels in the majority of our markets. Over the year, the Group s operating segments, each posted solid year-over-year improvements in net sales. In addition, our brands received numerous industry accolades driven by our continued commitment to research and development. Increased investment in research and development is critical to the execution of our strategy with product innovation keeping us at the forefront of technological change and helping ensure our future growth. In 2017, we further developed CNH Industrial s alternative fuels program, with a primary focus on natural gas and biomethane. In the Agricultural Equipment segment, we unveiled the New Holland methane-powered concept tractor at the Farm Progress Show in the United States last August. This advanced design concept tractor reflects the increasing importance and viability of alternative fuels in farming and our commitment to the creation of energy independent farms. IVECO continued to make strides with the launch of the Stralis NP (Natural Power) 460 in October. Designed to be the most sustainable long-haul truck on the market, the Stralis NP delivers diesel-equivalent CNHI AGM page 2 April 13, 2018

3 3 performance and productivity for all long-haul missions with the ability to achieve close to zero emissions on bio-liquefied Natural Gas (LNG). In November, our powertrain specialist, FPT Industrial, unveiled its Cursor 13 NG engine, the most powerful 100% natural gas engine available on the market today. These milestones are testament to the efficacy of natural gas propulsion as a viable solution for the present and future on a global industrial scale. Precision Solutions & Telematics remain integral to our Agricultural Equipment, Construction Equipment and Commercial Vehicles portfolios, with the next stages of implementation currently underway. Our sustainability efforts were acknowledged once again in CNH Industrial was re-confirmed as Industry Leader in the Dow Jones Sustainability Indices (DJSI) World and Europe, for the seventh consecutive year, and as Capital Goods Industry Group Leader for the second time. In addition, we were further recognized as a World Leader for corporate action on climate change by the NGO CDP s climate change program. From a financial perspective, in 2017 CNH Industrial closed the year with: Net revenues of $28 billion Trading profit of $1,440 million, with trading margin at 5.1%, and Net income of $477 million. On the basis of these results, the Board of Directors has recommended a dividend of 0.14 per common share, corresponding to a total dividend of approximately 190 million (or approximately $234 million). The global market is showing signs of increased demand for our products and services. Moving forward, we will further adapt our commercial strategies to ensure we respond effectively to our customers needs and meet the competition head on. CNHI AGM page 3 April 13, 2018

4 4 We will continue to make the tough calls that a changing market demands, while offering new ideas for the way we work and what we deliver to our customers. As a Group, we can all be proud of what we have achieved to bring us to this point, and we would like to thank you for your support on our journey, one that began two centuries ago and continues to gain momentum. Now I ask Richard Tobin to discuss in more detail the 2016 Report on Operations. Mr. Tobin Thank you Mr. Marchionne. Before we review the business, I would like to point out that the consolidated financial results being discussed with you today were prepared in accordance with IFRS accounting standards and use the US Dollar as the reporting currency. Please note that as required by Dutch law, we have also prepared statutory financial statements of our group parent company, CNH Industrial N.V. CNHI AGM page 4 April 13, 2018

5 5 CNH Industrial s Consolidated Revenues were $27.9 billion for 2017, with Trading Margin at 5.1%. Net revenues increased 8.4% at constant currency primarily due to an improvement in net revenues of Industrial Activities. Net Profit for the year was $477 mn, compared to a net loss of $371 million in 2016, which included a non-tax deductible charge of $551 million resulting from the European Commission settlement. Net Industrial debt at year-end was at $1.0bn down 46% from last year. Total available liquidity at year-end was $9.4bn up $0.6bn from last year. CNHI AGM page 5 April 13, 2018

6 6 Net industrial cash flow generated during the year was $1.4 billion up 85% from the $775 million generated in Change in working capital was positive for $185 million for the year, fundamentally with a strong contribution from a balanced level of inventories reached at the end of the year due to strong Q4 performance, achieving reduced inventory in AG from the last three years. CNHI AGM page 6 April 13, 2018

7 7 Net revenues of Industrial Activities were $26.4 billion in 2017, a 10.7% increase (up 8.8% on a constant currency basis) compared to the prior year, with solid growth in all segments. Trading profit of Industrial Activities was $967 million in 2017, an increase of $191 million or 24.6% compared to 2016, with a trading margin for the year of 3.7%, up 0.4 percentage points ( p.p. ) from the prior year. The increase in trading profit was attributable to Powertrain, Agricultural Equipment and Construction Equipment, partially offset by a decrease for Commercial Vehicles. This slide gives an overview of the Industrial Activities financial results by segment with highlights on the main drivers of the performance. Net revenues for Agricultural Equipment were $11.1 billion in 2017, a 10.0% increase (up 8.0% on a constant currency basis) compared to In LATAM, the increase was mainly due to higher industry volume, market share gains, a favorable mix of higher horsepower products and net price realization. Net revenues increased in APAC mainly driven by favorable volume in Australia, Russia, India, China and South East Asia. In EMEA, net revenues increased due to higher CNHI AGM page 7 April 13, 2018

8 8 industry volume, a favorable product mix and net price realization. In NAFTA, net revenues decreased as a result of de-stocking actions in our dealer network, primarily in the high horsepower tractors and the hay and forage product lines. NAFTA industry volumes were flat overall, with the row crop sector higher, offset by lower livestock sector volumes. Agricultural Equipment trading profit was $621 million in 2017, a 18.7% increase compared to $523 million in 2016, mainly due to the favorable volume and product mix in all regions except NAFTA. One percent net price realization more than offset increases in raw material cost and unfavorable foreign exchange fluctuations. Agricultural Equipment also increased spending in research and development, primarily related to our new precision farming solutions, and in selling, general and administrative costs, primarily associated with the increase in sales activity. Trading margin increased 0.4 p.p. to 5.6%. Construction Equipment, net revenues were $2.6 billion in 2017, a 14.0% increase (up 12.8% on a constant currency basis) compared to 2016, due to higher industry volume in all regions except EMEA, and net price realization, primarily in NAFTA and LATAM. Construction Equipment reported a trading loss of $50 million in 2017 compared to $86 million trading loss in The improvement was due to Higher volume and net price realization, partially offset by increases in raw material cost, unfavorable FX impacts on product components, and increased SG&A. Trading margin was (1.9)% compared to (3.7)% in Commercial Vehicles net revenues were $10.7 billion in 2017, a 9.4% increase compared to 2016 (up 7.4% on a constant currency basis), as a result of higher truck and bus sales in EMEA, higher volume and better product mix in APAC, and recovering truck sales in LATAM, mainly Argentina. Trading profit was at $134 million compared to $214 million in 2016, with a trading margin of 1.3%. Trading profit increased in LATAM and APAC, mainly due to higher volume and favorable pricing. In EMEA, trading profit decreased as favorable volumes were more than offset by unfavorable mix, primarily associated with fleet- CNHI AGM page 8 April 13, 2018

9 9 related channel sales, Euro 6 emission content costs, and the negative impact of the British pound devaluation. Increased spending in research and development on new product programs was more than offset by favorable manufacturing efficiencies. Powertrain net revenues were $4.4 billion in 2017, an increase of 17.8% compared to 2016 (up 15.7% on a constant currency basis). The increase was primarily attributable to higher volumes. Sales to external customers accounted for 48% of total net revenues (47% in 2016). Trading profit was at $355 million compared to $219 million in 2016, with a trading margin of 8.1% (5.9% in 2016). The improvement was due to higher volumes and manufacturing efficiencies. We had another strong year in terms of awards and product related accomplishments. At Agritechnica, our AG machinery brands were awarded Machine of the Year 2018 in the mid-class tractor category, and the IVECO Daily Blue Power won International Van of the Year 2018 title. At the Farm Progress Show we unveiled our New Holland Methane concept tractor. During the year, we announced that the IVECO commercial vehicles manufacturing facility in Madrid, Spain has become the Company s first site to achieve Gold status in the CNHI AGM page 9 April 13, 2018

10 10 World Class Manufacturing program while our Grand Island manufacturing facility in the U.S. and Curitiba manufacturing facility in Brazil, both achieved silver medals and finally our Benson Minnesota plant achieved the Bronze designation. I would like to congratulate all of our employees, these are significant achievements for our Group and re-affirms our commitment to product performance, safety, and quality. Financial Services net income was $455 million, a $121 million increase compared to 2016, primarily attributable to an improvement in income taxes as a result of the write-down of deferred tax liabilities in connection with the enactment of the U.S. Tax Act. Excluding the favorable tax impact, net income was flat compared to The managed portfolio (including unconsolidated joint ventures) of $26.8 billion as of December 31, 2017 increased $2.0 billion compared to December 31, Finally let me remind you that CNH Industrial manages its operations, assesses its performance and makes decision about allocation of resources based on financial results prepared only in accordance with CNHI AGM page 10 April 13, 2018

11 11 U.S. GAAP, and, accordingly, also the full year guidance was prepared under U.S. GAAP, as disclosed in the fourth quarter and full year 2017 Earnings release issued on January 30, 2018 and as provided in the EU Annual Report and it is unchanged since then. In conclusion, let me extend my appreciation to our employees and shareholders for your continued support of and contribution to CNH Industrial. Thank you. CNHI AGM page 11 April 13, 2018