4Q, Full-Year 2015 Earnings Show Shift in Global Marketplace Trends for OEMs
Heavy-duty truck and engine makers reported earnings for the fourth quarter and the year that show the North American market starting to ease, Europe on the rise and the rest of the world showing difficulties.
Further, the strong U.S. dollar aided European-based companies Volvo AB and Daimler AG, but hindered U.S.-domiciled Cummins Inc. and Paccar Inc.
• Gothenburg, Sweden-based Volvo, which operates the Volvo and Mack brands in the United States, reported that profits for the truck division — the company’s largest — had quarterly operating income equivalent to $605.4 million on revenue of $6.48 billion. In the same quarter the year before, the truck division lost $72.9 million due to one-time charges to settle a European Union antitrust investigation and losses from a Chinese venture. Revenue was $7.24 billion.
For the year, the truck division earned $2.55 billion, including a gain from the sale of an Indian firm that added $546.4 million. Revenue was $25.37 billion.
That compared with a profit of $818.8 million on revenue of $27.8 billion in 2014.
“Demand [for trucks] improved in Europe but declined from high levels in North America. Brazil weakened somewhat further while markets in Asia showed a mixed picture,” said Martin Lundstedt, Volvo Group CEO since October.
Reacting to lower order levels, Lundstedt said Volvo is trimming North American build rates.
At the U.S. division in Greensboro, North Carolina, Volvo spokesman John Mies confirmed that the company’s Dublin, Virginia, plant is trimming its list of layoffs to 600 employees, down from the 734 level announced in December. Prior to the layoffs, the New River Valley facility employed 2,800 people.
Analyst Jose Asumendi of the J.P. Morgan Securities’ London office wrote that Volvo is cutting North American truck making by 30% this year, even though management estimates sales will drop by 15%. He said this is being done to clear bloated inventories on dealer lots and that the plans should be fully implemented by midyear.
• At Stuttgart, Germany-based Daimler AG, quarterly truck earnings jumped 28% in euros to the equivalent of $691.1 million, and revenue of rose 14% to $11.03 billion.
For the year, global truck profits increased 37% to $2.86 billion. Revenue climbed 16% to $41.74 billion.
The company, as well as Volvo, benefited from foreign exchange rates compared with 2014.
The Daimler truck division is the company’s second-largest behind Mercedes-Benz cars.
Asumendi emphasized Daimler’s capital expenditure budget of about $3 billion a year for this year and 2017. He said this will result in an updated Freightliner Cascadia tractor in North America in 2017.
Freightliner spokesman David Giroux said the company has not announced a new Cascadia for 2017, but he did not deny the report.
• For Paccar, quarterly net income was $347.2 million, or 98 cents a share, on revenue of $4.06 billion. That compared with $394.3 million, or $1.11, on revenue of $4.82 billion in the same quarter in 2014.
The company, based in Bellevue, Washington, earned a record $1.6 billion, or $4.51 a share, on record revenue of $17.94 billion. In 2014, it had net income of $1.36 billion, or $3.82, on revenue of $17.79 billion.
For the year, European truck deliveries by the Netherlands-based DAF Trucks unit jumped 20% to 47,400 vehicles. Yet annual European revenue declined by 6.6% to $4.52 billion because the euro fell significantly relative to the dollar.
U.S. and Canadian truck deliveries fell to 15,900 vehicles for the quarter from 22,200 in the 2014 quarter. For the year, though, they rose to 91,300 units from 84,800.
• Cummins earned $161 million, or 92 cents, on revenue of $4.77 billion. That compared with $444 million, or $2.44, on sales of $5.09 billion in same quarter the year before.
On an annual basis, the Columbus, Indiana-based engine maker’s net income was $1.4 billion, or $7.84, on revenue of $19.11 billion. In 2014, it made $1.65 billion, or $9.02, on sales of $19.22 billion.
Management anticipates sales of midrange engines will be more important in North America this year, compared with 2015.
Cummins’ heavy-duty North American engine sales were about 36% of the market in 2015, but it claimed a majority of the medium-duty market, with more than 75%.
