Navistar Posts Q3 Revenue Gains as Market Share Rises
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Navistar International Corp. reported lower fiscal third-quarter net income, but revenue rose in response to double-digit gains in market share for trucks and buses.
For the period ended July 31, net income dropped 8% to $156 million, or $1.56 per diluted share, from $170 million, or $1.71, a year earlier.
Revenue climbed 17% to $3.04 billion compared with $2.61 billion the year before.
The Lisle, Ill.-based truck maker said the gain was primarily attributed to a 28% increase in volumes of Class 6 through Class 8 trucks and buses in the United States and Canada — its core markets.
Still, it forecast fewer retail deliveries of heavy trucks next year as a softer market is now at hand.
Clarke
“It is no surprise the U.S. economy, the trucking industry, is moderating. Our industry tends to run in four-year cycles. We have been preparing for this time,” Troy Clarke, Navistar chairman, president and CEO, said Sept. 4 on an earnings conference call.
“During our turnaround, we lowered the break-even point of the company by using lean practices, reducing our cost structure while growing market share and strengthening the balance sheet,” Clarke added.
For the nine months, net income was $119 million, or $1.20, on revenue of $8.47 billion. That compared year-ago earnings of $152 million, or $1.53, on revenue of $6.93 billion.
Navistar International is a holding company whose subsidiaries and affiliates produce International brand commercial trucks, proprietary diesel engines, and IC Bus branded school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services.
The company also said it has cut production by close to 15% at all plants, calling it a “re-balancing” of its lines.
“That’s the level [the lines] are going to enter first quarter at,” said Persio Lisboa, chief operating officer at Navistar Inc., the company’s manufacturing subsidiary.
“We used a lot of overtime days in the past few quarters, and we are removing some of them,” he said, leaving production about where the rates were in November and December of 2018. “We built it up, and now we are taking it back down.”
Lisboa
Navistar’s production backlog is about 165 days, and headwinds from disruptions in the supply chain, higher costs for materials and expedited freight shipments have lessened.
Meanwhile, it forecast industrywide retail deliveries of heavy-duty trucks will decline noticeably next year.
For 2020, Navistar forecast deliveries of Class 8 trucks in the United States and Canada will be between 210,000 and 240,000 units — down from an expected 295,000 to 315,000 units for 2019.
In the quarter, Navistar improved market share by 2.6 percentage points to 18.2% in core markets, as all vehicle segments improved year-over-year. Navistar expects to end the year with a market share between 18.5% and 19%.
Its truck segment recorded a profit of $167 million in the quarter, up $2 million compared with the same year-ago period.
Revenue in the segment jumped 25% to $2.4 billion on higher volumes in the company’s core markets, an increase in both Mexico sales and sales of Classes 4 and 5 trucks manufactured for General Motors, partially offset by the impact of the sale of a majority interest in Navistar Defense.
Clarke said the parts segment’s sales decreased 6% to $571 million, due to the impact of a new revenue standard and lower Blue Diamond Parts sales, offset by higher sales in the company’s North American markets.
Financial Services net revenue increased 14% to $74 million compared with the same 2018 quarter due to higher average portfolio balances in the United States and Mexico.
The Global Operations segment profit was $1 million, down $3 million compared with the year earlier, due to the impact of a shift in product mix. Sales were $90 million, comparable to the same period a year ago.
Other highlights in the quarter included: service agreements (now fully operational) with Love’s Travel Stops and its Speedco unit that added more than 1,000 technicians to Navistar’s service network who can handle an array of work covered by a Navistar-issued new product warranty, its extended warranties and used truck warranties. Also, there were enhancements to Navistar’s retail inventory management system, resulting in 50% lower emergency parts orders, a new parts distribution facility near Memphis, Tenn., and an investment of about $125 million in new and expanded manufacturing facilities at the Huntsville, Ala.-based plant to produce next generation big-bore powertrains developed with its global alliance partner Traton.
