Navistar Slows Losses Amid Tough Industry Conditions
Truck and engine manufacturer Navistar International Corp. reported lower year-over-year net losses for its fourth quarter and 2016 fiscal year periods ended Oct. 31.
Revenue declined in both periods, but Navistar expects to improve its standing in the market after it completes a pending alliance with German automotive manufacturer Volkswagen AG’s truck and bus unit, the company said.
Navistar, the parent company of the International brand of trucks, posted a net loss of $34 million, or 42 cents per diluted share, in the quarter, compared with a net loss of $50 million, or 61 cents, a year earlier. Revenues slipped to $2.1 billion compared with $2.5 billion a year earlier.
“In the fourth quarter and throughout the full year, we've demonstrated our ability to lower our break-even point and improve our operations,” Navistar CEO Troy Clarke said in a statement.
Tough industry conditions will continue through the first half of 2017, Clarke said. But “we see further opportunities to continue to reduce our break-even point, including leveraging some early cost synergies from the Volkswagen Truck & Bus alliance.”
Customers have reacted positively to the alliance, he said. In September, VW agreed to a $256 million equity investment for 16.6% of Navistar common stock.
The transaction is expected to be completed in the first quarter of calendar year 2017, and shortly after that Navistar intends to announce the companies' first powertrain collaboration, the Lisle, Illinois-based company said in the earnings report.
During the fourth quarter, Navistar launched the International LT Series, its new flagship line of Class 8 over-the-road trucks.
For the quarter, however, its truck segment recorded a loss of $61 million, compared with a year-ago fourth quarter loss of $36 million.
The company attributed the year-over-year change to increased used truck losses and a mix shift to units with lower margins in our core market, partially offset by lower adjustments to pre-existing warranties and the nonrecurrence of restructuring charges recorded in the prior year from a voluntary separation program.
Profits at the parts segment were $162 million, similar to the $163 million in the year-ago fourth quarter, as cost-reduction initiatives and lower inter-company access fees offset the impact of the expected decline of its Blue Diamond Parts joint venture with Ford Motor Co., according to Navistar.
Its financial services segment recorded a quarterly profit of $23 million, compared with $26 million a year earlier. The change was primarily driven by the impact on interest expense of higher interest rates, partially offset by its cost reduction initiatives, the company said.
Meanwhile, for full-year 2016 results, Navistar reported a net loss of $97 million, or $1.19, compared with a net loss of $184 million, or $2.25, for fiscal year 2015. Revenue fell to $8.1 billion, compared with $10.1 billion in the 2015 period.
For the 2016 fiscal year, its truck segment recorded a loss of $189 million, compared with a fiscal year 2015 loss of $141 million. The company said the increase was primarily driven by higher adjustments to pre-existing warranties of $70 million, increased used truck losses, lower Mexico margins due to the strengthening of the U.S. dollar and lower export volumes. These impacts were partially offset by improved purchasing and structural costs.
The parts segment recorded record profits of $640 million, compared with a fiscal year 2015 profit of $592 million. The 8% increase was by margin improvements in the U.S. market, cost-reduction initiatives and lower inter-company access fees, partially offset by unfavorable movements in foreign currency exchange rates, the company said.
For the 2016 fiscal year, the financial services segment recorded a profit of $100 million, up from $98 million a year earlier.
Navistar in 2015 had predicted it would return to profitability in 2016.
Navistar reported its first profit since the fiscal third quarter of 2012 in its fiscal 2016 second quarter for the period ended April 30. At that time, Navistar posted net income of $4 million, or 5 cents per share, on the strength of its parts and financial services segments.
