Navistar Trims Quarterly Loss, Aided by Medium-Duty Sales
This story appears in the June 8 print edition of Transport Topics.
Navistar International Corp. reported a smaller loss in its fiscal second quarter, driven by higher truck sales — particularly in the medium-duty sector — lower warranty expenses and cost reductions.
The truck and engine maker’s net loss for the three months ended April 30 was $64 million, or 78 cents per share, compared with a loss of $297 million, or $3.65, in the same period last year.
Revenue slipped to $2.69 billion from $2.75 billion.
“We continued to make progress this quarter, but we acknowledge we’ve got more work to do,” CEO Troy Clarke said June 4 on the company’s call. “We’re confident we’re going to stay the course on cost and continue to improve sales and share profitably.”
Navistar’s International-brand trucks are gaining share rapidly
in the medium-duty market, but “we have not recovered Class 8 market share as quickly as we had planned,” he added.
Despite the improvement, Navistar’s second-quarter results fell short of analysts’ expectations. On average, 10 analysts surveyed by Bloomberg News had projected a loss of 15 cents per share.
The company’s shares, which closed at $27.08 the previous day, dipped below $25 in the hours after its report.
The Lisle, Illinois-based OEM has posted losses in 11 consecutive quarters after the failure of its previous engine-emission strategy. The company announced in July 2012 that it would adopt selective catalytic reduction to meet federal emission standards and has now introduced that technology across its truck lineup.
On the call, Clarke said Navistar has begun production of its vocational WorkStar model with the Cummins ISB engine, making it the company’s final severe-service product to use selective catalytic reduction.
“Now that our SCR portfolio is complete, we have the foundation in place to increase sales and build our market share,” Clarke said.
Although Navistar has not achieved a quarterly profit in nearly three years, the company has significantly reduced the size of its losses. Navistar’s combined loss of $180 million over the past four quarters is smaller than the loss it reported in the 2014 fiscal second quarter alone — although that quarter did include $149 million in charges related to the company’s South American engine operations.
For the fiscal first half, Navistar reported a loss of $106 million, or $1.30, down from a loss of $545 million, or $6.70, in the first half of 2014.
Navistar said vehicle chargeouts in the United States and Canada rose to 18,600 units, up 10% from a year ago and a 38% jump from the first quarter. That total included 9,600 Class 8 trucks, up 9% from a year ago, and 6,700 Classes 6 and 7 trucks, representing a 24% gain.
Navistar projected that chargeouts — trucks that have been invoiced to customers, excluding units held in dealer inventories — will rise 8% year-over-year in its fiscal third quarter.
The company said its quarterly U.S. and Canadian market share for Class 8 trucks was 13%, up from 11% in the first quarter but down from 15% a year earlier. The company said it captured 27% of the total market in Classes 6 and 7, up from 21% in the previous quarter and 26% a year ago.
Within its medium-duty business, Navistar has seen “significant improvement in sales to major rental and leasing fleets and strong results in dealer-led sales,” Clarke said.
He also said Navistar is selling heavy trucks to 50% more customers than a year ago. Although many of them are small- and medium-size customers that have only purchased a few trucks, those transactions will give the company a chance to earn more of their business.
“This is an important step,” Clarke said. “We’re confident that the performance of our new products will lead to more sales and the resulting share increase that we’re looking for.”
Worldwide vehicle chargeouts edged up 1% year-over-year to 24,000 units, but engine shipments fell 43% to 21,200.
Clarke said he expects the business environment to remain favorable for the North American transportation industry.
“Improving freight rates, lower energy costs, favorable business conditions, aging fleets and better new-truck fuel economy and safety all translate into good demand for trucks,” he said.
Navistar projected that industrywide deliveries of Classes 6-8 trucks and buses in the United States and Canada will be between 350,000 and 380,000 units in fiscal 2016, the same range it expects to see in fiscal 2015.
A day earlier, Navistar announced the appointment of Jeff Sass as senior vice president of North American truck sales and marketing.
Sass, 47, joins Navistar after a 20-year career at Bellevue, Washington-based Paccar Inc., most recently as national sales manager for Paccar Parts.
He will report to Bill Kozek, president of Navistar’s truck and parts business.
“I have known Jeff for many years, having worked together at Paccar, and I know he’ll bring new insights, high energy and excellent leadership to our International Truck sales and marketing team,” Kozek said.
