Increased revenue from sales of New Holland and Case IH brand agricultural and construction machinery have helped global manufacturer CNH Industrial set financial records in the second quarter to June 30.
CNH has announced record second-quarter net income of US$710 million, up 29 per cent on the $552m net income it earned in the second quarter last year.
This was derived from consolidated revenue of $6.57 billion, up 8pc compared to the same quarter last year, with net sales income from "industrial activities" (agriculture and construction machinery combined) of $5.95b, up 6pc or $341m on last year's Q2 sales income.
CNH said the net sales income increase from its "industrial activities" was mainly due to "favourable price realisation (and) offsetting adverse currency conversion impacts".
It said global sales were higher "despite a proactive reduction in South American deliveries to moderate dealer inventory" and a delayed start to production of new sprayers for North American markets.
Gross profit margin from "industrial activities" of 25pc was up on the first quarter this year as well as on the 22pc for Q2, 2022, with both agriculture and construction machinery proving more profitable.
The increased profitability of its products was "reflective of favourable price realisation and of improved operating performance of our production system, which is limiting the effects of continued inflationary pressures", CNH said.
It paid tax of $192m for the quarter - an effective tax rate of 22.9pc - and a cashflow of $139m for operations during the quarter was significantly down on the $271m in Q2, 2022.
Consolidated debt was $24.9b at June 30, compared to $23b at December 31 last year.
Agricultural machinery net sales revenue was $4.89b, up 4pc on Q2 last year, generating a record adjusted earnings before interest and tax (EBIT) of $821m, an increase of $158m over Q2 last year.
The increased sales revenue resulted from "favourable" prices offsetting reduced global volumes, CNH said, while the record EBIT result was due to pricing and improved product mix offsetting increased production costs, selling, general and administrative (SG&A) costs and research and development (R&D) investment.
"In North America, industry volume was up 21pc year on year in the second quarter for tractors over 140 horsepower (104kW), but was down 8pc for tractors under 140hp and combines (harvesters) were up 27pc from prior year," it said.
"In Europe, Middle East and Africa (EMEA), tractor and combine demand was down 6pc and up 32pc respectively, which included European tractor and combine demand down 1pc and up 11pc respectively.
"South American tractor demand was down 4pc and combine demand was down 27pc.
"Asia Pacific tractor demand was down 4pc and combine demand was down 29pc (mostly in China)."
CNH said good prices and increased manufacturing efficiencies lifted its gross profit margin for agricultural machinery to 27pc (up from 23.4pc, Q2, 2022), offsetting "continued inflation in supply chain costs".
For the first time CNH's construction machinery sales revenue passed $1b in a quarter, with $1.06b generated ($891m Q2, 2022) for a record quarterly EBIT of $72m, compared to $34m for Q2 last year despite higher production costs, SG&A spend and R&D investments, it said.
Global industry volume for heavy construction machinery was down 9pc year on year for Q2, while the market for light construction equipment was "flat", CNH said.
Aggregated construction demand was up 8pc in North America, flat in EMEA, but decreased 16pc in South America and 13pc for Asia Pacific.
But when China's figures were excluded, demand in the other Asia Pacific markets was only down by 3pc, it pointed out.
The second quarter results took CNH Industrial's half yearly consolidated revenue to $11.9b, up 11pc on the first half last year, with net sales revenue from "industrial activities" up 10pc to $10.7b.
Net income for the first six months increased 35pc to $1.19b and gross profit margin jumped from 21.8pc last year to 24.8pc this year.
Adjusted six monthly EBIT was $1.38b, up from $1.08b.
Year-to-date net agricultural machinery sales were $8.82b, compared to $8.09b for the first half last year and adjusted EBIT was $1.39b compared to $1.09b.
The matching construction machinery six-monthly figures were net sales of $1.91b, compared to $1.69b for the first half last year and adjusted EBIT was $116m compared to $66m.
CNH said it was on track for net sales increases in 2023 of between 8pc and 11pc on last year, SG&A up by no more than 5pc on last year and R&D expenses and capital expenditure combined of about $1.6b.
Speaking to the second quarter results from a New Holland tractor manufacturing plant in Basildon, Essex, England, CNH Industrial chief executive officer Scott Wine said his team had delivered "great results in Q2" by capitalising "on favorable market fundamentals and solid operational execution".
"Our Agriculture segment set margin records and, for the first quarter in our history, construction (equipment) net sales surpassed $1 billion," Mr Wine said.
"The CNH business system is becoming a way of life, engaging our employees in improving processes and removing unnecessary costs.
"We are transforming the business and expanding our technology investments to drive growth and improve through-cycle margins," he said.