CNH To Idle Construction Machinery Plants Amid Lower Demand
22 Januar 2009 - 5:24PM
Dow Jones News
CNH Global N.V. (CNH) said Thursday it will idle its
construction machinery manufacturing during the first half of the
year and reduce farm equipment production in response to lower
demand and rising inventories.
The company, a unit of Fiat S.p. A. (FI.MI) warned that its 2009
sales could fall by as much as 20% from 2008, primarily because of
dismal conditions in the construction sector.
The company didn't provide specifics on the reduction in farm
equipment production, but said it would focus mostly on small
horse-power tractor production.
Its shares fell 23.61% to $11.10 Thursday.
Tightening credit conditions in recent months have put the
brakes on construction spending that typically drives sales of
CNH's bulldozers and excavators
The Illinois-based company provided no guidance on earnings for
the first-quarter or 2009, citing the uncertainty in the company's
business. Construction equipment accounts for about 30% of CNH's
business, while 65% comes from agricultural machinery.
"Construction equipment is very weak," said Rubin McDougal,
chief financial officer, on a call with analysts. "You should
expect the first quarter to have similar trends that we saw in the
fourth quarter."
The company's fourth-quarter profit fell by 2.5% from 2007 to
$117 million, or 48 cents a share, missing analysts expectation of
69 cents a share. Sales fell by 10% to $3.66 billion.
CNH, the world's second largest maker of farm machinery after
Deere & Co. (DE), said it expects U.S. farm income to be near
record levels in 2009 as commodity prices remain elevated while
farmers' outlays for fuel, fertilizer and other production expenses
trend lower.
Nevertheless uncertainty about credit and the economy are likely
to discourage farmers for buying equipment in the first half of the
year.
The company expects sales of high-horsepower tractors to fall by
10% to 15% in the first half of 2009 and end the year down by
5%.
CNH's fourth quarter diminished the company's strong performance
earlier in the year. Sales in 2008 rose 16% to $17.3 billion.
The company also reveled that its financial services unit is
seeking an alternative funding source. Sales in the quarter slipped
10% from a year ago to $3.66 billion amid uncertainty over whether
Fiat will continue to finance customers purchases Fiat provided
$5.2 billion in 2008 to CNH's financial unit.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
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