Navistar International has reported weak second quarter profits of $12 million, equal to $0.16 per diluted share, on $2.8 billion in net sales and revenues, in what the company calls historically weak market conditions not seen since 1962. In the second quarter a year ago, Navistar reported net income of $211 million, equal to $2.88 per diluted share, on $3.9 billion in net sales and revenues.
The second quarter results indicate poor industry sales in every part of Navistar’s commercial business, as compared to last year’s second quarter. Second quarter earnings were reduced by $31 million, equal to $0.44 per diluted share, from other costs related to the Ford settlement. In addition in the latest period, the company incurred research and development costs, and unanticipated costs related to warranty on products sold in prior periods, partially offset by the benefits from certain out-of-period accounting adjustments.
“Although the current growth of our traditional businesses is hamstrung by the global recession, we have nonetheless been able to advance numerous strategic and tactical initiatives that will be key contributors to our future success,” says Daniel Ustian, Navistar chairman, president and chief executive officer.
For the first six months of fiscal 2009, Navistar reported net income of $246 million, equal to $3.44 per diluted share, including the positive effect from the settlement with Ford of $155 million, equal to $2.17 per diluted share, compared with $146 million, equal to $2 per diluted share, in the first six months a year ago. First half net sales and revenues amounted to $5.8 billion, compared with $6.9 billion in the year-ago period.
“Continued reductions in our product costs, lower selling, general and administrative expenses and increased market share growth, along with the company’s military business, will enable us to maintain pace toward a profitable fiscal 2009 despite three consecutive years of dwindling truck volumes,” Ustian says.
The company projects total truck industry retail sales volume for Class 6-8 trucks and school buses in the United States and Canada for the fiscal year ending October 31, 2009, will total between 165,000 and 185,000 units, down from the previous forecast of 210,000 to 225,000 units. Industry volumes reached a recent high of 454,700 units in 2006 due to accelerated purchases of trucks (“pre-buy”) in anticipation of higher prices due to stricter emissions standards imposed by the Environmental Protection Agency in 2007. However, the industry is anticipating only a minimal pre-buy in 2009 ahead of 2010 emissions requirements.
Based on second quarter results and company forecasts for the remainder of the year, Navistar reported guidance for net income for its fiscal year ending October 31, 2009, in the range of $200 million, or $2.80 per diluted share, to $225 million, or $3.10 per diluted share, excluding the Ford settlement and related charges. Including results of the Ford settlement, per diluted share earnings should be in the range of $5.20 to $5.50 per diluted share.
“It is now clear that the economic recovery will take longer than had been originally expected,” Ustian says. “We are addressing this likelihood straight on by maintaining focus on our core product and market initiatives while taking the necessary steps that will allow us to adapt to the rapidly changing marketplace.”