CNH Industrial To Shift Its Focus On Agricultural Equipment

CNH Industrial has been in the news for the last few months due to the major changing happening in the company. The joining of new CEO Gerrit Marx first took the highlight and now his recent announcement regarding the company’s focus shift to agriculture is getting heavy attention. 

Under the supervision of Marx, CNH has decided to make some significant changes in its strategies amid the drop in sales in the second quarter. 

Why Agriculture is the new focus of CNH?

Marx has made several policies and strategies after joining the CNH Industrial and the focus shift to the agriculture sector is the extension of those proposed policies. 

The shift towards agriculture will not affect the construction sector in any way however, it will now be handled as a “distinct and fairly independent operation by producing the earth moving equipment”. Marx further said that this approach is merely a contribution to provide the construction industry with the product it needs the most. 

When asked, Marx mentioned that the CNH Industrial was already running two segments, construction and agriculture, separately in a successful manner with a little fluctuation. Both sectors were under the supervision of separate dealers having the expertise in their fields. The entire R&D team and the marketing team were acting under a separate umbrella.

This action, however, will strengthen that division even more and provide the construction industry with more autonomous products in the agriculture sector as well.

How does the financial aspect run along with?

A few of the difficulties dogging CNH Industrial’s construction division were also brought up during the discussion. For the second quarter, the company reported a drop in net sales in the construction industry. Revenue decreased by 16% year over year to $890 million. Lower volumes, mostly due to decreased market demand, were blamed for this decline in all of CNH’s market regions.

Oddone Incisa, CFO of CNH Industrial, stated that the drop was “larger than expected,” which caused estimates for the second half of the year to be revised down. As of right now, the company projects that net revenues in the construction industry will drop by 15% to 20% in 2024.

In the second quarter, CNH Industrial’s gross profit margin in the construction business increased to 16.5% from the same period the previous year, despite a decline in sales. Even though the company decreased the number of hours it produced construction equipment by 20% annually, this gain was partially justified by improved production cost control.

Construction net sales in North America came to $503 million during the second quarter, a 14.3% decrease from the previous year. The Europe, Middle East, and Africa markets of CNH Industrial saw the worst geographical decline in construction revenue, with sales plunging by 26.6% to $174 million.

Despite all the decline and major drops in the sale, the CEO and CFO are optimistic of its better comeback. They hope that this distinction will bring better sales generation as they are bridging the gap in the market that will ultimately help them gain a lost percentage in revenue. 

What’s ahead?

CNH Industrial’s strategy realignment to capitalize on its advantages is shown in its decision to give its construction division more independence while strengthening its agricultural division. 

The capacity of CNH Industrial to preserve collaborations between the construction and agriculture divisions while enabling each to flourish in its specific field will be very important to the strategy’s success. However, stakeholders will be closely monitoring how these adjustments affect CNH Industrial’s operational dynamics and financial performance as the year goes on.

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