Saturday, 6 June 2015
Navistar makes progress under Clarke
Navistar International Corporation is beginning to spend money again. As the company continues with its mission to be industry 'Uptime leader’ in the industry, Navistar has purchased test track and proving grounds in New Carlisle, Indiana for an undisclosed sum.
The site will also be used as a customer centre to showcase new products and give customers an opportunity to experience new products first hand.
The moves comes as Navistar announces reduced second quarter losses. In second quarter 2015, the net loss of $64 million compared to a second quarter 2014 net loss of $297 million. Revenues in the quarter were $2.7 billion.
Charge-outs in the company's core markets (Class 6-8 trucks and buses in the United States and Canada) were up 38 percent over last quarter.
Second quarter 2015 EBITDA (earnings before interest expenses, taxes, depreciation and amortization) was $85 million against an EBITDA loss of $119 million in the same period one year ago.
The $204 million year-over-year improvement was driven by an increase in truck segment sales, favourable product mix and the continuation of lower warranty expense and cost reductions, according to Navistar.
Prior year results of the Lisle, Illinois truck and engine business included $149 million in asset impairment charges related to the company's South American engine operations.
Second quarter 2015 adjusted EBITDA was $102 million compared to $82 million in the second quarter of 2014. The second quarter included one-time net charges of $17 million, compared to one-time charges of $201 million in the second quarter of 2014.
The company was cash flow positive in the second quarter 2015 and finished the quarter with $784 million in manufacturing cash, cash equivalents and marketable securities.
"Our results reflect continued progress in improving enterprise-wide business operations and positive momentum in the North American industry," said Troy A. Clarke, Navistar president and chief executive officer.
"We continue to make solid improvements in our North American truck and parts businesses and are especially encouraged by the progress in our bus business as well as increased market share in our medium-duty business, where we saw significant improvement in sales to major rental and leasing fleets and strong results in dealer-led sales," Clarke added
Highlights from the quarter include a 10 percent year-over-year increase in charge-outs in the company's core markets (Class 6-8 trucks and buses in the United States and Canada). This included a 24 percent increase in Class 6 and 7 medium trucks and a 9 percent increase in combined Class 8 trucks.
Exit from foundry business
The company says it continued to take actions to reduce fixed costs and improve its manufacturing capacity utilization with the sale of its foundry operations in Waukesha, Wisconsin.
Navistar will complete its exit from the foundry business as operations in Indianapolis wind down by the end of the summer. As a result, the company anticipates more than $13 million in annual savings. Are any other savings likely to be forthcoming? With its EGR problems seemingly safely behind it, Navistar's Troy Clarke still has to face the question of how long can (will) the corporation remain in the diesel engine business. Cummins seems to be 'on board' as Navistar's principal engine supplier, so it would not be difficult for the truck maker to quietly introduce more Cummins ISX engine products onto its options list for various trucks and buses, simply as a means of 'testing the waters'. If the take-up is significant then this could provide Clarke with a pointer to the future. By having their own test track, Navistar engineers and executives can quietly assess various Cummins products in the seclusion of their own back yard and at the same test customer reaction. It is not inconceivable that in the process, Navistar and Cummins become closer bedfellows, with its associated implications.
Meanwhile, Navistar's executives have provided the following guidance for the third quarter: Q3-2015 EBITDA in the range $125 million – $175 million, excluding pre-existing warranty and one-time items. Q3-2015 manufacturing cash, cash equivalents and marketable securities in the range $750 million – $850 million.
Additionally, the company projects a continued strong North American industry for FY2016 with retail deliveries of Class 6-8 trucks and buses in the United States and Canada to be in the same range as FY2015 — 350,000 to 380,000 units — with a stronger mix of school buses and medium-duty trucks.
"We continue to take the right actions to improve the business and expect to achieve in excess of an 8 percent EBITDA margin run rate as we exit the year," Clarke added. "We think 2016 will be another strong year for the North American industry and we believe we're well positioned to take advantage of favourable market conditions for our core businesses."