CNH Global Fourth-Quarter Earnings Tumble on Restructuring Expenses, Material Costs

Earnings dropped to $7 million, or 3 cents per share, from $26 million, or 11 cents per share, a year ago. Excluding restructuring costs, the company said it would have earned 17 cents per share, down from adjusted earnings of 21 cents a share in last year's fourth quarter. CNH reorganized its business into four global brand operations during the fourth quarter.

Revenue grew 1 percent to $3.04 billion from $3 billion. Equipment sales slipped 1 percent to $2.82 billion, but this was offset by higher finance and interest income. Analysts expected adjusted earnings of 19 cents per share on sales of $2.97 billion.

The company said costs for steel, plastics and other materials continue to rise, but said it was able to offset this with higher prices. Excluding the effect of foreign exchange rates, construction equipment sales for 2005 grew 10 percent to $4 billion, while agricultural equipment sales fell 4 percent to $7.8 billion. The company said an industrywide decline in Latin America was a major cause of its lower agricultural equipment sales.

For the year, CNH earned $163 million, or 70 cents per share, up from $125 million, or 54 cents per share, in 2004. For 2006, CNH predicted equipment sales will increased by 2 percent to 5 percent, but said a higher tax rate will partially offset this growth. The company said it continues to work to "close its performance gap to best-in-class industry competitors," but said it does not expect to see the full benefit of the plan until 2008. Excluding restructuring charges, CNH said 2006 earnings should improve over 2005.

The company predicted that the agricultural equipment market will see a decline in sales of under-40 horsepower tractors in North America in 2005, though sales of over-40 horsepower tractors should remain relatively flat. Tractor sales could be down about 10 percent in Latin America, the company said. CNH added that construction equipment sales should be stronger worldwide in 2006 than in 2005.