• Consolidated revenues of $4.6 billion, (up 13.4% compared to 1Q21 for continuing operations)
• Net income of $336 million, Adjusted Net Income of $378 million, with adjusted diluted EPS of $0.28, and Adjusted EBIT of Industrial Activities of $429 million (up $36 million compared to Q1 2021).
• Seasonal free cash flow absorption of $1,059 million (Industrial Activities) amid continued supply chain disruptions.

CNH Industrial reported net sales of Industrial Activities of $4,180 million in the first quarter of fiscal year 2022, up 13% mainly due to favorable price realization. Adjusted EBIT of Industrial Activities came in at $429 million ($393 million in 1Q21), with both segments up year over year. Agriculture adjusted EBIT margin was above 12% and Construction was at 4%.

The company reported adjusted net income of $378 million; adjusted net income in March 2022 excludes, among other items, $71 million related to asset write-downs, financial receivable allowances and valuation allowances on deferred tax assets as a result of the suspension of operations in Russia.

Adjusted gross profit margin of Industrial Activities was 22.2%, up 0.6% from 1Q21 primarily due to better mix and favorable price realization in Agriculture.

In the company's Agriculture segment, net sales in the first quarter were up 11%, mainly due to favorable price realization and better mix, mostly driven by the North America and South America regions. Gross profit margin was 24.1%, up 0.8% compared to 1Q21, mainly due to better mix, favorable price realization and favorable manufacturing absorption primarily in North America and South America, partially offset by supply chain disruption costs in all regions.

Adjusted EBIT was $426 million ($399 million for 1Q21), with Adjusted EBIT margin at 12.6% with the $27 million increase driven by higher gross margin, partially offset by higher labor cost, SG&A and R&D expenses.

Order book in Agriculture was up almost 40% year over year for both tractors and combines, driven by strong growth in North America and EMEA for tractors, and in South America and EMEA for combines.

2022 Outlook

The Company is confirming the following 2022 outlook for its Industrial Activities:

• Net sales up between 10-14% year on year including currency translation effects
• SG&A expenses lower or equal to 7.5% of net sales
• Free cashflow in excess of $1 billion
• R&D expenses and capital expenditures at around $1.4 billion

Addressing UAW Strike

During the earnings call, CEO Scott Wine stated that, after several weeks of negotiating with United Auto Workers (UAW), when the previous labor contract expired, "we remained very far apart on important issues."

"The union's decision to strike was disappointing," said Wine. "We had several weeks of constructive dialogue, but when the contract expired, we remain very far apart on some important issues. The very nature and purpose of a strike is to disrupt our business and create concern amongst our customers. Despite that intent, CNH Industrial is committed to reaching an agreement with United Auto Workers."

Wine stated the company was willing to meet the union at the bargaining table "at any time" and intended to continue operations through a contingency plan "that should minimize the impact on our operations."

Analyst Commentary

Analysis from J.P. Morgan viewed CNH Industrial's FY22 outlook as "prudently conservative" when accounting for ongoing supply chain issues and the effect it has on retail sales, as well as the UAW strike.

The firm also noted an improvement in the company's tone regarding the U.S. ag cycle.

"At its capital markets day in late February, management struck a relatively conservative tone on the trajectory of the U.S. ag cycle, assuming that 2024 market volumes would be similar to 2021 ('a good year') following a couple of years of growth. The CEO is more positive on the outlook for the ag cycle than he was a few months back given the surge in soft commodity prices since Russia’s invasion of Ukraine," the analysis said.

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