Truck and engine maker Navistar posted an $80 million net loss for the second quarter on revenues of $2.1 billion, with higher losses in its used truck business the main culprit.
The company said in its earnings release that it took a $60 million charge in the second quarter to beef up the “reserve” for used trucks equipped with the OEM’s “legacy” MaxxForce 13-liter engines – wiping out the $47 million in earnings before interest, taxes, and amortization (EBITA) it booked for the quarter.
Navistar stressed that the used truck situation “was the largest contributor to the year-over-year decline in profits” in its release.
The company pointed out, though, that it is “changing its sales strategy” for MaxxForce 13-liter equipped used trucks to “take advantage of additional opportunities to sell more units into export markets,” a move it expects will accelerate efforts to reduce its inventories of those vehicles.
"We are on track to improve on last year's results, but still have quite a bit of work to do in the second half," noted Troy Clarke, Navistar’s chairman, president and CEO, in a statement.
"However, the work we've done in the first six months growing share, building our backlog, and managing costs, combined with improving industry conditions, positions us to deliver a stronger second half," he added.
Other items Navistar noted in its second quarter earnings release include:
- Revenues of $2.1 billion in the second quarter were down 5% compared to $2.2 billion in the same period last year, a decrease that primarily reflects lower volumes in the company's “core market” of Class 6-8 trucks and buses in the U.S. and Canada.
- Navistar’s truck segment net sales declined 6% to $1.4 billion in second quarter compared to second quarter of 2016, due to lower core volumes, the impact of a shift in product mix in the company's core markets, and the cessation of sales of CAT-branded trucks units sold to Caterpillar. This was partially offset by an increase in Mexico truck volumes.
- Overall, Navistar said its truck segment loss increased to $56 million in second quarter versus a loss of $23 million in the same period a year ago, again driven by the higher used truck losses, market pressures, and the impact of lower core market volumes.
- Parts segment second quarter net sales dipped 6% or $37 million to $610 million, driven by lower sales from Blue Diamond Parts (BDP), the company's parts joint venture with Ford, as well as by lower U.S. and export volumes, partially offset by higher U.S. and Canada parts sales related to Fleetrite brand and remanufactured parts sales.
- Yet Navistar noted its parts business made a profit of $153 million in second quarter, though that’s down 13% versus the same period last, primarily due to margin declines in BDP and the company's North American markets.
- The company’s global operations segment witnessed a 9% dip in net sales to $70 million in the second quarter compared to same period in 2016, losing $7 million versus a loss of $1 million last year. Navistar cited lower volumes in the company's South America engine operation due to the continued economic weakness in the Brazil economy for those declines.
Outside of those results, Navistar noted that ended the second quarter 2017 with $949 million in consolidated cash, cash equivalents and marketable securities on hand, with two “significant” wins for its defense division bolstering its bottom line: two foreign military contracts to reset, upgrade and support 1,085 long wheel base MaxxPro mine resistant ambush protected (MRAP) vehicles and to produce and support 40 MaxxPro Dash DXM MRAP vehicles for foreign military sales.
The company is also expecting full “run-rate” production of General cutaway G van for General Motors at Navistar's Springfield, OH factory, to help generate more revenues as well.
Lastly, Navistar reiterated that it expects retail deliveries of Class 6-8 trucks and buses in the U.S. and Canada to be in the range of 305,000 units to 335,000 units for fiscal year 2017.