CNH Industrial finished 2017 on a high note with consolidated revenues up 11% and operating profit up 18%. Ag equipment revenues were up 10% for the year and 14.5% for the fourth quarter.
According to a Feb. 1 Bloomberg report, “CNH Industrial will work to strengthen its balance sheet this year before considering whether to separate its Iveco truck business from the company’s more profitable tractor division, Chief Executive Officer Richard Tobin said.
The report went on to say, “CNH, which makes farm equipment sold under the Case and New Holland brands, has been cutting debt, which brought its credit rating up to investment grade with two of the three major ratings agencies.”
Moving firmly into the higher tier would give CNH “flexibility to consider a variety of different options for the assets portfolio, and what creates the most value,” Tobin said in an interview at the company’s headquarters in central London. “You could spin out individual businesses with very efficient balance sheets.” But he added, “I am not saying we will do this.”
“At the end of the day, one doesn’t have to be a genius to see that the agricultural equipment business would have higher multiples,” Tobin said. “If you want to get full value, you would delink" the two businesses, he said. “Currently we pay a semi-conglomerate discount on the pieces," Tobin said. CNH trades at lower multiples than its main tractor peers such as Deere & Co. and Kubota Corp.
Tobin says CNH has been “very transparent” about evaluating options for its assets. “There is not a sacred cow, returns are highest in agriculture."