CNH Industrial 2023 Annual Report Highlights

Index

1. Overview

   1. Revenue

   2. Margins

   3. SG&A

   4. R&D

   5. Revenue by Geography

   6. Comparison Image to AGCO and John Deere

2. Distribution Insights

3. Acquisition Updates

4. Precision Ag

5. Scott Wine Departure

6. Final Comments

Overview

CNH  Industrial total 2023 revenues were $24.7 billion, up 5% year-over-year.

The agriculture business specifically hit several target numbers:

Net sales for the Agriculture business were $18.15 billion in 2023, a 1.0% increase compared to 2022.

The increase was driven by favorable pricing and partially offset by dealer de-stocking, primarily in South America.

South America was the sole region that decreased in ag sales in 2023:

In North America, volume was up 20% year over year in 2023 for tractors over 140 hp and was down 9% for tractors under 140 hp.

Operating margins and gross margin continue to increase for the ag side of the business, however, are forecast to be flat or slightly down in 2024, along with revenue:

In aggregate, CNH expects industry retail demand to be down 10% to 15% in 2024. The forecast for CNH's ag sales are to be down between 8% and 12%. They also stated that they do have pockets of elevated inventory in North America and Europe to address, which will impact first half sales volumes and pricing. Due to the earlier inventory challenges in South America, they state that they have relatively less work to do there.

Selling, General and Administrative Expenses (SG&A) expenses were $1.86 billion in 2023 (7.5% of revenues) compared to $1.75 billion in 2022 (7.4% of revenues).

SG&A should improve in 2024, too. A quote from the 2023 Q4 earnings calls:

SG&A expenses declined year-over-year in the fourth quarter. We expect this trend to continue for every quarter in 2024, driven by our restructuring program, which is well underway. For our SG&A restructuring, a 10% to 15% reduction translates to about $160 million to $240 million of savings. We are well underway with this difficult work and expect to complete this effort in the first half of 2024. We are also zero-based budgeting our non-labor SG&A with an eye toward rightsizing some of our service agreements and expanding support operations in low-cost countries. Together, we expect these SG&A initiatives to save about $140 million to $180 million in 2024 with the remainder carried over into 2025.

As of December 31, 2023, CNH had 40,220 employees including 11,891 employees in the U.S. and Canada.

In 2023, R&D expenses were $1.04 million compared to $866 million in 2022. The expense in both years were primarily for continued investment in new products, technologies and digital solutions. R&D investments helped support a launch of 73 new products across the company in 2023. Executives stated that those R&D investments are not only on the iron side but also on tech. It’s not clear how that breaks out from software and tech vs. engineering.

For context, on the 2023 investor call from John Deere, executives stated the following on their R&D alocation:

A tremendous amount of that continues to be focused on what we're doing from a technology perspective and bringing Sense & Act technologies across our portfolio, across the enterprise, autonomy, significant opportunities there.

Overall, the company financials compared to two other leaders in equipment, AGCO and John Deere, look like the following: