Navistar Posts Surge in Fiscal Q2 Net Income
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Navistar International Corp., the parent company of International brand trucks, reported a surge in net income and increased revenue for its fiscal second quarter as truck orders rose and it increased production.
Net income for the quarter ended April 30 was $163 million, or $1.63 per diluted share, compared with a net loss of $38 million, or a loss of 38 cents, a year earlier.
Revenue inched up to $2.1 billion compared with $1.9 billion a year earlier.
“We delivered strong operating results in our second quarter,” Navistar CEO Persio Lisboa said in a release.
The company did not hold an earnings call due to its pending takeover by Munich-based Traton SE — the truck and bus unit of Volkswagen AG — that remains on track to be completed by mid-year.
Navistar reported it spent $6 million in the quarter related to the transaction and $16 million through the first half of its fiscal year.
Under the deal, Traton will buy all of Navistar’s outstanding common shares for $44.50 per share in cash, or $3.7 billion. It currently owns 16.7% of the outstanding shares of Navistar’s common stock.
“The strong trucking industry,” Lisboa said, “fueled by robust economic growth, is supporting higher order activity by our customers and our team is working hard to overcome the supply chain challenges to best support their transportation needs.”
The Lisle, Ill.-based company said it increased production line rates in all of its vehicle assembly plants, including adding a second shift to its truck assembly plant in Escobedo, Mexico — but the pace of the increases was slower than planned due to supply chain constraints.
Chargeouts in the company’s core Classes 6-8 trucks and buses market in the United States and Canada improved to 13,900 units compared with those during the COVID-19 pandemic in the 2020 period.
The truck segment reported net income of $189 million compared with a loss of $51 million in 2020 second quarter.
The increase was primarily driven by a gain from an increase of $242 million in “fair value” of its equity investment in self-driving truck technology company TuSimple during the quarter, and higher sales, according to the company.
Net income in the truck segment was partially offset by a charge of $77 million for a tentative legal settlement with the Environmental Protection Agency over engine emissions certification issues, and higher warranty costs.
Truck segment revenue reached $1.5 billion, 7% higher compared with a year earlier.
In the parts segment, higher sales lifted net income to $135 million, up 31% compared with a year earlier.
An LT Series Truck. (Navistar International Corp.)
Parts segment revenue rose to $524 million, an 18% increase from second quarter 2020, primarily driven by higher volumes in the United States and Canada.
Its financial services segment saw net income drop to $15 million compared with $24 million a year earlier as revenue fell to $50 million compared with $64 million a year earlier on lower average yields.
The global operations segment recorded net income of $36 million, compared with a loss of $13 million in the second quarter of 2020. The increase was primarily due to higher revenue in 2021 and the recording of asset impairment charges in second quarter 2020.
Global operations revenue soared 171% to $138 million. The increase was primarily driven by higher engine and power generator volumes, the recognition of an estimated benefit related to Brazilian tax credits and higher parts sales revenue in South American operations.
Among the quarterly highlights:
- Launched a new aftermarket product line called Diamond Advantage Diesel Parts to provide for Classes 2-5 diesel engines and engine components.
- Announced the upcoming availability of Cummins Connected Software Updates and programmable trim parameters for the Cummins X15 engines through Navistar’s OnCommand Connection portal.
- Delivered its first electric school buses to Canada. The 18 electric CE Series school buses were delivered by Western Canada Bus to British Columbia School Districts. The company also announced that it has more than 100 orders for its electric CE Series.
Navistar finished the second quarter with $1.2 billion in manufacturing cash and cash equivalents.
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In related news, Traton reported during its first quarter, ended March 31, it notched its highest ever level of orders, 81,700 orders — of which 78,700 were for trucks, including the MAN TGE van. Incoming orders for trucks over 6 tons in Europe, an important market for the company, rose by 65% compared with a year earlier.
The impact of the COVID-19 pandemic continued to weigh sharply on Traton’s bus business, particularly on coaches, with bus orders declining by 46% to 3,000 vehicles.
“Guided by our Navistar 4.0 strategy [plan] and fueled by the hard work of our team, Navistar is capitalizing on the strong demand in the industry today,” Lisboa said. “This, together with the many opportunities available to us when our merger with Traton is complete, leads to a very exciting future for our company, our customers and all of our stakeholders.”
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