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Paccar Inc. reported lower net income and revenue in the first quarter as it reacted to weaker demand and the coronavirus, leading to temporary plant closures and lower truck deliveries. At the same time, activity in its parts unit remained strong.
In related news, Paccar has begun to restart plants in Europe and in Australia. “And then, we will work through the rest of our plants in the coming weeks and make sure we take care of the employees and bring the truck factories back up and running,” Paccar CEO Preston Feight said during the earnings call.
“[I am] really pleased with best practices that we’ve put in place in the factories, as far as temperature-taking for our employees, distancing protocols, separation of the employees with spacing and barriers, and then wearing masks and personal protective equipment, and enhanced cleaning,” Feight said. “It’s also important that we think about our supply base and their readiness for the restart of our factories, and make sure we stay aligned with them. And then, of course, our business needs.”
For the period ended March 31, net income fell to $359.4 million, or $1.03 per diluted share, compared with $629 million, or $1.81, in the same period last year.
Revenue was $5.16 billion compared with $6.49 billion a year earlier.
Calling it a good quarter for net income and revenue, Feight said in a release, “First-quarter truck deliveries were impacted by the temporary closures of Paccar truck manufacturing facilities worldwide, which began March 24, resulting from government coronavirus mandates. Thousands of our employees are working from home when possible.”
One financial analyst said Paccar is one of the best-run companies in the high-barriers-to-entry truck-making industry, with 81 consecutive years of profitability and 79 consecutive years of dividends.
“Paccar demonstrated solid execution amid very challenging conditions, beating our estimates top to bottom,” Cowen Inc. analyst Matt Elkott wrote in a note.
At the same time, Paccar Parts earned record quarterly pretax income of $214.7 million, or 3% higher than the $207.6 million earned in the 2019 period.
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The parts unit saw revenue dip to $998.6 million compared with $1 billion in the same period last year.
“Paccar Parts is achieving solid results due to investments in distribution and innovative technology, initiatives such as TRP all-makes parts and TRP stores, and a growing population of connected Paccar vehicles,” Paccar Parts General Manager David Danforth said.
The company reported it plans to open a 250,000-square-foot parts distribution center in Las Vegas and a 160,000-square-foot PDC in Ponta Grossa, Brazil, in the second quarter. It currently has 18.
“It’s not just about parts and storing them; it’s about getting them to the customers as quickly as possible, and that’s been really successful for us in helping the parts team grow the business,” Feight said.
At its truck unit, global deliveries in the quarter fell to 38,400 compared with 51,500 a year earlier. Deliveries in the U.S. and Canada were 22,200, down from 28,900 in the 2019 period.
Pretax profit in the truck unit plunged to $183.1 million compared with $517 million a year earlier.
Revenue at the truck unit dropped to $3.7 billion compared with $5.1 billion in the 2019 period.
Meanwhile, there was an estimated 3.8 months of North American retail sales inventory at commercial vehicle dealers through March, and Paccar dealers’ own level was 3.4 months. About half of that is at body builders, Feight said.
Paccar’s truck brands include Kenworth Truck Co., Peterbilt Motors Co. and DAF in overseas markets.
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