Traton Q1 Profit Jumps as Sales Rise

Unit Navistar Saw a 32% Leap in Sales
Workers on the floor at Navistar's plant in San Antonio. (Joe Howard/Transport Topics)

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Traton SE profits jumped in the first three months of 2023 on the back of higher sales and a Russian asset disposal, with truck production and sales at its North American Navistar unit climbing, the truck and bus maker said May 2.

Navistar’s performance is expected to improve in the coming quarters — executives added on a quarterly earnings call — on the back of higher prices, strong demand and an easing of supply chain difficulties in North America.

Munich-headquartered Traton posted an adjusted operating profit of $1.027 billion in the most recent quarter, compared with $441.6 million in the same period a year earlier, it said. Traton reports in euros.

Buoyed by higher sales volumes and what Traton termed “strong product positioning,” sales grew 31% year over year to $12.3 billion in the most recent quarter from $9.33 billion a year earlier, the parent company said.

The company’s brands — which also include Scania, MAN, RIO and Volkswagen Truck and Bus — saw sales rise 25% to 84,600 in the first quarter from 67,800 in the year-ago period, it said.

Although market demand remained strong, Traton brands continued to be restrictive when accepting new orders in light of an order backlog, the company said in its earnings statement.

Traton’s incoming orders in the most recent three months fell 28% year-over-year to 68,500 from 95,600 vehicles, with the worst-hit segment its trucks unit, the company said. Truck orders in the first quarter totaled 53,610, a 33% decrease from 79,529 in the year-ago period, it said.

Navistar’s sales totaled $3.01 billion in the first quarter of 2023, a 32% jump compared with the year-ago period, according to a presentation on the results. The unit posted an adjusted operating profit of $188.9 million in the most recent quarter, compared with $83.5 million in the same period a year earlier, it said.

Sales of Navistar’s International commercial trucks and IC Bus vehicles totaled 22,548 in the first quarter, compared with 17,070 in the year-ago period, the parent company said. During the earnings call, Traton Chief Financial Officer Michael Jackstein said Navistar turned in a “very compelling performance” in the quarter, driven by higher sales and improved production utilization.

Incoming orders at Navistar totaled 15,913 in the first three months of the year compared with 29,863 vehicles in the year-ago period, Traton said. Wait times for Navistar trucks were up to 12 months currently, the longest for any of Traton’s brands, Jackstein said during the call.

However, Navistar continues to face supply chain challenges as well as headwinds from higher component and raw material prices, Traton said in the presentation. The supply challenges are smaller in Europe where Traton’s biggest two units — Scania and MAN — operate, CEO Christian Levin said during the call.

Christian Levin

Levin speaks at a past press conference. (Krisztian Bocsi/Bloomberg News)

That said, North America offers significant opportunities because of the above-average fleet age and high pent-up demand, Levin said. In addition, the supply chain challenges are easing somewhat in the region, he added.

Any stabilization of the supply chain situation was unlikely before the first quarter of 2024 at the earliest as supply base investment caught up with demand, he said.

Levin said the challenges were no longer about semiconductors, rather the whole industry was playing catch-up on its order books. Truck makers were now in “a fight over capacity on basic stuff such as frames, axles or engines,” he said.

Navistar, Levin said, had suffered a little more as a result of the supply chain challenges than its competitors. Traton took control of Navistar in 2021, paying $3.7 billion for the shares it did not already own.

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North American and European truck lead times are slightly shorter than they were previously across the industry, Levin said, adding that first-quarter 2024 order books were beginning to open up.

Navistar’s prices are set to rise in North America due to the ongoing introduction of a new driveline across Traton’s brands, Levin said on the call. Scania customers were paying $3,295 more following the driveline’s introduction, and Navistar customers could expect an even bigger increase, he added.

U.S. demand for Navistar products was unlikely to be crimped by the price increase as Levin said American demand for new trucks would hold up in 2024 even if macro-economic factors meant new orders elsewhere around the globe did not. Levin said fleet owners’ enthusiasm for beating the introduction of federal exhaust emissions legislation was behind his optimism.

Traton is still expecting its overall unit sales and sales revenue to increase by 5% to 15% each for 2023, the company said.