MILAN (AP) — Farm equipment proved to be Fiat Industrial's big-earner in the second quarter, as the Italian capital goods company reported year-on-year earnings growth of 3.7 percent Wednesday.
The company, which was spun off last year from Fiat's car business, said net profit was €220 million ($270 million), up from €212 million last year, with the sales of agriculture equipment offsetting weaker truck and powertrain results. Revenues rose 5.4 percent in the quarter to €6.6 billion — a full €4.1 percent derived from the U.S.-based CNH agriculture and construction equipment business.
"Notwithstanding the fact that there is a high level of uncertainty in the markets, especially in terms of trucks in Europe and Latin America, we have been able to deliver incredibly strong results," Chairman Sergio Marchionne told analysts.
CNH revenues were up 14 percent over the last year on global demand for tractors and combines boosted by strong commodity prices. The farm business compensated for mixed results for construction.
CNH's results bode well for Marchionne's initiative to merge Fiat Industrial into CNH, a move that would shift the company's capital center to the United States and drop the Fiat name. Marchionne, who is also CEO of the Fiat and Chrysler auto companies, told analysts that he hopes the merger can be completed by the end of the year, but that he would have more details at the end of the third quarter after the CNH board gives its response to the proposal.
The new company will be legally based in the Netherlands, but Marchionne said no decision has been made on the future headquarters.
Fiat Industrial's Iveco truck business was less robust, with weaker sales in Europe due to the ongoing financial crisis and Latin America, where new emissions standards in Brazil have hurt sales. Iveco reported a 6.7 percent decline in second-quarter revenues of €2.3 billion, with volumes overall down by 15 percent to 35,000 units.
Iveco is reducing its footprint in Europe to help improve profits and better position it in the market. After closing bus plants last year in Spain and Italy, this year it is shutting down a heavy-duty truck plant in Ulm, Germany, to concentrate production in Madrid, bringing capacity up to 70 percent and creating savings of €55 million.
Iveco CEO Alfredo Altavilla said an agreement had been reached with unions in Germany and that Thursday would be the last day of production at the Ulm plant.
In its place, Iveco plans to concentrate production of firefighting equipment, now spread out in four plants in Graz, Austria, Chambery, France and the Germany cities of Weisweil and Goerlitz.
Fiat Industrial, based in the northern city of Turin, confirmed its full-year guidance of revenues of some €25 billion and a net profit of €900 million. Net industrial debt, unchanged at €1.986 billion, is expected to drop to between €1 billion and €1.2 billion.
Fiat Industrial shares closed 0.25 percent lower at €7.98 in Milan trading.
The company, which was spun off last year from Fiat's car business, said net profit was $270M, up from last year, with the sales of agriculture equipment offsetting weaker truck and powertrain results.