Navistar International Corporation, the commercial truck, school bus and mid-range diesel engine producer, reported substantially improved earnings for its third fiscal quarter and said that based on the current outlook, earnings for the fiscal year ending October 31, 2004, are on track to meet or exceed $2.95 per share.
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Net income for the three months ended July 31, 2004, totalled $56 million, or $0.73 per share, compared with $18 million or $0.25 per diluted common share a year ago. The company had previously forecast that earnings would be in the range of $0.60 to $0.70 per share.
Third quarter net income includes a benefit from an adjustment to a previously recorded restructuring charge. Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totalled $2.4 billion, compared with $1.9 billion in the same quarter a year ago.
As anticipated, the company was able to report the favorable impact in the third quarter of the Medicare prescription drug act of 2003. The company said in addition to the federal prescription drug subsidy, progress was made in reducing other post-retirement expenses consistent with the company’s long-term strategy to reduce below-the-line costs.
Navistar chairman Daniel Ustian said the third quarter profit was achieved despite increased costs associated with meeting 2004 emission requirements, increases in the price of steel and component shortages brought about by suppliers being slow to ramp up to meet increased industry market demand.
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By GlobalDataManufacturing gross margins in the third quarter rose to 14.3%, up from 12.9% in the second quarter and above the 13.5% reported in the third quarter last year.
“Our focus continues to be on improving our competitiveness and our cost structure and we expect to achieve a $1,600 per vehicle manufacturing cost reduction in the current fiscal year,” Ustian said. “We believe our truck and engine parts operations will achieve another record year and our finance subsidiary continues to be well positioned for profitable growth while significantly contributing to our bottom line.”
Net income for the first nine months of fiscal 2004 totalled $88 million, or $1.19 per share, compared with a net loss of $95 million, (-$1.41/share) a year ago. Consolidated sales and revenues for the first nine months rose to $6.6 billion from $5.3 billion.
Ustian forecast that earnings for the fiscal year ending October 31, 2004, should be $2.95 or more per share, compared with a loss of $0.27 a share in fiscal 2003.
“Our ability to mitigate the impact of current economic challenges, principally the impact of the current steel situation and the fact that all truck manufacturers now are on allocation of 15-litre engines from Caterpillar and Cummins, will dictate how high earnings will rise this fiscal year,” Ustian said.
Ustian noted that the company’s heavy truck operations have shown the most dramatic improvement this year as the company continues on track to achieve a 20% market share over the long term. Retail deliveries of heavy trucks for the first nine months of the year were up 48% over a year ago. As the result of continued strong market demand, the company has added a second shift at its Chatham, Ontario, assembly plant with output scheduled at 560 units per week. A year ago, Chatham was producing 175 units per week.
Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totalled 28,100 units, up from the 21,200 units shipped in the third quarter of 2003. Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totalled 83,000 units, compared with 82,200 units in the third quarter last year.
Ustian said the company has raised its industry forecast slightly for the year from 328,500 units to 330,000 units, reflecting a decrease of 1,500 school buses and an increase in heavy trucks of 3,000 units to 211,000 units.
