Cnh Industrial N.v. · NYSE:CNH
Cnh Industrial — Investor Day (September 2019)
32 slides from Cnh Industrial's investor day presentation, Sep 3, 2019
Slide 1: Transforming CNH Industrial Financial Performance
New York City September 3, 2019 TRANSFORMING Max Chiara CNH INDUSTRIAL Chief Financial Officer FINANCIAL Chief Sustainability PERFORMANCE Officer CAPITAL MARKETS DAY 2019
Slide 2: Disclaimer: Financial Information Provided Herewith
DISCLAIMER FINANCIAL INFORMATION PROVIDED HEREWITH: Figures presented in accordance with US GAAP. Non-GAAP measures are defined in Appendix Forward looking financial information based on the current portfolio composition of CNH Industrial Initiate disclosure of ROIC at Industrial Activities an
Slide 3: Financial Track-Record (2016-2018)
FINANCIAL TRACK-RECORD (2016 – 2018) STRONG PERFORMANCE IMPROVEMENT DESPITE PROLONGED DOWNTURN IN MAIN SEGMENT Adj. EBIT margin of Industrial Activities up 150 bps to 5.7% Adj. Net Income and Adj. diluted EPS up 2.3x since 2016 Investment Third Party Debt of Industrial Activities reduced to $(5.2)B
Slide 4: Corporate Sustainability Aspirations and 2024 Targets
CORPORATE SUSTAINABILITY ASPIRATIONS AND 2024 TARGETS CARBON NEUTRAL ZERO SERIOUS INJURIES CO2 emissions per production unit (*) (**) -46% Employee accident frequency rate (**) -50% Total electricity consumption from renewable sources (*) 80% Kg of CO2 emissions per ton transported (**) -20% Product
Slide 5: SBP Commitment: Realizing Full Potential
SBP COMMITMENT: REALIZING FULL POTENTIAL PLAN TO DRIVE PROFITABLE GROWTH, STRENGTHEN RESILIENCY AND CREATE SIGNIFICANT SHAREHOLDER VALUE EXECUTE PLAN ON AMBITIOUS GROWTH INITIATIVES WHILE DELIVERING ON OUR EFFICIENCY PROGRAM … Unlock solid top-line growth Disciplined execution Enhance valuation via
Slide 6: Financial Projections at a Glance
FINANCIAL PROJECTIONS AT A GLANCE ROBUST IMPROVEMENT ALONG ALL KEY DIMENSIONS 2019G – 2024E Comments CAGR in excess of 5%, above industry Net Sales (1) from $27B to $35B average Industrial Activities Adj. EBIT %* ~10% in 2024 More than doubling Adj. EBIT in $ value Adj. EBITDA %* ~13% in 2024 Increm
Slide 7: Financial Targets by Segment
FINANCIAL TARGETS BY SEGMENT Revenues ($B) Adj. EBIT (%) STRONG GROWTH ACROSS ALL SEGMENTS ROA (%) AGRICULTURE (NET SALES CAGR 5%) CSV (NET SALES CAGR 1%) $16 50% 15 $12 $11 $12 40% 10 30% 14% 20% 9% 7% 5 3% 10% 0 0% 2018A 2019G 2022E 2024E 2018A 2019G 2022E 2024E 20% 33% 7% 14% CONSTRUCTION 12 (NET
Slide 8: Ambition to Deliver Superior ROIC, EPS and TSR
AMBITION TO DELIVER SUPERIOR ROIC, EPS AND TSR ~ 30 STRATEGIC INITIATIVES PER SEGMENT IDENTIFIED TO ACHIEVE SUBSTANTIAL PROFIT GROWTH STRATEGIC INITIATIVES Sales Grow PLAN New products and technologies Distribution optimization TARGETS Profit Digital services Aftermarket sales ROIC 20% Cost
Slide 9: Efficiency Program
EFFICIENCY PROGRAM SUPPORTING “TRANSFORM 2 WIN” STRATEGY THROUGH IMPROVED PROFITABILITY AND EFFICIENT CAPITAL UTILIZATION ORGANIZATIONAL EFFICIENCY to simplify structure and achieve a more agile organization Program savings to contribute STREAMLINING FOOTPRINT into total benefit of the target ~10% o
Slide 10: Total Shareholder Return in Action
TOTAL SHAREHOLDER RETURN IN ACTION TSRi USED AS A KEY METRIC TO ASSESS STRATEGIC INITIATIVES TSRi CONTRIBUTION ($B) AGGREGATED VALUE * CONTRIBUTION ($B) Value accretive Value dilutive TOP-15 TOP-50 INITIATIVES INITIATIVES REPRESENT 60% REPRESENT 95% HURDLE OF VALUE OF VALUE RATE CONTRIBUTION CONTRIB
Slide 11: Investment and ROIC
INVESTMENT AND ROIC INCREASE INVESTMENT TO DELIVER SUPERIOR RETURNS CAPEX R&D INVESTMENT ALLOCATION* ROIC (%) (% OF NET SALES) (% OF NET SALES) $13B PRODUCT ROADMAP1) MEGA TRENDS2) 4.5% 20% 4.2% 58% 4.0% 3.7% 3.8% 2018A 14% 3.5% 1.9% 2.0% 2024E 20% 2018A 2019G 2020E 2020- 2018A 2019G 2020E 2020- MAI
Slide 12: Financial Target for Our Industrial Activities
FINANCIAL TARGET FOR OUR INDUSTRIAL ACTIVITIES FIRST IMPROVING PROFITABILITY, THEN ACCELERATING GROWTH Adj. EBIT ($B, %) $3.4B ~10% $2.4B ~8% $1.6B 5.7% ~$0.5B ~$0.6B 2018A Grow Perform& Optimize 2022E Grow Perform& Optimize 2024E Simplify Simplify SELF HELP THROUGH EXECUTION OF GROW INITIATIVES PAY
Slide 13: Adjusted Diluted EPS and Adjusted Net Income
ADJUSTED DILUTED EPS AND ADJUSTED NET INCOME ACCELERATING EARNINGS TRAJECTORY, WHILE INVESTING FOR GROWTH ADJUSTED NET INCOME (B$), ADJUSTED DILUTED EPS ($) 2020E Targeted Adjusted EPS of 2.00 $0.95 to $1.00 per share 1.40 0.80 0.86 * 2.7 1.9 1.1 2018A 2019G 2022E 2024E Adj. diluted EPS Adj. Net Inc
Slide 14: Industrial Activities Cash Flow
INDUSTRIAL ACTIVITIES CASH FLOW TARGETING A NET DEBT FREE POSITION BY 2021 FREE CASH FLOW ($B), OPERATING CASH FLOW ($B) 3.0 2.0 1.7 1.2 0.6 2018A 2019G 2022E 2024E Free Cash Flow Operating Cash Flow Net (Debt) / (0.6) (0.3)* 0.3 1.7 Cash ($B) Industrial Activities Net Debt free by 2021 * Mid-point
Slide 15: Underpinning a Stronger Balance Sheet
UNDERPINNING A STRONGER BALANCE SHEET INITIATIVES TO STRENGTHEN OUR BALANCE SHEET THROUGH THE PLAN GROSS Reduce Gross Debt leverage* in Industrial Activities from 2.0x in DEBT 2018 to 1.0x by 2024 AVAILABLE Maintain strong liquidity to protect balance sheet LIQUIDITY (by 2024 $13.5B expected, about
Slide 16: Capital Allocation
CAPITAL ALLOCATION ESTABLISH OUR PRIORITIES FOR CASH DEPLOYMENT STRATEGY THROUGH PLAN (2020-2024) CASH DEPLOYMENT STRATEGY* PRIORITIES GOING FORWARD Strengthen Balance Sheet anchoring on credit rating Balance Sheet improvement Higher rating Strong liquidity Foster superior growth via executi
Slide 17: Achievability of the Plan
ACHIEVABILITY OF THE PLAN PLAN TESTED AGAINST INDUSTRY SENSITIVITY AND INITIATIVES EXECUTION EFFECTIVENESS Current Plan position Market growth/decrease vs. Baseline assumption Growth initiatives execution effectiveness +15% 100% +10% 80% +5% 60% Baseline 40% -5% 20% -10% -15% 0% 0% 20% 40% 60% 80% 1
Slide 18: Transformation Outlook
TRANSFORMATION OUTLOOK ON- AND OFF-HIGHWAY COMPANIES WILL BE SIMILAR IN SIZE WITH LIMITED DIS-SYNERGIES 2018 NET SALES ($B, %) AND ADJ. EBIT ($B) PRO-FORMA* PRINCIPLES FOR SPIN-OFF Protect current Investment Grade Off-Highway On-Highway credit rating at Off-Highway from Day One and improve thereaf
Slide 19: Expected Transaction Highlights
EXPECTED TRANSACTION HIGHLIGHTS Pro-rata allocation of On-Highway shares to shareholders TRANSACTION On-Highway to include CV and PT STRUCTURE Off-Highway to have long-term certainty of engines / transmissions supply from PT One-time charges related to the transaction expected to be incurred
Slide 20: Final Remarks: Transform 2 Win Execution
FINAL REMARKS: “TRANSFORM 2 WIN” EXECUTION TSRi TO MEASURE AND SAFEGUARD CAPITAL ALLOCATION AND RETURNS PLAN BUILDING BLOCKS STRATEGIC DRIVERS GROW PERFORM & OPTIMIZE 1 Accelerate investment in new technologies and megatrends to improve competitive edge SIMPLIFY 2024 TARGETS 2 Improve earnings susta
Slide 21: Summary of SBP Financial Targets
APPENDIX SUMMARY OF SBP FINANCIAL TARGETS 2018A 2022E 2024E Net Sales ($B) 27.8 31.2 35.1 Industrial Activities Adj. EBIT (% of Net Sales) 5.7% ~8% ~10% Adj. EBITDA (% of Net Sales) 9.6% ~11% ~13% Operating Cash Flow ($B) 1.2 2.0 3.0 ROIC (%) 14% 16% 20% Adjusted Net Income ($B) 1.1 1.9 2.7 Adjusted
Slide 22: Financial Services
APPENDIX FINANCIAL SERVICES NET INCOME ($M) PORTFOLIO $34B IN 2024* $440 WHOLESALE RETAIL $385 38% 55% 2018A 2024E LEASING 7% ROA** 2.0% 1.8% FS goal of supporting sales of the industrial Segments, while remunerating its own capital, remains an underpinning of our portfolio strategy * Composition of
Slide 23: TSRi Concept – Prioritizing Investment Decisions
APPENDIX TSRi CONCEPT – PRIORITIZING INVESTMENT DECISIONS FOR SUPERIOR RETURN ANNUALIZED TSR* (%) SHAREHOLDER OPERATIONALIZATION PERSPECTIVE ON TSR* OF TSR* IN CNHI BASELINE TSR* 2015-2018 1st Qrt SHARE EBITDA PRICE GROWTH** CHANGE CNHI 2015-2018 Median Actual = Plan FREE CASH DIVIDENDS TSR* TSRi FL
Slide 24: Financial Track-Record Last 3 Years (2016-2018)
APPENDIX FINANCIAL TRACK-RECORD LAST 3 YEARS (2016 – 2018) NET SALES, ADJ EBIT OF IND. ACTIVITIES ($B) ADJ NET INCOME ($B), ADJ DILUTED EPS ($) 25.8 27.8 23.2 1.1 1.6 0.7 1.0 1.1 0.5 0.80 0.34 0.46 2016 2017 2018 2016 2017 2018 ADJ EBIT MARGIN 4.2% 4.4% 5.7% NET SALES ADJ EBIT NET INCOME ADJ DILUTED
Slide 25: Reconciliation of Net Income (Loss) to Adjusted EBITDA by Segment FY 2018
APPENDIX RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA BY SEGMENT (US GAAP) FY 2018 Unallocated Industrial Financial AG CE CV PT Items, Elim. & Total Activities Services Other Net Income (Loss) (1) 714 385 1,099 Add back: Interest expenses of Industrial Activities, net of interest income an
Slide 26: Reconciliation of Net Income (Loss) to Adjusted EBITDA by Segment FY 2017
APPENDIX RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA BY SEGMENT (US GAAP) FY 2017 Unallocated Industrial Financial AG CE CV PT Items, Elim. & Total Activities Services Other Net Income (Loss) (1) (162) 452 290 Add back: Interest expenses of Industrial Activities, net of interest income an
Slide 27: Reconciliation of Adj. Net Income and Adj. Income Tax
APPENDIX RECONCILIATION OF ADJ. NET INCOME AND ADJ. INCOME TAX (EXPENSE) TO NET INCOME (LOSS) AND INCOME TAX (EXPENSE) AND CALCULATION OF ADJ. DILUTED EPS AND ADJ. ETR UNDER U.S.GAAP FY FY ($mn) 2018 2017 Net income (loss) 1,099 290 Adjustments impacting Income (loss) before income tax (expense) and
Slide 28: Reconciliation of Adj. Net Income and Adj. Income Tax (continued)
APPENDIX RECONCILIATION OF ADJ. NET INCOME AND ADJ. INCOME TAX (EXPENSE) TO NET INCOME (LOSS) AND INCOME TAX (EXPENSE) AND CALCULATION OF ADJ. DILUTED EPS AND ADJ. ETR UNDER U.S.GAAP ($mn) FY 2018 FY 2017 (a) Adjustments impacting Income (loss) before income tax (expense) and equity in income of unc
Slide 29: Reconciliation of Total Debt to Net Debt
APPENDIX RECONCILIATION OF TOTAL DEBT TO NET DEBT (US GAAP) Consolidated Industrial Activities Financial Services ($mn) Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, 2018 2017 2018 2017 2018 2017 Third party debt (24,445) (25,895) (5,211) (6,461) (19,234) (19,434) Intersegment notes payable - - (1
Slide 30: From Total Debt to Net Debt of Industrial Activities
APPENDIX FROM TOTAL DEBT TO NET DEBT OF INDUSTRIAL ACTIVITIES Dec 31, Dec 31, FY FY ($mn) 2018 2017 2018 2017 Net Industrial (Debt) / Cash at Total (Debt) (1) (24,445) (25,895) (908) (1,609) beginning of period Financial Services Third Party Adj. EBITDA of Industrial Activities 2,671 2,191 19,234 19
Slide 31: Non-GAAP Measures
APPENDIX NON-GAAP MEASURES CNH Industrial monitors its operations through the use of several non-GAAP financial measures. CNH Industrial’s management believes that these non-GAAP financial measures provide useful and relevant information regarding its operating results and enhance the readers’ abili
Slide 32: Safe Harbor Statement and Disclosure
SAFE HARBOR STATEMENT AND DISCLOSURE All statements other than statements of historical fact contained in the slides presented today including statements regarding our competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to reven