Navistar International Corp.’s second quarter of 2016 delivered its first quarterly profit in three years, with net income of $4 million a remarkable reversal of Q2 2015’s $64 million net loss. Second-quarter 2016 net income was $4 million, or $0.05 per diluted share, compared to a Q2 2015 net loss of $64 million, or $0.78 per diluted share.
Revenues in the quarter were down 18% to $2.2 billion, compared to the second quarter last year, reflecting lower sales volumes in the company's Core U.S. and Canadian markets. Navistar attributed the sales slump to a soft Class 8 truck market and discontinuation of the company's Blue Diamond Truck (BDT) joint venture in mid-2015. Declines were partially offset by higher sales in the company's parts segment.
"Our performance this quarter begins to demonstrate the earnings potential of this company," said Troy A. Clarke, Navistar president and chief executive officer. “The fact that we earned a profit despite lower Class 8 truck volumes that impacted the entire industry underscores the tremendous progress we continue to make in managing our costs effectively and improving our operations."
For the second half of 2016, Navistar lowered its industry guidance range by 20,000 units, due to softening Class 8 market conditions. Given this, along with slower-than-anticipated domestic market share growth, weaker export markets, and the impact of a stronger dollar, the company also reduced its full-year revenue and adjusted EBITDA guidance.
"While we were net income positive in the second quarter, it will now be difficult for us to be profitable for the entire year given the tougher than anticipated market conditions, primarily due to the lower outlook for Class 8 industry volumes," Clarke said. "We are confident we will generate and implement additional performance improvements to partially offset current industry conditions."
Guidance
Industry – Reduced its forecast of fiscal year 2016 retail deliveries of Class 6-8 trucks and buses in the United States and Canada to 330,000 - 360,000 units.
- Reduced its Class 8 market projection to 220,000 - 250,000 units.
- Maintained its projection that the medium, school bus and severe service segments will grow in 2016 versus 2015.
Navistar – Revised 2016 revenue guidance downward to $8.2 billion - $8.6 billion.
- Reduced 2016 adjusted EBITDA guidance to $550 million - $600 million.
- Updated total cost reduction guidance to well exceed $200 million.
- Reduced its end-of-year manufacturing cash guidance to be approximately $800 million.
