The company increased its revenue outlook for industrial activities to between eight and 11 per cent this year, versus a previous forecast of between six and 10 per cent.

Farmers’ solid income cushioned profits even as commodity prices came down from their peaks a year ago. Growers were able to cash in on still-elevated wheat and soybean prices, which fueled purchases for new and used machinery, CNH CEO Scott Wine said.

CNH’s farm equipment brands include Case IH, New Holland, Steyr and Flexi-Coil.

“The high-horsepower and cash crop markets continue to be very strong,” Wine said in an interview, adding that the company is planning to accelerate production of large ag equipment to catch up on volume output that was reduced during an eight-month long United Auto Workers strike.

Like competitors Deere and Caterpillar, CNH’s profit margins were propped up by price increases across its machinery businesses to offset inflated input costs and a choppy supply chain.

Analysts believe the manufacturer’s double-digit price hikes that contributed to a 16 per cent increase in net sales on the year for its agriculture division will sustain the company’s margin growth in the coming quarters, said Eric Greaser, vice-president at Moody’s.

Industrial activity revenues increased 21 per cent in 2022.

CNH’s first-quarter adjusted earnings before interest and tax (EBIT) for industrial activities rose 29 per cent to US$555 million, just ahead of analysts’ consensus forecast in a Reuters poll. Revenue was in line with expectations at US$4.78 billion.

Company executives said they were confident the company would complete its delisting from the Milan bourse by the end of the year and keep its shares trading only in New York.

— Reporting for Reuters by Giulio Piovaccari in Milan and Bianca Flowers in Chicago.

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“Whether we face a global recession in 2023 is up for debate, but we are preparing for this eventuality,” Chief Executive Scott Wine told analysts in a post-earnings call.

The Italian-American company, whose brands include Case IH, Steyr and New Holland, said adjusted earnings before interest and tax (EBIT) from industrial activities reached $654 million in the April-June period, topping a $605 million forecast in an analyst poll compiled by Reuters.

“Pricing, volumes and favourable mix offset significant cost escalation,” Wine said.

He cautioned about “a decidedly less advantageous climate for the next several quarters” but said the group expected to meet its full-year forecast for an increase in its net sales from industrial activities of between 10-14 percent and for a free cash flow of more than $1 billion.

By 1520 GMT Milan-listed shares in the group were up 5.6 percent, among the best performers within Italy’s blue chip index .FTMIB.

Wine cited the strong U.S. dollar impacting soft commodity prices, with potential further deterioration in farmer sentiment and income, and a possible decline of European industrial demand due to the war in Ukraine, energy risks and inflation.

However, he added, there were hints the supply chain crunch was easing.

“Raw material, labour, and freight cost escalations are sadly familiar to us, but we are finally starting to see signs of their impact diminishing,” he said.

Wine also said CNH had closed this week the sale of Aerostar, the aerospace and defence solutions business of its U.S. unit Raven.

In a separate statement, Maryland-based TCOM Holdings later on Friday announced the purchase of Aerostar.

Financial details of the transaction were not disclosed.

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“Don’t underestimate how difficult the environment is, it’s a battle,” CEO Scott Wine told analysts after the company posted a 9.2 per cent rise in operating profit as demand remained “healthy.”

“But I am confident in our team’s ability to navigate the current environment,” he said regarding logistics pressures and semiconductor shortages.

Wine said the group — whose agriculture brands include Case IH, New Holland and Steyr — was adapting production to the chip shortage and was delivering more to clients this quarter.

In its first results since spinning off its truck, bus and engine businesses under the name Iveco Group, CNH reported $429 million in adjusted earnings before interest and tax (EBIT) for industrial activities in the January-March period, topping the $391 million forecast by analysts in a poll compiled by Reuters (all figures US$).

“Order books remain exceptionally strong, up almost 40 per cent in agriculture and 80 per cent in construction,” Wine said, confirming full-year forecasts the group had previously released.

CNH added, however, took a $71 million hit in the quarter due to the suspension of its Russian operations, including for asset writedowns.

It also saw negative cash flow generation from industrial activities of $1.059 billion, as “critical supply chain disruptions” constrained its ability to ship finished goods.

— Giulio Piovaccari is a Reuters correspondent in Milan.

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The maker of Ram, Dodge, Chrysler, Fiat and Jeep vehicles said its Automotive Cells Co. (ACC) joint venture with Mercedes-Benz and TotalEnergies would build a battery plant in Italy and boost its capacity in Europe.

Separately, South Korea’s LG Energy Solution (LGES) said it would invest about $1.9 billion to set up a joint venture with Stellantis to produce batteries in Canada.

The total investment will be more than $5 billion, which Innovation Minister Francois-Philippe Champagne said was the largest ever in the Canadian auto sector. Officials did not immediately say how much the federal and provincial governments were contributing.

The Canadian plant, to be built just across the border from Detroit, aims for an annual production capacity in excess of 45 gigawatt hours (GWh) and will create an estimated 2,500 new jobs in the Windsor area, the companies said.

The moves are part of a plan by the world’s fourth largest carmaker to have five battery plants, two in North America and three in Europe, where it has already announced so-called ‘gigafactories’ in France and Germany, also being built via ACC.

They come as rivals also move forward with battery production plans and as the car industry struggles with chip shortages and other supply chain disruptions.

Volkswagen on Wednesday picked a site near Valencia for its planned battery cell plant in Spain, while Tesla on Tuesday launched a factory in Germany, its first European hub.

ACC said on Wednesday it would convert an existing Stellantis engine plant in the southern Italian town of Termoli into a battery facility as agreed Monday in a memorandum of understanding with Italian authorities.

The total investment for Termoli would amount to 2.3 billion euros (C$3.2 billion), including 370 million euros in public funds, Italy’s deputy industry minister said in a statement.

The plant in Canada comes as the country, rich in key materials for EV battery production, has been wooing battery makers to safeguard the future of its car manufacturing industry as the world seeks to cut emissions.

Ontario is geographically close to U.S. automakers in Michigan and Ohio, and General Motors, Ford Motor Co. and Stellantis have all announced plans to make electric vehicles at factories in Ontario.

“This is going to make Windsor the home of Canada’s first EV battery manufacturing plant, a plant that will be manufacturing hundreds of thousands of batteries,” Champagne said. “It’s great news for the entire auto sector in Canada.”

Separately, ACC said it would increase its industrial capacity to at least 120 gigawatt hours (GWh) by 2030, versus an initial target of 48 GWh, and scale up the development and production of next-generation high-performance battery cells and modules.

The plan will involve an investment of more than seven billion euros, ACC said, and will include bringing production capacity at its French and German plants to 40 GWh each, from the 24 GWh initially planned.

This suggests the Termoli battery plan would also have a capacity of 40 GWh. Tesla’s Berlin plant is aiming for an eventual capacity of 50 GWh.

Presenting its first business plan earlier this month, Stellantis said it aimed to sell five million battery electric vehicles a year by 2030. It also increased its planned battery capacity by 140 GWh to approximately 400 GWh, through its five gigafactories and additional supply contracts.

— Reporting for Reuters by Giulio Piovaccari in Milan and Steve Scherer in Ottawa; additional reporting by Giuseppe Fonte and Giulia Segreti in Rome and Heekyong Yang and Joyce Lee in Seoul.

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“It’s the worst supply chain situation I’ve seen in my career,” Chief Executive Scott Wine told analysts. “I recently equated our tireless efforts to manage this crazy supply chain situation to a game of whack-a-mole.”

The maker of farm machinery, Iveco commercial vehicles, construction equipment and powertrains said it now estimated an impact from raw material cost increases, freight costs and other supply chain bottlenecks worth around $1 billion in 2021.

The CEO however said a “robust environment” contributed to expand CNH’s order books and to an “excellent” performance across all its main businesses in the second quarter of this year and that it was poised for a “noteworthy second half”.

The group now sees its sales from industrial activities to grow by 24-28 percent this year versus a previous forecast of between 14-18 percent. Free cash flow is seen in excess of $1 billion, from a previous forecast of $0.6 billion-$1.0 billion.

The outlook improvement came as CNH said its adjusted operating earnings (EBIT) of industrial activities stood at $699 million in the second quarter, versus a $58 million loss a year earlier. That compares with a $496 million forecast in an analyst poll compiled by Reuters.

Sales at the group’s industrial activities rose 65 percent in the April-June period to $8.49 billion, topping a $7.06 billion analyst forecast.

Milan-listed shares in CNH turned positive to rise as much as 1.7 percent after results were published. By 1515 GMT they were up 0.1 percent.

CNH, controlled by Exor, the holding company of Italy’s Agnelli family, last month announced a $2.1 billion deal to buy U.S.-based Raven Industries to bolster its agricultural equipment business, as it prepares to spin off its truck, bus and engine operations.

Asked whether he saw interference from potential rival bidders, Wine said he believed CNH was the “right owner” for Raven.

“We think that we’re going to bring this home and quite confident,” he said, adding he saw no impediments to complete the deal – expected to be finalised in the fourth quarter – “in a timely fashion”.

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In March the group, which is controlled by Exor, the holding company of Italy’s Agnelli family, withdrew its financial outlook for this year due to the deterioration of global macroeconomic and market conditions triggered by the virus outbreak.

The maker of farm machinery, Iveco commercial vehicles, construction equipment and powertrains, said its adjusted operating loss from industrial activities amounted to $58 million in the second quarter, better than a forecast in an analyst poll compiled by Reuters for a $221 million loss.

That compares with an operating profit of industrial activities of $527 million in the same period of last year.

Milan-listed shares in CNH Industrial trimmed losses after results were released. By 1220 GMT they were down 0.4 percent after being down up to 4 percent previously.

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CNH said board chair Suzanne Heywood would replace Hubertus Muhlhauser as CEO until a permanent replacement was found.

A source close to the matter said Heywood’s appointment was a board initiative and that Muhlhauser’s resignation followed.

“The board reached its unanimous decision and accepted the resignation of Hubertus Muhlhauser as chief executive officer, who has left the group with immediate effect,” CNH said in a statement, adding it would stick with the group’s plan to split in two.

The company later added that Mulhauser left CNH “to pursue other interests.” In a statement Tuesday in response to a request from the Italian Stock Exchange, CNH also said he had offered to assist the company while it searched for a successor.

Muhlhauser, who took office as CEO in September 2018, could not be reached for comment Monday.

Exor, the investment firm of Italy’s influential Agnelli family and CNH’s biggest shareholder, said in a separate statement it welcomed Heywood’s appointment to provide the business with “the decisive leadership required especially in the current global context.”

Heywood is also Exor’s managing director.

“Extraordinary times require clear and effective leadership of the kind we know Suzanne Heywood will bring to her new role,” said Exor CEO John Elkann, who is also the chairman of automaker Fiat Chrysler.

CNH, the Italian-American maker of Case IH, New Holland and Steyr farm machinery, Iveco commercial vehicles, construction equipment and powertrains, slashed its 2020 earnings forecast in February, blaming weakening demand from farmers in the Americas.

The company on Friday said it was suspending most of its European assembly operations for two weeks due to the coronavirus outbreak, citing supply chain constraints.

On Monday, CNH said it had also appointed Oddone Incisa as its new chief financial officer to succeed Max Chiara, who will leave the company to take up a new position. The source said that change was not linked to the CEO replacement.

The company said a permanent CEO would be named after a thorough search process.

CNH’s board confirmed its strong support for a plan — devised when Muhlhauser was CEO — to split the group in two and list its Iveco truck, bus and FPT engine divisions separately in an effort to boost asset values and streamline its businesses.

— Reporting for Reuters by Giulio Piovaccari in Milan.

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The plan comes just six years after CNH Industrial was created when Fiat Industrial — spun off from the Italian carmaker — was folded into U.S.-based agricultural and construction machine firm CNH.

CNH Industrial aims to complete the separation by early 2021, creating a company to run agriculture and construction brands such as Case and New Holland and listing a separate unit to manage Iveco trucks, Iveco and Heuliez buses and FPT powertrains.

Monica Bosio, head of equity research at Intesa Sanpaolo-Banca IMI, said the plan should help boost the value of the agriculture side, which is currently trading at a discount compared to competitors.

“The split should also give more appeal to the truck unit as it might become an interesting asset for other operators, despite the pledge by Exor to remain key shareholder in both entities,” she said.

CNH’s top shareholder Exor — the holding group of Italy’s Agnelli family, which also controls Fiat Chrysler Automobiles and premium sports car maker Ferrari — said in a statement it supported the new plan.

“Exor will continue to be the shareholder of reference in both entities following completion of the spin-off process,” it said.

Last year, CNH’s agriculture and construction business had proforma sales of $15.6 billion, while its so-called “On-Highway” operations generated $13.1 billion (all figures US$).

The group’s most profitable businesses were agricultural equipment and powertrains, which both boasted margins of 8.9 per cent compared with the 2.7 per cent of commercial vehicles.

Under the plan, some high-margin industrial vehicle brands including heavy-duty quarry truck maker Astra and Iveco Defence Vehicles will be assigned to the agricultural and construction unit.

“The agricultural entity will trade at higher multiples from the beginning, despite the challenging environment, because that’s the business with higher margins. Multiples at the truck entity might increase depending on the management’s ability to extract margins and eventual M+A perspectives,” Bosio added.

But in a sign agricultural margins could also come under pressure, U.S. rival Deere and Co. last month announced a review of costs after bad weather and the U.S.-China trade war dented profits, triggering a profit warning.

“It looks as if (Exor head John) Elkann is focusing on cash-in deals to help fund asset diversification at Exor,” said Roberto Lottici, asset manager at Milan-based Ifigest.

The new plan, dubbed “Transform 2 Win” will reduce operating costs and increase efficiency “through targeted restructuring actions,” CNH said in a statement.

The group expects full implementation of the plan by the end of 2022 and to spend between $450 million and $500 million in restructuring charges.

In a separate statement, CNH said it planned to enter a strategic and exclusive partnership for Iveco with U.S.-based Nikola Corporation, as it seeks to accelerate its transition toward emission neutrality for heavy-duty trucks in North America and Europe.

The Italian-American group will take a $250 million stake in Nikola, which will kick-off the production of a zero-emission heavy-duty vehicle powered by proprietary hydrogen fuel cell and battery technology, it said.

— Reporting for Reuters by Giulio Piovaccari; additional reporting by Stephen Jewkes.

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