Navistar International Corp. on Sept. 6 announced that it rolled back into the black during its fiscal third quarter with a profit of $37 million, although it would have been higher had it not been involved in litigation over its earlier model engines.
The profit of 38 cents per share compares to a year-earlier loss of $34 million, or 42 cents per share, while revenue increased 6% to $2.2 billion, primarily due to an increase in truck segment volumes, according to the truck and engine manufacturer.
The third quarter of fiscal 2017 had adjustments that including a $31 million charge for a legacy engine litigation matter, $6 million of pre-existing warranty charges, and a $3 million net benefit in asset impairments and restructuring costs.
"We returned to profitability this quarter thanks to strong operational performance across the board, highlighted by a 15% increase in chargeouts and solid market share gains amid flat industry conditions, and strengthening margins," said Troy A. Clarke, Navistar chairman, president and CEO. "We also moved ahead with new products and solutions that position us well for ongoing growth, while continuing to restructure our business to improve our future competitiveness."
Chargeouts are defined as trucks that have been invoiced to customers, with units held in dealer inventory primarily representing the difference between retail deliveries and chargeouts.
Truck segment net sales increased 10% to $1.5 billion compared to third quarter 2016, due to higher volumes in its core markets of Class 6-8 trucks and buses in the United States and Canada, plus an increase in Mexico truck volumes, and the production ramp up of GM-branded units manufactured at Navistar's Springfield, Ohio plant. Chargeouts in the company's core markets increased by 15% during the third quarter.
In the third quarter of 2017, Truck segment results improved by $61 million year-over-year, recording a $7 million profit compared to a $54 million loss in the fiscal third quarter of 2016.
The improvement was primarily driven by the impact of higher volumes in core markets and Mexico, lower used truck losses, and lower restructuring charges, partially offset by lower other income, according to the company
Parts segment net sales declined $11 million to $586 million compared to third quarter 2016 but recorded a profit of $157 million, up 3% compared to third quarter 2016.
Global operations net sales were flat compared to the prior year at $84 million, but moved from a $5 million loss a year earlier to a $3 million profit in the most recent quarter.
For the third quarter 2017, the financial services segment recorded a profit of $23 million, down $3 million compared to third quarter 2016.
Navistar also reported its alliance with Volkswagen Truck & Bus is moving forward as planned.
“The two companies are finding significant opportunities to leverage their combined scale through their procurement joint venture, while also pursuing technology collaboration on a number of fronts,” Navistar said in a news release.
The company reiterated its 2017 guidance that retail deliveries of Class 6-8 trucks and buses in the U.S. and Canada are forecast to be in the range of 305,000 units to 335,000 units for fiscal year 2017 and that Navistar’s full year revenue is expected to be similar to 2016.
"Looking ahead, I like our position as we enter the prime selling season," Clarke said. "I feel good about the fourth quarter and look forward to finishing the year on a strong note."