Chrysler 1999 Annual Report Download - page 44

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Report on Operations – Agricultural and Construction Equipment
❚In January 2000, CNH completed the acquisition of Flexi-
Coil Ltd., a leading provider of air seeding systems and
tillage equipment based in Canada.
❚In September, Harbin New Holland Beidahuang Tractor Ltd.
began operations in the People’s Republic of China. The
joint venture, in which CNH holds a 70% interest, will
produce agricultural tractors in the 100-180 horsepower
range for sale in the People’s Republic of China and for
export.
PRODUCT INNOVATION
In 1999 the Company continued the efforts to renovate
its product lines and expand its distribution network:
❚CNH launched five new models of New Holland’s TM
series tractors, with engine horsepower ranging from 92
PTO hp to 135 PTO hp.
❚During the third quarter, the Sector extended the availability
of many of the Company’s newest products to the markets
of the Asia/Pacific region.
❚The latest large square balers, featuring the industry’s
first self-steering tandem axle and outstanding driving
characteristics, were introduced in Europe.
❚During the second quarter, the Company launched an
extensive array of new construction equipment in North
America and enhanced its offering of agricultural products.
❚In the first quarter, the Company expanded its construction
equipment product offering in Latin America through the
launch of a full range of hydraulic excavators, manufactured
by O&K.
FINANCIAL ACTIVITIES
As it relates to the Company’s financial services operations,
early in 1999, a fully licensed Banco New Holland Brasil S.A.
commenced financing operations. In addition, New Holland
Financial Services expanded its activity in its recently created
entities serving Australia and Denmark.
RESULTS FOR THE YEAR
The results of CNH do not include those of Case, which
will be consolidated into the Group’s accounts in year 2000.
Stated in US dollars, the Company’s reporting currency,
1999 revenues totaled $5,589 million down 2.2 % from 1998.
Stated in euros, revenues amounted to 5,246 million, or
2.3% more than the 5,127 million reported in 1998. The
appreciation of the US dollar versus the single European
currency accounts for the increase. Excluding the contribution
of O&K, which was consolidated for the first time in 1999,
revenues in 1999 were down approximately 5.5% on a
comparable basis. The decrease is mainly due to lower units
sold, particularly in North America, and to the unfavorable
sales mix, with a greater preponderance of lower-segment
products.
Stated in US dollars, the Company’s reporting currency,
operating income for 1999 was $395 million, compared with
$504 million in 1998 (-21.6%). Stated in euros, operating
income totaled 371 million, or 17.9% less than in the previous
fiscal year (452 million).
The return on sales declined from 8.8% in 1998 to 7.1 %
in 1999; the main cause was the reduction in sales for the
reasons described above, which affected negatively the
absorption of fixed costs. The improvement in the Company’s
cost structure, as a result of the restructuring actions initiated
in 1998, was not sufficient to compensate such effect.
Depreciation and amortization totaled 117 million euros,
compared with 116 million euros in 1998. Over the same
period, research and development costs increased from
136 million euros to 158 million euros.
Net income amounted to 216 million euros, down from 507
million euros in 1998, when it reflected an extraordinary gain
of 233 million euros generated by a change in the accounting
principle for deferred taxes. The Sector’s interest in net
income came to 212 million euros, compared with 501 million
euros in 1998.
The decrease in net income had a direct impact on cash
flow, which fell to 333 million euros (624 million euros in 1998).
Again in 1999, the achieved rate of return on invested capital
allowed for a positive value creation.