LISLE, Ill. — Navistar reported a net loss of $33 million (all figures US) in the first quarter of 2016 on revenues of $1.8 billion.
That’s down from a net loss of $42 million compared to a year ago on revenues that were down 27% compared to Q1 2015. The reduced revenue was attributed to lower volumes in the US and Canadian truck markets, reduced exports and lower engine volumes in Brazil. The company says it will return to profitability this year.
“Despite a lower revenue base, we continued to unlock value by significantly improving adjusted EBITDA through managing and optimizing our costs,” said Troy A. Clarke, Navistar president and chief executive officer. “We are encouraged by our Q1 performance and remain on track to achieve our goals of returning to profitability and generating manufacturing free cash flow in 2016.”
“This was a solid quarter in which we made real progress toward our 2016 targets,” added Walter G. Borst, Navistar executive vice-president and chief financial officer. “We operated within our indicated cash range in what is seasonally our weakest revenue and most cash-intensive quarter, ending the first quarter 2016 with $673 million in manufacturing cash, cash equivalents and marketable securities. We also continued to manage costs out of our business, putting us on track to achieve our annual $200 million cost reduction target.”
Among the quarter’s highlights, Navistar: reduced costs by $57 million; achieved record Q1 parts segment profit of $150 million; and decreased warranty expenses to 2.6% of manufacturing revenue, approaching “best in class” quality levels.
The company acknowledged an industry-wide surplus of used trucks.
“We expect the industry’s oversupply of used trucks will continue in the near term,” Borst said. “While our inventory is higher than we planned, I am confident in our abilities to address this issue and bring these inventories down over time.”
Navistar also announced it will be expanding its product line, with a new product announced on average every six months. This will completely refresh its product line by the end of 2018, Clarke said.
The truck maker issued guidance calling for retail deliveries of Classes 6-8 trucks and buses in the US and Canada to total 350,000-380,000 units for the fiscal year 2016. The Class 8 truck market will be down from 279,000 units last year to 240,000-270,000 units this year, however the medium-duty market is expected to grow.