10-Q: CNH Industrial Q2 Earnings Plunge Amid Weak Demand

CNH Industrial reports a significant drop in second-quarter and first-half 2025 revenues and net income, driven by lower industry demand and dealer destocking.

Summary

• Total revenues for the three months ended June 30, 2025, decreased by 14.2% to $4,711 million, and for the six months, they declined by 17.1% to $8,539 million.
• Net sales for Industrial Activities fell by 16.3% in Q2 2025 to $4,021 million and by 19.5% in H1 2025 to $7,193 million, primarily due to lower shipment volumes, decreased industry demand, and continued dealer destocking.
• Net income attributable to CNH Industrial N.V. for Q2 2025 was $213 million, a 46.6% decrease from $399 million in Q2 2024, and for H1 2025, it was $344 million, a 55.2% decrease from $767 million in H1 2024.
• Basic and diluted earnings per share (EPS) for Q2 2025 were $0.17, down from $0.32 in Q2 2024, and for H1 2025, basic EPS was $0.28 and diluted EPS was $0.27, down from $0.61 in H1 2024.
• Adjusted EBIT for Industrial Activities decreased by 55.4% to $224 million in Q2 2025 and by 62.9% to $325 million in H1 2025.
• Agriculture segment net sales declined by 17.0% in Q2 2025 and 20.0% in H1 2025, with Adjusted EBIT margins falling to 8.1% and 6.9% respectively.
• Construction segment net sales decreased by 13.1% in Q2 2025 and 17.2% in H1 2025, with Adjusted EBIT margins at 4.5% and 3.6% respectively.
• Financial Services net income decreased by $4 million in Q2 2025 to $87 million and by $32 million in H1 2025 to $177 million, mainly due to increased credit risk provisions in Brazil.
• The receivable balance greater than 30 days past due as a percentage of receivables for Financial Services increased to 3.9% as of June 30, 2025, up from 2.5% as of June 30, 2024, primarily due to higher delinquencies in Brazil.
• A material weakness in internal control over financial reporting related to the existence and completeness of raw material and work-in-process inventory remains unremediated as of June 30, 2025.

Sentiment

Score: 3

Explanation: The filing indicates a significant downturn in financial performance across key metrics, driven by challenging market conditions, decreased demand, and dealer destocking. While some cost reductions and a positive resolution to an SEC inquiry are noted, the overall financial results are substantially weaker year-over-year, and an unremediated material weakness in internal controls is a concern.

Positives

• Restructuring expenses significantly decreased to $5 million in Q2 2025 from $51 million in Q2 2024, and to $11 million in H1 2025 from $82 million in H1 2024.
• Interest expense decreased to $360 million in Q2 2025 from $418 million in Q2 2024, and to $722 million in H1 2025 from $812 million in H1 2024.
• Industrial Activities benefited from favorable net price realization and improved purchasing and manufacturing costs, partially offsetting the impact of lower volumes.
• The SEC Staff concluded its inquiry into revenue recognition and sales practices on July 25, 2025, and did not intend to recommend any enforcement action.
• The company extended the maturity date of its five-year committed revolving credit agreement by one year to April 19, 2030.
• Undrawn medium-term unsecured committed facilities increased to $5,925 million at June 30, 2025, from $5,493 million at December 31, 2024.

Negatives

• Total revenues declined significantly by 14.2% in Q2 2025 and 17.1% in H1 2025.
• Net income attributable to CNH Industrial N.V. plunged by 46.6% in Q2 2025 and 55.2% in H1 2025.
• Basic and diluted EPS saw substantial declines of approximately 47% in Q2 2025 and 54% in H1 2025.
• Adjusted EBIT of Industrial Activities decreased by 55.4% in Q2 2025 and 62.9% in H1 2025.
• Cost of goods sold as a percentage of net sales of Industrial Activities increased to 79.4% in Q2 2025 (from 77.1%) and 80.1% in H1 2025 (from 77.2%), indicating reduced profitability.
• Lower shipment volumes, decreased industry demand, and continued dealer destocking negatively impacted both Agriculture and Construction segments.
• Financial Services net income decreased due to increased credit risk provisions, particularly in Brazil, and a higher effective tax rate.
• The receivable balance greater than 30 days past due for Financial Services increased to 3.9% from 2.5% year-over-year, mainly from higher delinquencies in Brazil.
• Equity in income of unconsolidated subsidiaries and affiliates declined significantly due to lower sales in the TrkTraktr ve Ziraat Makineleri A.S. joint venture.
• The effective tax rate increased to 27.6% in Q2 2025 (from 20.9%) and 28.1% in H1 2025 (from 20.1%).
• A material weakness in internal control over financial reporting related to inventory management remains unremediated.

Risks

• Global economic volatility, including geopolitical events, shifts in trade and economic policies, tariffs, and changes in commodity prices and climate conditions, may continue to disrupt operations.
• Production and supply chain disruptions, such as industry capacity constraints, material availability, and global logistics delays, are expected to persist through 2025.
• Macroeconomic pressures like new and retaliatory tariffs, fluctuating currency exchange rates, interest rates, and inflation may impact the company's business, customers, and suppliers.
• Uncertainty in consumer confidence and worldwide demand for capital goods and related products poses a risk to sales volumes.
• Changes in government policies regarding banking, monetary and fiscal policy, legislation (agriculture, environment, debt relief, subsidy programs, trade, commerce, infrastructure development), and international trade and investment policies (sanctions, import quotas, capital controls, tariffs) could adversely affect the business.
• Actions of competitors in the various industries in which the company operates could impact market share and profitability.
• Development and use of new technologies and technological difficulties may affect product competitiveness and R&D costs.
• Compliance requirements with respect to engine emissions, safety, or other product aspects could lead to increased costs or regulatory issues.
• Labor relations, interest rates, currency exchange rates, inflation, energy prices, and agricultural commodity prices are external factors that can impact financial results.
• The company's ability to obtain financing or refinance existing debt could be affected by market conditions.
• Price pressure on new and used equipment may impact sales and margins.
• The resolution of pending litigation and investigations, including product liability, asbestos, intellectual property, emissions, and environmental claims, could result in substantial damages or fines.
• Security breaches, cybersecurity attacks, technology failures, and other disruptions to IT infrastructure could impact operations.
• Obligations related to pension plans and other post-employment benefits represent ongoing financial commitments.
• Political and civil unrest, as well as volatility and deterioration of capital and financial markets, pose broader systemic risks.
• The unremediated material weakness in internal control over financial reporting related to inventory management could lead to material misstatements in financial statements.
• Failure to realize anticipated benefits from business initiatives, acquisitions, joint ventures, strategic alliances, or divestitures could impact strategic goals.
• There is a risk that Iveco Group N.V. or its subsidiaries may default on potential payment obligations arising from follow-up damages claims related to a 2016 European Commission decision.
• Brazilian market conditions, including current crop prices, flooding, and drought events, have led to increased retail credit losses and payment refinancing for South American customers.

Future Outlook

The global economy is expected to continue experiencing volatile disruptions through the rest of 2025 due to geopolitical events, shifts in trade and economic policies, tariffs, changes in commodity prices, and climate conditions. These factors are anticipated to affect the price and availability of products and services, as well as customer profitability, purchasing power, and demand for products. The company is evaluating the financial implications of the One Big Beautiful Bill Act (OBBBA) and will begin reflecting its effects in the third quarter of 2025.

Management Comments

• Management is closely monitoring global economic conditions and the impact that macroeconomic pressures, such as new and retaliatory tariffs, fluctuating currency exchange rates, interest rates, and inflation, may have on the business, customers, and suppliers.
• Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented.
• Management believes the reasonable possible range of losses for unresolved legal matters, in addition to amounts accrued, would not have a material effect on consolidated financial statements.
• Management is of the opinion that the outcome of environmental matters will not have a material adverse effect on the company's financial position or results of operations.

Industry Context

The agricultural equipment industry experienced significant declines in demand, with North America seeing a 7% drop in tractors under 140 HP and a 37% drop in tractors over 140 HP in Q2 2025, and combines down 23%. EMEA tractor demand was down 7%, while Asia Pacific tractor demand was up 3% but combine demand was down 42%. The construction equipment industry saw mixed global trends in Q2 2025, with Heavy construction equipment increasing by 3% year-over-year, but Light construction equipment decreasing by 2%. Aggregated demand decreased in North America and South America, while increasing in EMEA and Asia Pacific. Overall, the market is characterized by decreased industry demand and continued dealer destocking, impacting sales volumes across both industrial segments.

Comparison to Industry Standards

• No specific comparable companies, projects, or results were mentioned in the filing to assess the results in the context of global benchmarks.

Corporate Governance

Legal Proceedings

• Follow-up on Damages Claims: CNH cannot be excluded from current and future follow-on proceedings originating from a 2016 European Commission decision against Iveco S.p.A. and its competitors regarding certain business practices in the European Union (1997-2011). CNH has intercompany arrangements for recourse against Iveco and IMAG for reimbursement of any damages paid.
• FPT Emissions Investigation: German criminal investigations concluded in December 2023. FPT is defending individual civil claims alleging emissions' non-compliance in Germany and Austria. CNH had no role in the design and sale of the engine models and vehicles in question.
• SEC Subpoenas: The SEC inquiry into the company's revenue recognition and sales practices concluded on July 25, 2025, with the SEC Staff not intending to recommend any enforcement action to the Commission.

Related Party Transactions

• EXOR N.V., holding 45.3% of CNH's voting power, is a related party, but no significant transactions occurred with EXOR N.V. during the six months ended June 30, 2025 or 2024.
• Transactions with Iveco Group post-Demerger include the sale of engines from Iveco Group to CNH, and arms-length service contracts (Master Service Agreements, Engine Supply Agreement, Financial Service Agreement). Net revenues from Iveco Group were $54 million (H1 2025) and purchases were $319 million (H1 2025).
• Financial receivables from Iveco Group N.V. totaled $263 million and financial payables to Iveco Group N.V. were $69 million as of June 30, 2025.
• Transactions with unconsolidated subsidiaries and affiliates (e.g., CNH de Mexico, TrkTraktr, New Holland HFT Japan) include net sales of $174 million (H1 2025) and purchases of $192 million (H1 2025).
• Pledged guarantees and commitments for CNH Industrial Capital Europe S.a.S., an unconsolidated affiliate, amounted to $72 million as of June 30, 2025.

Stakeholder Impact

• Shareholders: Experienced a significant negative impact due to the substantial decline in net income and earnings per share. The share buyback program authorized in February 2024 did not see any purchases in Q2 2025.
• Employees: The company's restructuring program led to a decrease in labor costs, which may imply workforce adjustments or reductions.
• Customers: Demand for agricultural and construction equipment was negatively impacted by global economic conditions, fluctuating commodity prices, and extreme weather events (e.g., flooding and drought in Brazil), affecting their purchasing power. Payment refinancing was offered to certain South American customers.
• Dealers: Affected by continued dealer destocking and lower industry demand, impacting their inventory levels and sales. The Financial Services segment provides wholesale financing to dealers.
• Creditors: Total debt increased, but the company maintains adequate liquidity and access to financial markets, with committed credit facilities extended, suggesting continued ability to meet obligations.

Next Steps

• The company will begin reflecting the financial implications of the One Big Beautiful Bill Act (OBBBA) in the third quarter of 2025.
• Planning the execution of full-physical inventory counts of raw material and work-in-process inventory in the fourth quarter of 2025 at certain locations as part of remediation efforts for the material weakness.
• Developing standard operating procedures to ensure consistent communication of the raw material and work-in-process inventory count process and adherence to the cycle count policy.
• Providing training on standard operating procedures, cycle count policy, and related internal controls to plant personnel.
• The company expects to adopt new income tax disclosures as required on Form 10-K for the year ended December 31, 2025.

Key Dates

Recommendation

The company reported a substantial year-over-year decline in both revenue and net income across its core industrial segments, driven by weakened market demand and ongoing dealer destocking. While some cost efficiencies were noted, the overall financial performance is significantly worse, and the increase in credit risk provisions in the Financial Services segment, particularly in Brazil, indicates deteriorating asset quality. Furthermore, the disclosure of an unremediated material weakness in internal controls related to inventory management raises concerns about financial reporting reliability. Despite the positive resolution of the SEC inquiry, the combination of poor operational results, a challenging market outlook, and internal control deficiencies suggests a negative investment thesis.

Keywords

CNH Industrial, Agricultural Equipment, Construction Equipment, Financial Services, SEC Filing, Quarterly Report, 10-Q, Earnings, Revenue, Net Income, Adjusted EBIT, Dealer Destocking, Market Demand, Brazil Market, Internal Controls, Supply Chain, Geopolitical Risk, Financial Performance, Capital Goods