Navistar International Corp. said financial results for its fourth quarter fell short of expectations because of softness in customer demand for trucks in the heaviest Class 8 weight segment.
The Lisle, Ill. truck maker reported a net loss of $34 million compared with a $50 million deficit in the same period a year earlier. Revenues in the quarter fell to $2.06 billion in the fourth fiscal quarter, a 17 percent decline from the same period in 2015.
Sales of buses and trucks in the Class 6 through 8 weight segments dropped 18 percent year-over-year to 13,000 units, pushing revenue for those lines down 20 percent to $1.4 billion, Navistar said.
The decline reflects weaker Class 8 volumes in the U.S. and Canada, said Troy Clarke, the company’s chief executive.
Wall Street analysts had expected the company to return to profitability in the fourth quarter.
J.P. Morgan analyst Ann Duignan also had forecast higher revenue of $2.11 billion.
Navistar reduced spending during the quarter. Its costs fell to $2.08 billion in the quarter from $2.52 billion during the same quarter in 2015.
“In the fourth quarter and throughout the full year, we’ve demonstrated our ability to lower our break-even point and improve our operations … despite a substantial decline in revenues primarily due to the challenging conditions in the Class 8 market,” Clarke said.
Navistar said it’s still being stung from costs associated with warranty work on its failed diesel-exhaust technology that was designed earlier this decade to meet new federal standards for nitrogen oxide emissions. Navistar attempted to introduce trucks that relied solely on a pollution-cutting technology known as gas exhaust recirculation, but that created reliability and fuel economy issues for its trucks.
The company reported an $8 million charge for the pre-existing warranty work, and took a $9 million hit for restructuring charges. The company said it is still moving ahead with its strategic alliance with Volkswagen Truck and Bus, saying that all appropriate regulatory filings have been made and that it already received approval in the U.S. and Poland.
Volkswagen will own almost 17 percent of Navistar when the alliance is completed. The German automaker will invest $256 million in the truck company and appoint two directors to its board.
For the full year, the Navistar reported a net loss of $97 million, narrowing last year’s $184 million loss. Revenue, however, declined to $8.1 billion in fiscal 2016 from $10.1 billion a year earlier, Navistar said.
The company said in the fourth quarter it launched its International LT Series “flagship” Class 8 trucks with improved fuel efficiency, reliability and driver appeal. That’s helped sales. Navistar’s retail market share increased to 13.6 percent during the quarter from 10.2 percent in the prior three months, according to J.P. Morgan, the investment bank.
“We continued to invest and launch new products in 2016,” Clarke said. “We also saw solid truck and bus order share performance, which positions us for higher retail market share in the future.”
Navistar forecast industry deliveries of Class 6 through 8 trucks and buses in the United States and Canada to be in the range of 305,000 to 335,000 units for fiscal year 2017.
The company said it forecasts cash on hand at the end of the 2017 fiscal year – a year from now – of about $800 million, including the capital from the Volkswagen alliance.