By Susan Kelly
CHICAGO, July 24 (Reuters) - Two top farm equipment makers on Thursday reported higher profits before restructuring costs and said sales in the depressed sector had perked up in recent months, which gave their shares a boost.
CNH Global N.V. , whose parent is Italian car maker Fiat , said the agricultural equipment industry, which has suffered through a five-year farm recession, saw second-quarter sales improve "significantly" from a year ago in North America and Latin America.
CNH, maker of Case IH and New Holland brand equipment, said sales of its own farm machinery, especially combines, increased at the retail level, enabling dealers to reduce stocks as it adjusted its manufacturing output.
Smaller rival Agco Corp. also said industry sales improved in recent months, reflecting stable commodity prices and improved weather conditions.
Analysts said the agricultural equipment market, while not yet in recovery mode, was showing signs of stabilizing, but cautioned that falling grain prices could delay a rebound.
"Lower grain prices will make the spring 2004 recovery hopes in North America less bullish than an economic recovery," Goldman Sachs analyst Joanna Shatney wrote in a research report.
CNH NET FALLS
Lake Forest, Illinois-based CNH said its second-quarter net income fell to $36 million, or 27 cents a share, from $39 million, or 57 cents a share, a year earlier. Before one-time charges, it earned $56 million, up from $45 million.
Excluding restructuring charges in both years, earnings fell to 42 cents a share from 66 cents. CNH's shares outstanding nearly doubled from a year ago, reducing earnings on a per-share basis, after the company completed a debt-to-equity swap with parent Fiat and issued new equity.
The earnings were in line with analysts' expectations.
Revenue rose to $2.91 billion from $2.71 billion, helped by the weaker dollar, CNH said.
For the full year, CNH predicted "significant bottom line improvement," based on expected market share gains in high-horsepower tractors and combines, cost controls and higher margins on new products.
CNH said it expects worldwide industry sales this year to increase slightly from a year ago, with higher sales of under-40-horsepower tractors in North America offsetting flat sales of its more powerful models. Combine sales were also projected to rise slightly in North America.
In Europe, industry sales of tractors were expected to remain flat, with sales of combines down slightly, but the company warned that unseasonably hot weather and drought conditions could hurt sales in the second half of the year.
AGCO RESULTS IMPROVE
Agco, based in Duluth, Georgia, posted a higher second-quarter profit as it focused on reducing costs to weather a prolonged slump in its agricultural markets.
Results exceeded analysts' expectations, which were lowered after the company cut its own outlook last month due to a sales shortfall and the cost of relocating some production to France and Brazil from England.
Agco said its second-quarter net income rose to $15.6 million, or 21 cents a share, from $14.1 million, or 19 cents a share, a year ago. Excluding one-time items, Agco said it earned $29.0 million, or 38 cents a share, compared with $29.1 million, or 39 cents, a year ago.
The average analyst forecast was 31 cents a share.
Sales rose to $902.7 million from $772.6 million, boosted by improved demand in South America and the weaker dollar.
Shares of CNH rose 35 cents, or 4.1 percent, to close at $8.90 on the New York Stock Exchange. Agco shares gained 40 cents, or 2.2 percent, to end at $18.90.