Traton CEO: ‘We need to somewhere expect that price increases cannot continue’
Truck manufacturer Navistar finished 2022 riding a big wave, recording a 35% increase in fourth-quarter unit sales and an operating profit of about $177 million, which reversed a small loss in late 2021.
Navistar, which has been a subsidiary of Germany-based Traton SE since mid-2021, sold 21,984 units in Q4 versus 16,231 in the same period a year earlier. Higher factory utilization and rising prices helped lift its sales and profits even though supply chain and material price pressures persisted.
While those problems are gradually easing, they have still led CEO Christian Levin and his team to put limits on the orders they’re taking at Navistar and Traton’s other divisions.
“We continue to be restrictive in accepting orders as we are tightly managing the supply chain situation and the input costs,” Annette Danielski, company CFO, told analysts and investors March 7. “The development of order intake is more driven by supply and the ability to produce and deliver later.”
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Those uncertainties and the expectations for slower economic growth in 2023 have helped lead Traton’s leaders to forecast sales growth of 5% to 15% this year (with truck sales growth offsetting a decline in bus activity) with strong operating margin growth of up to two percentage points. Notable in the forecast is that it calls for a slight drop in service revenues because many fleets are now driving newer units and an assumption that further significant price increases won’t happen.
“Discussing with the customer [who] didn't buy vehicles for a year or two, it starts to be a little bit cumbersome,” Levin said of price hikes in 2021 and 2022 while also noting that Traton’s prices early this year have held up well. “We need to somewhere expect that this cannot continue, so we've chosen to be rather conservative on this.”
A big priority for the year is Navistar launching the International S13 integrated powertrain in the second half to continue the company’s push toward having just two chassis platforms. That unit promises fuel efficiency gains of up to 15% thanks in part to a new aerodynamics package.
“The plan is to shift over before the market is shifting completely over to battery electric, which will probably happen, given the proposed legislation from [the] EU, in the time frame up to 2040,” Levin said. “It will be a bumpy road. It will cost some money. But we think this is the fastest way to come to a really high-performing company.”
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Navistar rang up revenues of roughly $11.1 billion in all of 2022, its first full year under the Traton umbrella. During the second half, sales rose 64% year-over-year to nearly $6.2 billion. Operating profits for the year were $530 million, with more than $360 million of that coming in the second half, as sales totaled nearly 82,000 units.
Those numbers helped lift Traton’s consolidated results, which included topping 300,000 vehicles sold for the first time: Taking into account mainly its exit from Russia, the company posted adjusted earnings of nearly $2.2 billion versus about $1.7 billion in 2021.
Shares of Traton (Ticker: TRATF) rose nearly 5% in Frankfurt trading March 7. Over the past six months, they have climbed more than 30%, growing the company’s market capitalization to more than $9 billion.
