By Deborah Mary Sophia
(Reuters) - CNH Industrial cut its annual profit forecast and warned of steeper declines in farming equipment sales on Thursday, as a global agriculture downturn squeezes demand for its tractors and combines.
Dwindling farm incomes as crop prices moderate and higher borrowing costs are forcing a rethink on big-ticket purchases, setting up for a murky demand backdrop for heavy equipment makers.
CNH projected an 11% to 15% drop in agriculture segment sales for the year, compared with its previous expectation of 8% to 12% decline.
Meanwhile, machinery dealers are looking to reduce inventories after bulking up early last year to cater to a surge in demand, forcing CNH and peers to cut production.
"Despite somewhat significant production cuts, we still did not decrease dealer inventory at the levels we wanted to. So we've got work to do," said outgoing CEO Scott Wine.
The most pressure is in combines, where used inventory was building up and demand was down "quite considerably", he said.
Agriculture demand was low across all key regions including the Americas and Europe, and company executives also said they were cautious about the construction segment, which typically makes up about 16% of overall sales.
"(Construction) has been a robust market but it's not going to get more robust throughout the year. If anything, it's going to get less," Wine said on a post-earnings call.
Caterpillar (NYSE:CAT), the world's largest construction equipment maker, last week forecast glum current-quarter sales.
CNH now expects full-year adjusted profit of between $1.45 and $1.55 per share, compared with $1.50 to $1.60 projected earlier.
Still, the company topped market expectations for quarterly sales and profit, aided by higher prices.
Shares of the company were last up about 1% in choppy trading. The stock dropped as much as 2% earlier.