Features International News — 31 January 2018

Paccar,  the maker of  Kenworth, Peterbilt and DAF trucks globally has  reported record revenue and the second-highest annual profit in company history for the year ended 31 December 2017.

The results come ion the back of  improved North American market share along with a strong European truck market and solid numbers from Paccar’s parts business and other global units including here in Australia,

PACCAR CEO, Ron Armstrong revealed the result  in a call with investors this week addressing fourth quarter and year of end earnings.

The the sheer growth of Paccar trucks on the roads as well as investments in technology and distribution bolstered its annual profits, said Armstrong.

PACCAR earned the equivalent of $AUD728.5  million in the fourth quarter of 2017, after taking into account recent US corporate tax benefits changes  amounting to  more than$AUD 214 million. This means the company more than doubled  the profit result for the same period  in 2016 when it logged a profit of  $AUD356.98 million.

PACCAR’s profit result for the full year in 2017 produced an astounding earning of $AUD 1.8 billion almost quadruple its result for 2016 and was PACCAR’s   79th consecutive annual profit.

A large fine imposed by the EU  for price fixing in Europe depressed  the company’s previous year results while revenues for 2017 were up 14 per cent  with a record $24.06 billion,.

While the earnings beat analysts’ expectations, some expressed concern about lower-than-expected gross margins in the quarter.

In a research note, Goldman Sachs analyst Jerry Revich said the result raised “questions on production ramp-up costs and pricing.” When asked about it on the call, Armstrong referenced higher material costs and fewer production days during the holiday season.

Last year, Peterbilt and Kenworth grabbed two per cent more market share in the U.S.,giving it to a record 30.7 per cent share of heavy truck sales in the States.

Although market share in 2017 was up, Michael Baudendistel, an industry analyst with Stifle Financial, said it could come down. “We suspect some of that market share gain was related to strength from vocational customers.”

This year, a majority of trucks sales will come from the return of large fleets to the marketplace, Baudendistel said.

The company has benefitted from a strong economic climate boosting freight demand, said  PACCAR executive vice president, Gary Moore.

Moore expects the growth to continue in 2018, and projects North America will sell between 235,000 and 265,000 trucks.

Paccar’s aftermarket parts segment performed well in the quarter, with $AUD194.35 million in profit, up 14 per cent. The parts business comprised just under 20 per cent of Paccar’s portfolio. In 2017, it added new distribution facilities in Australia and Panama, and plans to open another in Toronto, Canada this year.

Technology also is top of mind for the 113-year-old company. The company is investing in technology with an eye toward the federal government’s next phase of greenhouse gas emissions regulations that will kick in for model year 2021, said Armstrong.

Last year Paccar spent $AUD 327.27 million on research and development of new truck models, hydrogen fuel cell technology, aerodynamic truck designs, connectivity and advanced safety systems.

While it is investing in zero emissions technology, Paccar will only compete in the electric truck space when “those vehicles become economical to our customers,” he said.

Paccar opened a center in Sunnyvale, California. to focus on emerging technologies in July. It plans to grow its research and development investment to between $AUD 346.10 and $AUD 383.18 million in 2018.

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