CCNHCNH Industrial N.V.

CNH Industrial makes tractors and combines as well as construction machinery — equipment bought on borrowed money.

Demand is set by farm incomes, and those by grain prices and harvests. When grain gets cheaper, buying a new combine is put off a year or two because the old one still works. Hence the deep cyclicality characteristic of the whole agricultural machinery industry.

An in-house finance arm lends to the buyer and produces income that smooths the troughs while adding credit risk. A separate line is precision agriculture: machines with autosteer and weed recognition save the farmer chemicals. Risks: grain prices, dealer inventories of equipment and interest rates. Dealers hold the inventory, so a downturn shows first as a halt in factory shipments while retail sales still continue. A dividend is paid.