Q2 2021 CNH Industrial NV Earnings Call
The.
Good morning, and afternoon, ladies and gentlemen.
And welcome to the day C N H industrial 2021 second quarter and first half results conference call for your information Today's conference call is being recorded after the Speakers' remarks, there will be a question and answer session to ask a question. During the session you will need to press.
And your telephone.
At this time I would like to turn the call over to Federico Donati head of Investor Relations. Please go ahead Sir.
Thank you Sandra the morning, and good afternoon, everyone. We would like to welcome you to the webcast and conference call of <unk> industrial the second quarter 2021of the results for the Bureau of ending June Turkey.
Turkey is call is being broadcast live on our website and is copyrighted by its the nature of industrial any other use recording or transmission of any portion of this broadcast without the express recent constant ups, the NH and outside of the sacred for beta.
We are pleased to have a year with us today, our CLS called line and our CFO, Don and cheese out what would the all seeing today.
So we will use the material available for download from the teenage industrial website.
After the presentation would be all of the Q&A session in which also get at box precedent commercial and specialty vehicles and the other day Nathan for the to be created on the eyewear company, we'd be unable to respond to the questions alongside of our C of O N CFO.
But.
Please note that of any forward looking statement, we might be making during today call are subject to the risks and uncertainties mentioned in the safe Harbor statement included in the presentation material additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent reported 20-F and you on what the report as well as the other periodic reports and.
The call with the U S Securities and Exchange Commission and the Cleveland and that's all it is in the Netherlands and Italy.
The company presentation may include certain non-GAAP financial measures additional information, including reconciliations of the most directly comparable GAAP financial measures is included in the presentation of material..1 final reminder, once again our team is connecting from different countries. So please forgive.
Filings, if there are moments of silence during the call while we manage the transition between the speaker I will now turn the call over to Scott.
Thanks, Federico and welcome to all of those of you joining the call I recently equated our tireless efforts to manage this crazy supply chain situation into a game of whack a mole.
If they ever make that an old.
Big Sport I put odds on C H industrial the win of gold medal.
Our entire team performed admirably in the second quarter adroitly navigating supply chain constraints rising commodity costs and ongoing COVID-19 concerns to deliver robust financial results solid operational execution and healthy demand from our end markets drove strong net.
Bill gave out was across all segments, which in combination with positive pricing and margin improvement activity helped us establish second quarter records for earnings per share and free cash flow.
Impressively Derek Nielsen is the AG team delivered record EBIT margins of 14, 7%.
I'm extremely proud of the outstanding execution.
1 of our C and H industrial team of the second quarter for keeping our employees safe delivering for our customers and dealers around the world and making C and H industrial a little bit better every day.
Our industries are clearly in a cyclical upturn and our team's tireless and innovative efforts enable us to capture much of the benefit.
This very healthy demand environment.
Along with the excellent second quarter performance of each of our businesses contributed to growth in both shipments and the order books with.
With the acquisition of Raven industries, we're adding significantly to our precision agriculture capabilities and establishing the foundation for a sustainable competitive advantage.
We also continued to make progress towards the spin.
The finding leadership structures in roles for each company with an emphasis on agility and customer centricity.
Both spin co and remain co are laser focused on delivering for our customers throughout these activities.
With market demand and customer sentiment rising our production facilities moving mountains to satisfy customer needs and a comprehensive plan being nimble.
Instituted by our dedicated team C. N H industrial is poised for a very respectable second half, we do anticipate more cost pressure than the first half, but will be ready to start 2022 strong with 2 independent businesses.
Yeah.
While it is customary to discuss the industry volumes and year over year format, comparing our Q2.
Nimbly Act last year's pandemic depressed the numbers is not exactly insightful of note. However is that in most industry segments, we outperformed pre pandemic levels.
The AG machinery industry remained strong extending the themes, we saw last quarter, including rising commodity prices growing trade with China.
And the replacement of aging agricultural machinery fleets.
High horsepower tractor sales were impressive across all regions up almost 50% in North America, and nearly 25 per cent worldwide. While in combines the demand continues to improve with all markets growing over 10% versus 2020.
Compared to 2019 both.
Results, which are and combine the industry volumes were up across all regions, except in combines in Europe, which were relatively flat.
We are confident that the agriculture segment will continue to outperform through 2021, giving given our existing order backlog, which now extends well into 2022.
For construction equipment.
Trac persistent growth in both the light and heavy segments.
The former is largely driven by continued strength in residential construction, while the latter is due to increased contractor demand as well as preparations for the probable U S infrastructure Bill construction equipment demand in South America is particularly high driven by overall segment demand in Brazil.
Versus the same quarter in 2019, the construction industry grew double digits on a worldwide basis and was up across all regions aside from heavy in North America and Europe.
The European truck market was up 45 per cent year over year in the second quarter light trucks were up 40% driven by a combination of surge in e-commerce sales.
Continuing tamper growth in an upswing in construction.
Median in the medium and heavy duty trucks were up 60% due the vaccine progress accelerating industrial activities and government funded truck replacement schemes compared to Q2.2019, the European market was down 11% with light duty trucks up 5 and medium and heavy.
About 12% I mean down 12%.
The over 3 and a half time of Merit, South American truck market increased by 78% compared to Q2.2020. This market also grew 22% versus Q1, 2021 and 24% versus Q2.2019 with solid demand.
It's across all segments.
Buses saw a slight uptick in the quarter driven by post pandemic community of increases in transportation authorities, adding capacity. Despite the minor improvement, we still see bus registrations of bit negative for the year.
The overall situation for production of the dealer inventories did not improve much.
Increased quarter, but I'm still pleased with our teams of depth handling of the ongoing supply chain issues.
Looking at the sequential quarters retail trends improved with trucks and AG up more than CE, which was flat.
Retail trends depend on production and dealer inventory and improving those continues to be challenging.
Dealer inventories.
Throughout the stork low levels and between supplier constrained production on 1 hand and exceptional retail demand on the other.
We were unable to fully meet consumer demand of replenishment requirements.
Fleets continue to age and indications are that the cycle remained positive momentum for the next several quarters.
Our AG order books more than doubled year over year for both tractors and combines driven by strong demand across all regions with the North American high horsepower order book almost of up.
6 times for tractors and 5 times for combines.
Although somewhat inflated by anticipated production constraints the backlog for products now.
<unk> balance of next year with farmers booking fiscal year 2020 to combine slides before even starting to harvest this year's crops.
As expected AG production slightly trailed retail in the quarter.
For construction, we underproduce retail worldwide by 6% with company inventory down 40% versus Q.
Q2 levels last year, our order books are up 2.8 times year over year for the segment with growth in all regions.
For trucks, we overproduced retail sales worldwide by 10% in the second quarter in preparation for the planned August break light trucks, overproduced retail by 11%, while medium and heavy duty we ever per retail.
1.7% for the second quarter company inventory was up 22 per cent in light down 18 per cent for medium and heavy.
The truck book to Bill in the EU was at 1 point to 2 with light duty trucks at 1 point of 7 and medium and heavy at 1.74 of which heavy duty trucks and that at 1.89.
<unk> market share for trucks in Continental Europe was up overall for the second quarter of last year with light up 350 basis points to 13, 4% and medium and heavy up 80 basis points to 9.1%.
Liquefied natural gas market share for Iveco was at 57% and market penetration for LNG trucks overall remained steady.
Betty at about 4%.
Order intake in Europe was up 150 per cent compared to the second quarter of 2020 with light duty trucks up 140% in medium and heavy duty trucks up 170 per cent.
We also saw continued strong demand in the results from our parts of service businesses supporting the efforts of.
Oh, good businesses as well as providing a boost to our margins.
I'll now turn the call over to of donated to take you through some of our key financial details.
Okay.
Thank you Scott and good morning or afternoon to everyone.
And I was like 6 without cute towards all the highlights.
But the top line second quarter net sales increased.
65% get the higher volumes mix and probably the price realization across video segments.
So you mean other drivers also accounted for an 800 basis points in crazy low gross margin.
On the bottom line keep the adjusted EBIT increased by 757 million, you've got adjusted EBIT margin of 8.2%.
Driven by strong performance across segments.
Free cash flow in the quarter was a cash inflow of $1 billion sort of the strong operating performance and positive working capital contribution.
The industrial activities net cash of the 1.4 billion and in case of $800 million from March 31, 'twenty 'twenty 1.
Q2, adjusted net income was 582 million or 42 cents adjusted earnings per share adjusted effective tax rate for the quarter was 25 per site.
At the end of Q2, 2021of our available liquidity stood at $14.4 billion up 500 of 42 million sequentially.
Turning to slide 7 with vocals now on industrial activities net sales, which were $8.5 billion.
The 55 per se on a constant currency basis.
As you can see how the button up the slides sales by region and proud of in the quarter over quarter comparisons were up across the board on immediately easy comps.
By the way I, almost 19% higher on a constant currency basis, when compared to the second quarter of 2019 with agricultural 30% higher.
Foreign exchange translation had an impact of approximately 10% in the quarter.
Agricultural net sales totaled 4 billion up 49% and of course.
Constant currency basis versus prior year, mainly due to the higher industry demand better mixing of regions and favorable price realization.
If we look at the performance by region, North America, and Europe were driven by a better mix of high horsepower tractors with South America was fairly strong of calls across all product categories.
Construction of net sales were 808.
In the quarter of 86% on a constant currency basis is that of.
Out of higher volume driven by industry demand channel inventory de stocking actions from 'twenty to 'twenty and higher price realization.
Commercial and specialty vehicles net sales reached $3.2 beginning of the quarter up 71% on a constant currency.
Many of these year over year, and 16% higher than 2019, primarily driven by higher truck volumes.
Powertrain net sales totaled $1.3 billion in the quarter up 55% on a constant currency basis.
Sales to external customers accounted for 42% of total net sales that was 600.
He basically per cent of last year.
For the noting that the comps on Expedia vehicles on the extent of assays of both safety remains strong with the Chinese customer have the first quarter 'twenty 'twenty and of getting rolling into 'twenty. Thank you wanted to be proportionate to the COVID-19. He that is happening now in the other geographies.
Additionally, in the back of household.
So the year will start in the audience, yes, the only seen the effect of discontinuation of the large third party contract for the non rolled ankles.
Turning to slide 8 now with the look of the industrial activities adjusted EBIT by segment the driver.
Volume and net pricing what the clear drivers for the increase.
Across all segments in the quarter by channel alone was a it was higher than the combination of searching for the back from costs in 2021 and more normalized SG&A spend when consider the exceptional circumstances of capital 20 planting.
If we take a closer look at each segment Q2, 2021adjusted EBIT.
The 4 act was $582 million with an adjusted EBIT margin at 14, 7% driven by higher volumes favorable mix positive price realization of almost 6% for the quarter, partially offset by higher raw material and freight costs, and SG&A and R&D spend as well as high a body of about.
The compensation.
For the construction adjusted EBIT was 24 million an increase of $111 million with an adjusted EBITDA margin of 30% is the better volume and mix positive price realization and favorable quality performance, partially offset by higher material cost and freight cost.
Last year of profit.
IDT was.
Significantly impacted by Covid, 19, and access of exacerbated by necessary, the stocking and pricing actions.
Commercial and specialty vehicles, adjusted EBIT was $100 million with the.
Adjusted EBIT margin of 3.1% the $256 million increase was driven by favorite.
<unk> volume of mix and positive price realization, partially offset by higher material costs, and SG&A and R&D spend from low levels of prior year as well as higher variable compensation.
Powertrain adjusted EBIT was $74 million, an increase of 42 million with adjusted EBIT margin of $5, 7%.
With increased volumes, partially offset by exceptionally high freight costs of $25 million in the quarter and higher spending for regulatory and new programs.
In summary on the right hand of the slide gross margin was up across segments was price with price realization and increased fixed cost absorption more than offsetting the hiring.
The important transportation cost.
Moving now to slide 9 and our financial services business net income was $99 million up $46 million compared with Q2.2020, primarily due to lower its cost and improved pricing on used equipment sales.
In the quarter retail originations.
$2.9 million volume and the managed portfolio, including JV is at the end of the period was $27 million.
Delinquency was down sequentially by 10 basis points and the remain at historically low levels.
Slide 10, I'd like to discuss the net financial position of free cash flow performance of our industrial activities.
Free cash.
With lots of activities was positive $1 billion due to the strong operating performance.
While working capital did contribute to the overall result, it was not as notable this quarter as this war of the more more of a balance of inventories and payables growth.
Total debt was $24.24.5 billion.
Cash flow leaders at the.
The June 32021, and industrial activities net cash position was $1.4 billion.
In May 2021 of the company paid 180 million in dividends to shareholders and at the same month C and H industrial capital LLC issued $600 million in aggregate principal amount of $1.45 per cent per.
And of the notes still plenty of 26.
Liquidity remained strong at $14.4 billion and as a reminder, the consideration for deposition of Raven industries will be fully paid out of available cash of the closing of the transactions expected in Q4 this year.
Slide 12.
We have our full year 2021 outlook.
We have again increased our industry expectations across most of our regions and segments of the combination of global reopening of escalating industrial production and increased movement of people and goods continued to drive demand for our products.
We expect the RV industry recovery to continue.
At this point, we see notable strength in North America, and South America for combines and tractors, we generally strong demand across of all of the regions.
And the sentiment while stabilizing recently is still out of high level to the commodity price and income both rising.
As well as continued Chinese soy and corn demand.
The sentiment has been slightly muted by higher input cost deflation the situation in some pockets and somehow constrained availability of machinery.
For construction equipment with the industry demand continued to recover with heavy equipment significantly increasing its contribution to the up cycle.
Optimists from contractors.
The us alongside a strong housing market continues to drive sales and order books.
The months for truck from trucks continues to show substantially into the upside from 2021.
And while we had a slightly lower outlook for Europe, having immediate trucks will still increase of fair amount on a year over year basis due to the combination of consumer spending.
<unk> vaccination rates in the initial grants from the U recovery fund.
We expect this positive momentum to continue contingent upon the cadence of the main European economies and the ability of the supply chain to keep up with the month.
Buses are the only segment of expected not to grow mainly due to of steel substantially depressed tourism and cash and coach.
7.
Considering our strong Q2 financial results and a robust order books for the remainder of the year, we have chosen to update our guidance as follows.
For 2021, we now expect net sales of industrial activities to be between 24% of 28 per cent.
Yeah.
Our expectation of what is the G&A is confirmed the lower done or equal to 75 per 7.5 per cent of net sales.
We anticipate positive free cash flow of industrial activities to be higher exceeding $1 billion Mark.
R&D and Capex will be up slightly from the project.
Combined the spend for the year.
Yeah.
Lastly, we now estimate the impact of raw material cost increases freight cost and other supply chain constraints to be at around 1 billion for full year 2021, when compared to 2020 offsetting a large proportion of the price realization that we continue to pursue.
Finally, as mentioned earlier in the back half of the year, we expect spt's margin to be pressured by both constraining engine component supplies and discontinuation of a meaningful third party engine contract.
SPT is developing new customers to replace these volumes, but these would start in 2022, so for modeling purposes.
On the 2 point this out.
This concludes my prepared remarks of the financials and I will now turn it back to Scott for his final remarks.
Thanks to the owner and the 5 weeks since the announcement of the Raven acquisition. Our teams have made good progress both towards confirming our initial assessment and defining a path towards realizing the.
The synergies and strategic objectives, we outlined in the call announcing the deal those are summarized here on the slide but I will focus on developments.
As we continue to actively plan for integration of Raven, we were both solidifying our plans for building out previously identified value drivers and identifying new areas of opportunity.
The integration teams from both CNA.
I was real and Raven our defined engaged.
Together, we are working towards obtaining the requisite regulatory approvals and we foresee no impediments to doing so in a timely fashion, we have seen firsthand how important raven as to the Sioux Falls community how deeply rooted they are in the local culture and closely tied to the residents and we are committed to.
Upholding in extending the admiral quality.
Since the announcement, we and our dealers have become even more excited about the opportunities of this acquisition will create for our shareholders employees and farmers alike. I am confident that the combination will cement CNA to industrial is the leader in the precision agricultural space.
H in the Vaca launched several new products during the quarter, starting with the other Iveco driver panel a pioneering onboard voice activated driver of companion built on the Amazon Web services and Amazon Amazon Alexa features this innovative system increases driver efficiency and safety by replacing numerous manual operations.
The the new Iveco S way heavy duty truck is 100% connected vehicles, reducing total cost of ownership via a new engine line up and other advanced features that increase fuel efficiency.
The new daily and daily minibus launch with state of the art engine and after treatment system technology to ensure full euro 6 the.
The final.
In Europe <unk> compliance ahead of regulations the.
The mini bus version also includes the air Pro an industry first adaptive electronically controlled pneumatic suspension system that enhances both comfort and safety.
Finally, the Iveco heavy range is completed with the new off road Iveco T way truck designed and engineered.
Final half the submissions and the most extreme conditions.
We recently announced the management team for the post spin on Highway company.
Gerrit Marx will lead the CEO and Annalisa stupid Ingo will become the head of industrial operations. Following her 6 years of successfully heading the SPT business.
Additionally, Sylvain blase.
For the full assumed responsibility for the powertrain business unit within the Newco Sylvain ran iveco bus since 2014.
The prior to that he ran the long stint of case IH here of the United States.
Succeeding Sylvain of buses will be Dominica of new chair of.
Who has 20 years of experience in the auto industry.
The many years with us.
So the niche industrial has appointed Scott Moran as Chief C. N H industrial business system Officer, and Kelly Tober, as chief diversity inclusion sustainability and transformation officer. These.
Of these executive appointments form part of the H industrials revitalize the emphasis on customer centricity by evolving both our culture and our price.
This is the agenda of this focus and further our commitment to diversity and inclusion and sustainability.
We have designed and will soon announce the first 2 levels of the new off and on highway companies are new organizations will involve fewer layers and layers of management to strength in communications simplify processes and streamline decision making.
We expect the developed clear accountability functional excellence and a leaner more efficient business.
While this reorganization is of tremendous first step forward towards.
And more agile and accountable organization. It is just the beginning of our journey. There is an enormous amount of work to do both of them put the new structure into practice and to capitalize.
And the potential that will be unlocked.
Our spend time line has been enriched as we are now planning and on highway event, followed by a virtual roadshow in the second part of November preparation for the spend remains on schedule and is certainly supported by strong momentum across the on highway portfolio.
I am pleased with the way our business is evolving and the substantial progress. The team has made over the past 6 months their efforts are even more impressive considering how hard they're working to serve customers. During these extraordinary circumstances unprecedented supply chain challenges continuing COVID-19 issues. The Raven acquisition the spinoff of the on highway business.
And even these incredibly strong markets.
Based on macro indicators and the strength of our order books, we expect to maintain most of our momentum in the second half as global pandemic recovery continues there will be some costs that re entered the company, but we are determined to keep those 2 of minimum.
There is much talk and more excitement about the U S infrastructure.
Structure Bill, but it is unclear of what final form it will take and how impactful it will be for us directly.
We are ramping up investments in both R&D and SG&A to support our products and brands and designing our organization to better serve our dealers and customers the potential of our businesses is quite bright and not just because of our strong end markets.
Going into the second half of the year, we will continue to rely upon the diligence and ingenuity of our tired, but still game supply chain the logistics teams.
We were 1 of the very few Oems and our various peer groups, who has not had to take any significant downtime and production and considering the complexity of our global manufacturing system. This accomplishment is.
Is 1 all of our production and support team should be very proud of as I am of them.
That concludes our prepared remarks, and we can now open it up for questions Garrett marks will be joining the <unk> AI for the Q&A section Sandra. Please go ahead and open the line for questions.
Thank you we will now begin the question.
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We will take the first question from the line of Steven Fisher from UBS. Please go ahead.
Great. Thanks, Good morning, good afternoon, the price versus cost was much better than I was expecting for the quarter.
When were.
The pricing actions taken that that flow through the results. This quarter of those fairly recent or was that sort of last year in preparation for this and how should we think about the.
The differential in the second half does it does actually go negative on the price versus cost or the sort of just the neutralizing the is it more in Q2.
Q3 of Q4 thanks.
Stephen the the <unk>.
The actions I mean, the the the commodity markets as you know our are incredibly dynamic and cross the the global footprint. I mean, you know, Brazil was very aggressive with pricing early.
<unk> also been in and we've really.
Just step by.
The step taken the necessary increases in prices that enabled us to get ahead of some of the stuff in the AR in the first half the second half the pricing is still going to be quite strong I think we're expecting more cost to come in just as we see what's happening and you will probably be more balanced as we go into the second half than we.
In the first half, but really it's especially in AG here in North America. The pricing has been very good and the team has been then on at every step of the way.
Okay, and then just as a follow up of I noticed that it looks like you have trimmed and your expectations for industry.
Sales for North American tractors under 140 horsepower can you just talk about what's behind that change.
Okay.
Okay.
Hey, good performance from the second quarter and you know all of that that's part of the market is much less relevant for us.
Is the over 140, that's the horsepower market and remember last year.
The lowest part of practice, we do in North America.
Despite the despite the COVID-19 and everything.
Okay. Thanks very much.
Yeah.
We will take our next question.
From the line of coastal <unk> from Oppenheimer. Please go ahead.
Hey, good morning, good afternoon, and thank you for taking the question. So you talked about an inability to meet AG equipment demand in the quarter and can you provide us a sense of how much volume was moved into the back half and if you could.
How much of that was the supply chain versus your own production capacity constraint.
Almost all of it is related to supply chain I again, I've said consistently it's the worst supply chain situation I've seen in my career, but as I said in my prepared remarks, I'm really impressed with how our supply.
Comment industrial teams are handling of what they're doing a really nice job, but you know the big issue for US is what we call our fleet inventory of the stuff that we've built the doesn't have all the parts of the complete and that's you know several thousand units.
The the Grand Island, where we've got combines in Wichita, where we've got our construction equipment and it's just you know the teams.
The change we have to continue to produce because.
We've got so much demand and we don't have the capacity if we just stop the lines, but you know we're producing without you know all of the parts and that's been a I'm really impressed with how the team manage that I mean, it's really really of difficult task, but you know certainly.
Some of you know we've got several thousand units that are in that state of needing to be finished and shipped.
Great and then my follow up is related to precision and uptake and can you just provide some additional color on what the uptick was in the quarter.
There may be some some areas, where you're seeing outsized growth and just so that we can level set on the the contribution of rate and going forward I'm just provide a baseline view on on what precision AG revenue is today. Thank you so much.
We don't provide specific precision AG revenue I mean, we've looked at what our peer groups of reported and we think.
<unk> the head of that but.
But we are seeing very very strong demand with the GNU C. H 'twenty 6 tractors that have gone out of Magnums, who we just we see the uptake very high across the portfolio and you know we know I mean, the engagement we've had with Raven again, they've been of great supplier.
To us for many years and it was really integrate that more fully into our products. We think will offer better solutions for our farmers and we expect that to grow even more so we're pleased with where we are with our precision capability. We've obviously got more work to do which is part of the reason for the the acquisition, but overall I think demand is high and.
We believe as we move forward with integration of Raven will be able to meet increasing demand going forward.
Yeah.
We will take our next question from the line of Martino de <unk>.
Yeah.
Please go ahead.
Thank you and good morning, good afternoon everybody.
The first question are the first to the incremental margin in the in your previous school of you indicated of 20 to 25 per cent range of Florida, the increments on margin for the group the.
I shall bullshit.
It has to be revised upward the considering the higher our revenue expectation and the steel on the on the incremental margin in the business and we've of such a stronger top line growth.
The unexpected the higher operating leverage of them where the.
And the wrong, so if a bunch of extremely good the 13% per user.
Close to your historical peak, but the and I wrongly assuming that the you could have had the higher but if the leverage in Q2.
So all of them.
The on the quarter.
Of course, the operating leverage was the other audio for the name.
Oh, but I'd love it if it was higher than that and then what was hey loss last line for the full year and and we expect the baton off to be maintained for the remainder of the year. So we expect.
The lower operating leverage in the second part of the year.
The.
The.
I'm, sorry, I think we of an earthquake 3 of them but.
Yeah.
We are in the middle of I heard of quick anyway.
Now we stopped them.
Uh huh.
Due to the.
What are the same.
So the operating leverage the.
I think the operating performance at $14.7.
The 7% margin.
For the quarter and up is.
Well above.
Manny expectation I would say as we say within a half of the.
Full but we didn't fulfill completely the demand. So we could have some property somehow better if we had all the units out in the market.
Okay. So for the rest of of the year for the group of it will be lower than what we show in the in the first thing to do.
Okay. Okay.
But the.
The expectation for the group of for the rest of the year.
So we gave we gave our.
Expected.
During the day only walked through that in his prepared remarks, and you know really as we see you know just the ongoing supply constraints.
I'd say enough about how well the entire team is managing through this and I think it's it won't get any easier.
For us in the cost certainly get higher but we still are we expect to deliver very very solid results in the second half.
Okay. Thank you of the second question here on the.
Nicole as the trucks and how the testing activities progressing and whats the updated timetable for the launch of both of the U S and in Europe.
Gary you want to take that 1.
Yeah sure Scott.
The testing activities and also.
Also the prototyping and the pre serious is all on track.
We have produced a 5 out of our protocols 9 beds of protocols. We have now produced another true gamma which means the area now entering into try production. So we basically started with the gama.
And we also have.
The first 2 fuel cell electric versions.
Versions of the tray prototypes of an old in Germany. So we are on track the manufacturing infrastructure in all of the.
1 of them is being commissioned we are getting ready for our production readiness in Q4 for the battery Electric U S version.
Now some of the Nikola Tre as we initially announced in.
2019, net we are on track with the European versions.
Eventually leading them to the launch of the fuel cell.
Electric European version by the end of 'twenty 3.
So all of those confirmed then we are progressing well.
Okay. Thank you.
Thank you we will take the next question from the line of Lawrence de Maria from William Blair. Please go ahead.
Thanks, Good morning, good afternoon, everyone.
I just wanted to ask a little bit more about the Raven fits in.
Obviously.
Yeah.
<unk> right now.
It seems geared towards our economy is that the technology that you think.
H needs to own for the future or does this propel you further to this machine learning infield adjustment business that obviously <unk> is moving forward with you'd expect it in other words, how that internally, but the raven or still rely on let's.
Sure.
Outside of solution for that that kind of technology.
Yeah, No. We're very as you heard in my prepared remarks, but and then on the call. We were just really excited about bringing the Raven team.
And of the end of the CNI industrial family there, what we really I mean.
Her proven their understanding of how to take software solutions and make them beneficial to farmers is really what we like and I think that can take many forms right now I mean, they're they're precision with sprayers is just is unmatched.
What we've seen with there.
They're autonomy program.
Grabs it's got incredible potential and we think with our capability match with theirs, we can do a lot to facilitate and bring that to market, but really the the the culture and the team at Raven gives us confidence that there's really not much we can't do and the precision and digital spaces with their team and ours.
It won't happen overnight.
But you know we're just very encouraged I mean, it's almost plug and play with the current capabilities. They have but as we co developed together, there's just tremendous opportunities for us and that really was what spurred us to to pursue this.
Okay. Thanks.
Secondly.
Maybe could you just give us a little bit more color on the <unk>.
The next year, obviously, that's partially related to supply chain, but it's also the strong demand so maybe delineate a little bit about the 2 and how far into next year and just overall.
The strength of the next year it sets up the first half already obviously.
Well, I mean, certainly north and South America.
Of our night seeing incredible demand will probably end of the second half of 2022, right now and you know again with with solid pricing. So just encouraged by the way the of the market demand is improving and it's as much as anything it's really can we execute and.
And getting products to our dealers and customers and that is the of the hard work that we're doing but certainly the.
The early signs are in and the orders continue to come in but right now we're well into 2022.
Thank you.
Thank you.
We're just into the next question comes the line of Ross Gilardi from Bank.
So think of America. Please go ahead.
Good morning, Thank you.
Scott the was there was some public filing disclosures made recently about the background of the Raven buyout and I'm just wondering how much confidence you have in closing the deal without <unk>.
And from a another bidder.
And then on the revenue synergy targets.
Can you say at all like what portion of the the revenue synergies or are simply the C N H of existing.
The abuse and network the heightened or your other existing dealers at the simply could be buying.
We take a lot more raven equipment that they could be whether they'd be driving penetration to their you know their customer base.
Yeah, well I mean I'm the the proxy filing that came out the provides a little bit of color about how the the bidding went down and I think you know just showed how well.
<unk> executed that you know obviously it was an attractive assets and I'm you know, we believe that we of the right owner for it and I think the where we're very very confident in that we're the right owner for it and our teams are working well we've got working through the Sip your filings in the SEC approvals, but.
No. We we think that we're going to bring this 1 home and quite calm, but you never know I mean, what's the it's.
It's a we have free markets for a reason, but all signs are right now that you know this will close our eyes as Tony said likely in the fourth quarter.
And as far as you know we've we've identified you know the.
Our team at the value streams that we're working on in the very first 1 is exactly what you just described how do we take our very very strong global distribution network for both new Holland in case of age and facilitate a greater sales of Ravens existing products through that category you mentioned tightened to me there.
A great Raven partner today, So I don't know how much more there is specifically with them, but they they provide a great example of what can be done with Raven and I think you know well look you know obviously respecting that they've got a good channel now they provide really good support for their of their customers and we will look to leverage.
That but really we think the opportunity for global expansion through our network is certainly a good near term opportunity.
No that's great because it would seem like the the revenue synergies through your existing distribution network would be.
A number or something that would be much more perhaps.
Under your control and having to cross sell to other.
All of our customers, which.
In any event the thank you and then.
Maybe this is sort of an oddball question, but I'm wondering what portion of the Fiat powertrain production volume is actually going.
To the AG market, obviously to your to your AG business and I'm trying to get a better sense as to whether or not youll sustained some pretty meaningful AG exposure within the on highway spend simply.
Powertrain goes onto.
Supply the AG business and just any any color.
We should expect some type of announcement on the mechanics of how of that supply agreement.
Yeah, well you know SPT has been a debt just a phenomenal partner for us over the.
The the last decade, and it's just it's nice having them as part of the family.
We've worked.
Color on 1 of the 1 that we've not there's no surprise that this spend is happening right. We've known about it for a long time, there's probably no single part of the spin that we spent more time on then drafting and getting this engine services agreement in place.
To manage it and it's the.
It is.
I cared I call it shared need we need we need each other in this case.
We're not by far not the largest part of of the SPT business by any stretch of the imagination, but we are an important.
Part of it and we feel like that we've got a.
It will be public.
You know at some point, but right now we've got an engine services agreement that both sides of agreed to that we feel very comfortable that we'll manage of these businesses for both of us.
Successfully for the next.
The 5 or 10 years.
But just to be clear I mean, something that's gonna make this the spend different versus other truck.
And as the the on highway spend is actually going to retain.
Some meaningful.
Exposure, which is something that.
Most of the other.
Truck Oems wouldn't have and I just want to make sure I'm thinking about that correctly and I mean is there any signs of it is it the.
20% of the volume are temporary.
<unk> per cent 40 per cent.
I don't have I don't have the number with me you know roughly.
The percentage of the volume.
Roughly 20 per song Okay interesting okay. Thank you very much thank.
And it's not just us I mean, they sell the other some other AG customers as well.
Right.
Alright interest.
Just just validating your point of little bit more.
Yeah.
Thank you next question comes from the line of March of Bush cut from the index. Please go ahead.
Hum.
Great question.
I had the least I'm I'm.
Is it the story, so I hope it doesn't flow Tonight, but the.
Just looking at your revenue.
And the first portion of the opposite.
The 7% and the second quarter.
No.
Just mathematically.
And the local okay for.
For the second half.
Half of the year.
Of that or whatever you and headwinds.
The reported 28% of correct.
The other kind of I'm, just saying to them the.
And now for the second half, what's the price of the businesses that we expect.
Uh huh.
What I think.
And you know.
I have 1.1 per the last question I guess the order from Iraq.
Yeah, well I think the the answer to your question is mostly related to the Comparables.
Throughout the year I mean, obviously the the first half of 2020 was severely impacted.
By the pandemic shutdowns less so in the second half and as you know well if you look back we had improving results and revenue throughout the second half of 2020. So it's more of the comparable than anything else of all of our businesses with the exception of powertrain, where we did talk about I'm, losing 1 of our.
Customers are seeing significant growth.
In the in the second half and again, it's really driven by what we can produce because the demand is ahead of our ability to supply.
Okay.
<unk>.
Yeah It seems.
The third party.
Yeah no debt.
I don't know if they'd like community count growth, but I get your point.
And then the second question I was just wondering what the what is the dynamic.
Order intake in your consumer business in the second.
Of course out of there. She is the first my sort of sequentially.
And whether there was sort of like Oh.
The Big 3 bank effect in the first quarter because of that and price increases and to you know I know the Cincinnati and so on but just like with regards to the pick of cycle. What is your feeling of for the develop of the sequential development going on.
We talked about in the prepared remarks, I mean really the high horsepower tractors were seeing very very strong demand as our combines with you know again the orders are well into 2022, so yeah. That's the.
Where we've seen the the biggest demand, but it's it's.
Quite quite strong across the.
Folio right now.
I was just the questioning on the year on year.
The only I'm clearly not answering that 1 quite from well enough. So.
No we weren't we were up in orders.
The last quarter and.
The port of this quarter, we keep we keep seeing all of those coming in and out of very good pace.
Okay. Thank you.
Thank you. Our final question comes from the line of the Daniela Costa from Goldman Sachs. Please go ahead.
And the yellow your line is open.
Okay.
Can you. Please check your line is from mute on your side of Daniela. Please.
The line of Daniela close stuff, where the final question is open.
And that we can take the Indiana.
Question out of them.
Do you have more questions in the case that will conclude the question and answer session and I would like to turn the call back over to from there you could donati for any additional or closing remarks.
Thank you everybody and have a nice day.
Okay.
Yeah.
That will conclude today's conference call. Thank you for your purchase for your participation ladies and gentlemen, you may now disconnect.
Thank you.
Oh.
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Okay.
Thanks.
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