Q4 2021 CNH Industrial NV Earnings Call

Good morning, and good afternoon, ladies and gentlemen, and welcome to <unk>.

Speaker 1: Good afternoon ladies and gentlemen and welcome to today's C&H Industrial 2020.

In just 2021.

This quarter.

<unk> conference call and webcast. After the speaker remarks, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone at this time I would like to turn the call over to Noel White head of Investor Relations. Please go ahead Sir.

Thank you Sandra good morning, and good afternoon to everyone. We would like to welcome you to the webcast and conference call for CNA to Industrial's full year and fourth quarter results for the period ending December 31, 2021. This call is being broadcast live on our website and is copyrighted by <unk> industrial any other use recording or trans.

Speaker 2: We would like to welcome you to the webcast and conference call for CNH Industrial's full year and fourth quarter results for the period ending December 31, 2020.

Speaker 2: This call is being broadcast live on our website and is copyrighted by CNA.

Speaker 2: Any other use, recording, or transmission of any portion of the broadcast without the express written consent of CNH Industrial is strictly prohibited.

Mission of any portion of the broadcast without the express written consent of <unk> industrial is strictly prohibited hosting today's call are <unk> industrial CEO , Scott wine and CFO Adani and Cheetah.

Speaker 2: Hosting today's call are CNH Industrial CEO Scott Wein and CFO Adoni Adoni.

They will use the material available for download from the <unk> industrial website, our company completed a significant transformation on January one 2022 today, we will illustrate full year and fourth quarter results for <unk> industrial prior to the spinoff or demerger of exactly group as reported under U S. GAAP in light of the successful spin off.

Speaker 2: They will use the material available for download from the CNH Industrial.

Speaker 2: Our company completed a significant transformation on January 1st, 2020.

Speaker 2: Today we will illustrate full year and fourth quarter results for CNH Industrial prior to the spinoff or demerger of the VECCO group, as reported under US GAAP. In light of the successful spinoff of the VECCO group entities effective January 1, 2022, we will also discuss unaudited pro forma results for CNH Industrial after the spinoff.

Vivek group entities effective January one 2022, we will also discuss unaudited pro forma results for CNA to industrial after the demerger, we are providing both reported and pro forma information in the materials. We are distributing today the newly listed company Iveco Group will host a conference call. Shortly after the conclusion of this call.

Speaker 2: We are providing both reported and pro forma information in the materials.

Speaker 2: The newly listed company, Eveco Group, will host a conference call shortly after the conclusion of this call to illustrate the full year carve-out of their combined financial results. Therefore, we kindly ask you to save questions.

To illustrate the full year carve out of their combined financial results. Therefore, we kindly ask you to save questions related to that group for their analyst call.

Speaker 2: Please note that any forward-looking statements we might be making during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation.

Please note that any forward looking statements, we might be making during today's 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.

Speaker 2: Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent report, 20F, an EU annual report, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission and the equivalent authorities in the Netherlands.

Our results to differ materially is contained in the company's most recent report 20-F and EU annual report as well as other periodic reports and filings with the U S Securities and Exchange Commission and the equivalent authorities in the Netherlands and Italy.

Speaker 2: The company presentation may include certain non-GAAP financial measures. Additional information including reconciliations to the most directly comparable U.S. GAAP financial measuresRI, Schweitzer Russian Medical Center.

The company presentation may include certain non-GAAP financial measures additional information, including reconciliations to the most directly comparable U S. GAAP financial measures is included in the presentation material.

Speaker 2: Once again, our team is connecting from various locations. So please forgive us if there are moments of silence during the call what we manage to turn into concerns between speakers.

Once again, our team is connecting from various locations. So please forgive us if there are moments of silence during the call what we manage the transistors between speakers I will now turn the call over to Scott.

Speaker 3: Thank you Noah and welcome to everyone joining our call. I would like to sincerely thank our CNH industrial team for their hard work in executing clean and efficient demurder, which they accomplished while very effectively managing the lingering tail of COVID and ongoing but slightly improving supply chain disruption.

Thank you Noah and welcome to everyone joining our call.

I'd like to sincerely, thank our CNI industrial team for their hard work in executing a clean and efficient demerger, which they accomplished while very effectively managing the lingering tail of COVID-19 and ongoing but slightly improving supply chain disruptions.

Speaker 3: Our record financial results testify to the efficacy of the team's efforts. And today we will discuss how we delivered an excellent 2020-21 while also building a solid foundation

Our record financial results testified to the efficacy of the team's efforts and today, we will discuss how we delivered an excellent 2000 2021.

While also building a solid foundation for the company's future.

Speaker 3: We marketed the demerger internally as twice as strong. And as we advance our own prospects as a pure play ag and CE company, we're also excited to see and cheer on the success of Garrett and the Aveco group. Conversely, I am extremely pleased to welcome the Raven and Semperiana teams to our company. And I look forward to detailing their potential and much more at our Capital Markets Day on February 22nd, 2022.

We marketed the demerger internally is twice as strong and as we advance our own prospects as a pure play AG and CE company. We're also excited to see and cheer on the success of Garrett and the Iveco group. Conversely, I am extremely pleased to welcome the Raven and Sim periodic teams to our company and I look forward to detailing their potential.

And much more at our capital markets day on February 22022.

Last year, we not only grew sales by double digits versus 2019, but our AG revenue accelerated faster than the overall industry.

Speaker 3: Last year, we not only grew sales by double digits versus 2019, but our ag revenue accelerated faster than the overall industry.

Speaker 3: 2021 was also another great year for free cash flow as our operational excellence execution improved

<unk> 2021 was also another great year for free cash flow as our operational excellence execution improved.

Speaker 3: Market-driven volume, discipline pricing, and the team's outstanding execution were all key contributors to our record earning.

Market, driven volume disciplined pricing and the team's outstanding execution were all key contributors to our record earnings.

In 2021, we also devoted considerable effort towards making the company more innovative sustainable and efficient.

Speaker 3: In 2021, we also devoted considerable effort toward making the company more innovative, sustainable, and efficient.

Speaker 3: Our AG Brands won numerous design awards, including Sustainable Tractor of the Year 2022 for New Holland's T6 methane power, the world's first 100% methane power production track.

Our AG brands won numerous design awards, including sustainable tractor of the year 2022 for New Holland T. Six methane power the world's first 100% methane powered production tractor.

Speaker 3: When fueled with biomethane, this tractor is an integral part of the energy independent farm concept.

When fueled with Biomethane. This tractor is an integral part of the energy Independent farm concept case age also stood out by receiving a total of three American society of agricultural and biological Engineers 2022 Innovation Awards.

Speaker 3: KSIH also stood out by receiving a total of three American Society of Agriculture and Biological Engineers 2022 Innovation Awards.

Speaker 3: Concerning sustainability, we recently received a gold medal from Standard and Pores for this year's Global Sustainability Yearbook. Additionally, for the 11th consecutive year, we were awarded a top score in the prestigious Dow Jones Sustainability Index.

Concerning sustainability, we recently received a gold medal from standard and Poors for this year's global sustainability yearbook.

Additionally for the 11th consecutive year, we were awarded a top score in the prestigious Dow Jones Sustainability Index. We're also one of only 57 companies globally to achieve the illustrious double a score for CDP water change. These recognitions confirm our dedication to reaching our ESG targets and maintaining our position as an industry leader in sustainability.

Speaker 3: We're also one of only 57 companies globally to achieve the illustrious AA score for CDP water change. These recognitions confirm our dedication to reaching our ESG targets and maintaining our position as an industry leader in sustainability.

Inability.

Speaker 3: In terms of efficiency, we have completed the spin of the Aveco group entities, closed Raven, Simperiana, and several other acquisitions, and accelerated the evolution of a leaner, more customer-focused corporate structure.

In terms of efficiency, we are completing the spin of the Iveco group entities closed rave and some purion and several other acquisitions and accelerated the evolution of a leaner more customer focused corporate structure.

Speaker 3: Over the next few years, we will drive increased value for our global supply base, apply lean methodologies holistically across our business, and continuously improve to drive world-class safety, quality, and deliver.

Over the next few years, we will drive increased value for our global supply base apply lean methodologies holistically across our business and continuously improve to drive world class safety quality and delivery.

I will now turn the call over to have donated to take you.

Speaker 3: Well now turn the call over to Adonis, to take you through some of our key financial details.

Through some of our key financial details.

Speaker 2: Thank you, Scott. Good morning, good afternoon. I will do a quick run through the whole company's pre-emerger for year financials. And then later in the presentations, spent some time on the performance material that will help us to grant us on the historical figures for sea nature industrial as a focus of the cultural and construction equipment entity, by providing the numbers for 2019, 2020 and 2021 for our business as it would play from now on.

Thank you Scott good morning, and good afternoon, I will do a quick run through the whole company is freedom of the full year.

Financials, and then later in the presentation spend some time on the pro forma P&L that will help us roundhouse on historical figures foreseen natrium dovetail as a focused agricultural and construction equipment entity.

And the numbers for 2019.

19, 2020 in 2021 for our business I think we play from now on.

Full year net sales of industrial activities through the merger of $31 6 billion without the 28% for the year at $8 6 billion.

Speaker 2: Free and net sales of industrial activities pre-demurder at 31.6 billion, we're at 28% for the year, and at 8.6 billion dollars, we're at 9% for the fourth quarter of custom cards.

9% for the fourth quarter at constant currency.

Speaker 2: Fully of demand rebounded from COVID-19 depressed 2020. And solid price-resilization contributed to strong growth across the country.

As demand rebounded from COVID-19, the price 2020 and solid pricing.

Elevation contributed to some growth across segments.

Speaker 2: For growth profit, we achieved $5.7 billion at 2.2 billion versus fully at 2020, and at 1.2 billion versus 2019, as higher production levels and positive pricing of set significant role-materials supply chain cost increase.

The gross profit, we achieved $570 million up $2 2 billion versus full year 2021 .

One 2 billion versus like a Nike.

Higher production levels and positive pricing offset significant raw material supply chain cost increases.

Speaker 2: percentage terms, cross margin, give 350 basis points versus 2020.

Percentage gross.

Guilty underlying 50 basis points versus 2020.

Speaker 2: with our agricultural segment delivered in 22.4 gross margin 330 basis parts better than 2020 and 160 basis points versus 29.

With that I'll get a cultural segment delivering 22 for gross margin and 330 basis points better than 2020, and 160 basis points versus 2019.

Full year adjusted EBIT of $2 1 billion up $1 $6 billion from 2020 was driven by profitability improvements across agriculture, construction and commercial vehicles segment.

Speaker 2: Fueira, just a little bit of 2.1 billion, half a 1.6 billion dollars from 2020, was driven by profitability improvements across agriculture, construction, and commercial vehicle sites.

Speaker 2: The DBS margin at 6.7% was at 140 basis points versus 2020 and at 140 basis points versus 2019.

Adjusted EBIT margin at six 7% was up 140 basis points versus 2020, and 140 basis points versus letting 19.

Speaker 2: In the last quarter of the year, EBITDA margin went down against strong Q4 comparable, because of the adverse mix in agriculture, as production was constrained for medium tractors in Europe , and reduce sales in power trains.

And the last quarter of the year EBIT margin was down against strong Q4 comparable because of the adverse mix in agriculture. As production was contains constraints for medium trucks are in Europe , how did your sales in powertrain.

Speaker 2: I will comment on the yearly and quarterly performance for agricultural and construction equipment between us as segments that remain within the image industry later in the presentation.

I will comment on the yearly and quarterly performance for agricultural and construction equipment to industrial segments that he made we'll see merchandize sales later in the presentation.

Speaker 2: For the entire group, Freakash Flow from industrial activities was positive 1.8 billion for the year and for the quarter due to the strong operating performance throughout 2021 and working capital improvements in the fourth quarter.

For the entire group free cash flow from industrial activities was positive $1 8 billion for the year and for the quarter due to the strong operating performance throughout 2021, and working capital improvements in the fourth quarter.

Speaker 2: Industrial activity net cash ended at 288 medium, at the increase of 455 million from September 30, 2021. After this verse, more than 2.3 billion for M&A activities.

Industrial activities net cash ended at $288 million, a decrease of 455 million from September 32021.

After disbursing more than $2 3 billion before M&A activities.

Speaker 2: Fullyer adjusted net income was 1.9 billion or $1.35 cents a drop of DDS. The highest fullyer performance in the company history, with an adjusted aesthetic tax rate for the full year of 23% because the consequence of better durian vision and mix of the tax rate.

Full year adjusted net income was $1 9 billion or $1 35, adjusted EPS the highest full year performance in the company history with an adjusted effective tax rate for the full year of 23% as a consequence of better mix.

Mix of pretax earnings.

Speaker 2: Adjustment of income was 347 million for the quarter, resulting in the death and earnings of 24 cents per share for the quarter of 2021.

Adjusted net income was 347 million for the quarter, resulting in adjusted earnings of 24 cents per share for the fourth quarter 2021.

Speaker 2: At the end of the year, our availability liquidity is to the $12.1 billion, down $3.67 billion from December 31, 2020, and our $1.3 billion from the end of the time.

At the end of the year, our available liquidity stood at $12 1 billion down $3 7 billion from December 31st wedding planning and a $1 3 billion from the end of September .

Speaker 2: A strong cast generation in the quarter was countered by MNA of late.

Our strong cash generation in the quarter was countered by M&A outlays.

Speaker 2: I had the 2022 unorganized meeting. The Board of CNH industrial intense recommend to the company shareholders and annual cash dividends of 28 euro cents for commercial, totally approximately 380 million euros and around $430 million.

I head up to 2022 onwards is on meeting the board of <unk>. Thanks to recommend to the company's shareholders and I don't know if cash dividends of 28 2008 euro cents per common share totaling approximately 380 million euros.

$430 million.

Yes.

Moving now to slide six in our financial services business again for the entire company pre the merger net income was $420 million 171 million compared to the full year 2020.

Speaker 2: Moving now to slide six in our financial service business, again for the entire company, Freedom Murder. That income was 420 million up 171 million compared to the full year 2020. Primarily driven by lower risk cost due to improved market outlook, improved pricing in North America, higher recovery of new equipment sales, and higher average portfolio balance.

Primarily driven by lower risk costs due to improved market outlook improved pricing in North America higher recoveries of new equipment sales and higher average portfolio balance.

Speaker 2: For the year, retail originations were 11.4 billion and a amount of preferred including JVs at the end of the period was 26.7 billion.

For the year retail originations were $11 4 billion and our managed portfolio, including JV at the end of the period was $26 7 billion.

Delinquencies were again down sequentially.

Speaker 2: The linkages were again now sequentially a year over year to 1.7% and remain at historically low levels. As a reminder, financial service was separated with a demurder and the portfolio remaining in C&H industrial financial services is 17.4 billion exclusivity jb.

One, 7% and to remain at historically low levels as a reminder, financial services and were separated with the merger and the portfolio remain in CNI Industrial financial services is $17 4 billion excluding jb's.

Speaker 2: Next on slide seven, we have the net financial position and three cash flow performance for our industrial activity, this three the merger.

Next on slide seven we have the net financial position I think cash flow performance for our industrial activities pre the merger.

Speaker 2: C&H industrial started the year with 786 million in net industrial cash and closed its operation as we have known them prior to the merger with 288 million in cash after having acquired Raven and Santiana as well as other smaller investments throughout the year.

<unk> started the year with $786 million and net industrial cash and closely its operation as we have known them prior to the merger with $188 million in cash after having acquired Raven in South Carolina as well as all other smaller investments throughout the year.

Speaker 2: Freak-as-law industrial activities was positive, 1.8 billion to the strong operating performance and stable working capital in the year, with finished codes and ventories remain at low levels, at a higher manufacturing ventories and a higher trade payables of spending due to the elevated production volumes and constraint supply chain.

Free cash flow of industrial activities was positive $1 8 billion due to the strong operating performance and stable working capital in the year with finished goods inventories remain at low levels, but higher manufacturing inventories and higher trade payables outstanding due to the elevated production volumes and constraining the supply chain.

Speaker 2: Cabin expenditure when excess of 700 million in the year, a 47% increase versus 20%

Capital expenditure were in excess of $700 million in the year of 47% increase versus 'twenty plan.

Despite the usual seasonal fluctuation of free cash flow in our business industrial activities remain cash positive throughout the year as you can see in the bottom right corner of the slide.

Speaker 2: Despite the user's visual expectation of free cash flow in our business, industrial activities remain cash-positive throughout the year, as you can see in the bottom right corner of the slide.

Speaker 2: Now, from this slide forward, we'll present a summary of the performance financial for CNH industrial after the demurder of the vehicle group's activities. The following slides are consistent with the performance pages that we posted on the website back in December . I will not cover them in detail today, but these pages on page 34 to 41 in the appendix have been designed to assist you in modeling process going forward.

Now from the slide forward will present, a summary of the pro forma financials for CAH industrial after the merger of the vehicle group activities. The.

Following the slides are consistent with the pro forma pages that we posted on the website back in December .

I will not cover them in detail today, but these pages on page, 34% to 41 in the appendix have been designed to assist you in modeling process going forward.

Speaker 2: What I would like to highlight on page nine is that even though we have split the company, CNH Industrial, is an almost 20 billion revenue entity with industrial net sales of 17.8 billion globally in 2021, growing almost 30% from 2019.

But I would like to highlight on page nine is that even though we have split the company <unk> industrial is an almost $20 billion revenue entity with industrial net sales of $17 8 billion globally in 2021 growing almost 30% from 2019.

With pro forma adjusted EBITDA of almost $1 8 billion for 2021, the adjusted EBIT margin of the new <unk> industrial was just shy of 10% for the year.

Speaker 2: We perform a drastic debate of almost 1.8 billion for 2021 that the steady-bid margin of the new CNH industrial was just shy of 10% for the year.

Speaker 2: Adjust the net income double from the performance of 2019. So did adjust the only per share at $1.28 in 2021.

Adjusted net income doubled from the pro forma for all of 2019. So the adjusted earnings adjusted earnings per share at $1 28 in 2021.

Speaker 2: As anticipated, with the merger netting that fell back at the beginning of 2022, was 1.1 billion, after having funded the largest acquisition in companies.

As anticipated with the merger net industrial debt at the beginning of 2022 was $1 1 billion. After having funded the largest acquisition in company history.

Let me now go more in detail on the performance of our industrial segments for the year and for the quarter with a user look I think that's the activities adjusted EBIT by driver and segment.

Speaker 2: Let me now go more in detail on the performance of our industrial segments for the year and for the quarter. We will use a look of industrial activities adjusted in bit by driver and cyclist.

Speaker 2: A reculture achieve adjusted EBIT of $1.8 billion and adjusted EBIT margin of 12.3%. Construction reported adjusted EBIT of 90 million and increase of 274 million from 20.1.

Agriculture.

<unk> adjusted EBIT of $1 8 billion and adjusted EBIT margin of 12, 3% construction reported adjusted EBITDA of $90 million, an increase of 274 million frontline <unk>.

Speaker 2: Volumes and net pricing drove profitability growth for the full year. Increase production cost, including raw material pricing increases.

Volumes in that pricing drove profitability growth for the full year increased production cost, including raw material price increases.

Speaker 2: expedited trade and components of components and additional works at the end of the alcohol production lines were more than upset by price realization also in the fourth quarter of 2021.

Fate and components of components and additional works.

At the end of the hour, but actual lives were more than offset by price realization also in the fourth quarter of 2021 .

SG&A variances reflect increased activity levels and higher variable compensation, while R&D expenses grew around 30% in the year as we invested more in developing our technology.

Speaker 2: The GNA balances reflect increased activity levels and higher valuable compensation, while R&D expenses to around 30% in the year as we invested more in developing our technology.

Speaker 2: Looking at the individual segments, agriculture's full year 2021 address the limit increased 930 million due to the positive prioritization and favorable volume and mix, partially upset by higher product costs related to raw material and freight cost and higher valuable compensation.

Looking at the individual segments agriculture as full year 2021, adjusted EBIT increased 930 million due to the positive price realization and favorable volume and mix, partially offset by higher product costs related to raw material and freight costs and higher variable compensation.

Adjusted EBITDA margin for the segment was 12, 3% and adjusted gross margin was 22, 4%.

Speaker 2: Adjust the DB in margin for the segment was 12.3% and adjust the gross margin was 22.4%.

Construction adjusted EBIT reached 90 million for the full year 2021, with essentially the identical causal affecting the AG segments and had an adjusted EBIT margin of two 9% a strong recovery from a difficult 2020, but also 110 basis points increase in margin from 2019.

Speaker 2: Construction of just a little bit which is 90 million for the full year 2021 with essentially the identical causes for affecting the act segments and have an adjusted image margin of 2.9%. A strong recovery from a difficult 2020, but also 110 basic points increases margin from 29.

Speaker 2: For recorder, address delivery of industrial activity was 378 million, and the margin was 7.6%.

For the quarter adjusted EBIT of industrial activity was $378 million and the margin was seven 6%.

Speaker 2: As we anticipated, the quota was affected by numerous interruption to our production cycle due to missing components, many semiconductors. Price realization in both sides.

As we anticipated the quarter was affected by numerous interruption to our production cycle due to missing components, mainly semiconductors.

Price realization in both segments was once again.

Speaker 2: higher than increasing overall for the cost. I did not reduce manner compared to the previous quarter.

Higher than increase in overall product cost a bit on a reduced manner compared to the previous quarters.

Speaker 2: The problem is that it was not favorable on our line as we were able to ship less media and negative factors than needed. You have to send me back to the shortage.

Brother May explain unfavorable on a lag lines as we were able to ship less medium and heavy tractors the needed due to semiconductor shortages.

Speaker 2: raw materials that freight cars continue to wait on our production expenses and we expect these to continue in the first part of 2020.

Raw materials and freight costs continue to weight on our production expenses and we expect this to continue in the first part of 2022.

Speaker 2: On its DNA, the impact of variable compensation was stronger in the fourth quarter than in previous period.

On SG&A the impact the variable compensation was stronger in the fourth quarter than in previous periods.

On a pro forma basis, the <unk> industrial business started 2021 with $900 million net debt position on the back of our strong operating performance and free cash flow for industry activity was positive $1 9 billion for the year with working capital further improving despite higher manufacturing inventories.

Speaker 2: On a performer basis, the C&H in the business started 2021 with 900 million net debt position. On the back of a strong operating performance, three cash flow for industrial activity was positive 1.9 billion for a year, with working capital further improving despite higher manufacturing events.

Speaker 2: And that ended at 1.1 billion primarily due to the cash out for the acquisition of 100% in the Arabian industry and 90% in the interest of the piranha as this calf went talking about the report.

Net debt ended at $1 1 billion, primarily due to the cash out for the acquisition of 100% in revenue industry and 90% interest is and Piranha is discussed when talking about the reported figures.

Speaker 2: You will see in the appendix, it was like 40, the total third party that for the company after the merger was 20.9 billion at December 31st, 2021, and was 22.9 billion at December 31st, 2020. With 15.6 billion and 15.7 billion respectively, belonging to our financial services operation.

You will see in the appendix on slide 40, the total third party debt for the company. After the merger was $20 9 billion at December 31st 2021, and was $22 9 billion at December 31, 2020, with $15 6 billion and $15 7 billion, respectively belonging to our financial services operations.

Speaker 2: With the spin-off, C&H Industre is retaining the entirety of the former C&H Industre tourparadep and the entirety of the Androum revolving credit facility, giving an available liquidity position above 10 billion at the end of 2021.

With the spin off <unk> is retaining the entirety of the pharmacy in <unk> industrial third party debt and the entirety of the Undrawn revolving credit facility.

And available liquidity position above 10 billion at the end of 2021.

Speaker 2: We will give you another idea of the long-term trajectory of these figures in two weeks of our capital market day. But let's just say for now that we feel we are well positioned, we strongly equated the invisible path to unethy industrial cash position in the near-ter.

We will give you a better idea of the long term trajectory of these figures in two weeks at our capital market day, but let just say for now that we feel we are well positioned with strong liquidity and visible one net industrial cash position in the near term.

Speaker 2: That's when the list on January 4, 2022, featuring trading trades, its long-term issues, the forwarding of CNH and DAT and D, to 3.0B plus, from 3.0B minus.

That's not the least on January 4th 2032, Fitch ratings raised its long term issues that <unk>, who will take will be plus some capably behind us.

Speaker 2: Each also upgraded CNH industrial finance Europe a safe senior senior and secure rating from triple B but the two triple B plus plus from triple B minus and stable outlook. The upgrade follows the merger of

Each also upgraded <unk> industrial finance Europe is facing or a senior unsecured rating from people to triple B pass plus from Triple B minus and stable outlook.

The upgrade follows that the merger of Iveco group Wendy.

Speaker 2: With this, I will turn back to Scout. Yeah, who took the picture? Take a photo to the remainder of the prepare by.

With this I will turn back to Scott.

Take us through the remainder of the paradox.

Speaker 3: Thanks, Houdone. At the end of November , we completed our purchase of Raven Industries. Our teams are diligently performing the vital task necessary to make this reverse integration as productive as possible.

Thanks, Sudan, a at the end of November we completed our purchase of Raven industries. Our teams are diligently performing the vital tasks necessary to make this reverse integration as productive as possible.

Speaker 3: We will very soon demonstrate how CNH Industrial's strong engineering heritage will leverage Raven's technology to introduce best-in-class products and solutions, delivering enhanced productivity and yields for farmers and growers.

We will very soon demonstrate I've seen H industrial strong engineering heritage will leverage Ravens technology.

To introduce best in class products and solutions, delivering enhanced productivity and yields for farmers and growers.

Speaker 3: Furthermore, just prior to year end, we completed the purchase of 90% of the capital of Sampiriana, a construction equipment company specializing in developing and manufacturing, earth moving machines, particularly with many and many excavators. Their Eurocomact product range will significantly enhance our construction equipment portfolio, and will lead to notable improvements in our products and technology.

Furthermore, just prior to year end, we completed the purchase of 90 purchase of 90% of the capital of some Purion M. A construction equipment companies specializing in developing and manufacturing Earth moving machines, particularly with many X mini and mini excavators Theyre Euro commack product range will significantly enhance our construction equipment port.

Folio and will lead to notable improvements in our products and technologies, we entered 2022 as a simpler and stronger C and H industrial with a laser focus on our customers and dealers.

Speaker 3: We enter 2022 as a simpler and stronger C&H industrial with a laser focus on our customers and dealers.

The AG machinery industry was strong throughout 2021 farm income levels remained high benefiting from favorable commodity prices, which drove many to replace aging fleets with more advanced precision equipment.

Speaker 3: The ag machinery industry was strong throughout 2021. Farm income levels remained high, benefiting from favorable commodity prices, which drove many to replace aging fleets with more advanced precision equipment.

Speaker 3: From a demand perspective, it was a particularly strong year for combine harvesters with year-over-year industry deliveries up 25% in North America, and slightly less in other regions. High horsepower tractor deliveries notably increased in North America, and in most regions, 2021 tractor demand exceeded 15%.

From a demand perspective, it was a particularly strong year for combine harvesters with year over year industry deliveries up 25% North America.

And slightly less in other regions high horsepower tractor deliveries, notably increased in North America and in most regions 2021 tractor demand exceeded 15%.

Speaker 3: Backlogs remain high as order books across OEMs increased, with KSI to New Holland order books up year over year, more than two times for tractors, and one and a half times for combat.

Backlogs remain high as order books across Oems increased with case, IH and new Holland order books up year over year more than two times for tractors and one five times for combines.

Speaker 3: Worldwide, both light and heavy construction equipment grew versus 2020. Light demand was largely driven by strength and residential construction, while heavy benefited from increased contracted man and preparations for the U.S. infrastructure bill.

Worldwide.

Both light and heavy construction equipment grew versus 2020 light demand was largely driven by strength in residential construction, while heavy benefited from increased contracted demand and preparations for the U S infrastructure Bill.

Speaker 3: South American demand was particularly high of 87% led by Brazil while North America and Europe increased 23% and 19% respectively.

South America demand was particularly high up 87% led by Brazil, While North America, and Europe increased 23% and 19% respectively.

Speaker 3: Construction equipment retail cadence was also quite strong with light equipment up approximately 10% in most geographies aside from South America, which was up 25%. For heavy retail in North America was up approximately 20%, trailing Europe and South America, which were up 37% and 25% respect.

Construction equipment retail cadence was also quite strong with light equipment up approximately 10% and most geographies aside from South America, which was up 25%.

For heavy retail in North America was up approximately 20% trailing Europe , and South Africa, South America, which were up 37% and 25% respectively.

Given our existing order backlog, which now extends far into 2022, our agriculture segment should continue to perform well.

Speaker 3: Given our existing order backlog, which now extends far into 2022, our agriculture segment should continue to perform well. Some of our equipment is essentially sold out for the year at current production rates.

Some of our equipment is essentially sold out for the year at current production rates.

Speaker 3: Almost the same can be said for our construction order book, which more than doubled year over year driven by strong increases in North America and Europe .

Almost the same can be said for our construction order book, which more than doubled year over year, driven by strong increases in North America and Europe .

Speaker 3: But we expect these businesses to return to more normal seasonality during 2022. It may be a bit concealed in the first half by supplier-related production constraints.

While we expect these businesses to return to more normal seasonality during 2022, it may be a bit can see it in the first half by supplier related production constraints.

Speaker 3: The team reacted quickly to very late deliveries of civic conductors at the end of the fourth quarter to ship a sizable portion of our accumulated fleet inventory. Overall, channel inventory remains low across product lines.

The team reacted quickly to very late deliveries of semiconductors at the end of the fourth quarter to ship a sizable portion of our accumulated fleet inventory overall channel inventory remains low across product lines.

Speaker 3: We expect global ag industry demand to remain solid with limited grain and oil seed stocks, unfavorable weather conditions in South America, and geopolitical upward pressures, particularly on wheat.

We expect global AG industry demand remained solid with limited grain and oilseed stocks unfavorable weather conditions in South America, and geopolitical upward pressures, particularly on wheat.

Speaker 3: As a result, farmer sentiment, although down slightly from last year, remains positive, driven by elevated commodity prices and supportive farm incomes. In addition, new and used equivalent inventories are at historically low levels, and average fleet age in North America is at a two-decade high.

As a result, the farmer sentiment, although down slightly from last year remains positive driven by elevated commodity prices and supported farm incomes. In addition, new and used equipment inventories are at historically low levels and average fleet age in North America is that a two decade high.

Speaker 3: There are of course plenty of headwinds to these positive trends with input cost inflation and limited equipment availability leading away. However, we believe that high prices for nitrogen, seed, and other inputs should be a catalyst to accelerate precision ag adoption as farmers expect to turn more efficient and sustainable methodologies.

There are of course plenty of headwinds to these positive trends with input cost inflation and limited equipment availability leading away. However.

However, we believe that high prices for nitrogen seed and other inputs should be a catalyst to accelerate precision AG adoption as farmers expect to turn more efficient and sustainable methodologies.

Speaker 3: If you compare 2022 industry demand with the same slide from a year ago, some of these increases look small. While the main ag markets continue to be very healthy, the comps get slightly more difficult as capacity constrained industry production is outstripped by demand.

If you compare 2022 industry demand with the same slide from a year ago. Some of these increases look small.

While the main AG markets continue to be very healthy comps get slightly more difficult as capacity constrained Andy production industry production is outstripped by demand.

Speaker 3: For construction equipment, we anticipate some of the same supplier constraint production in the first half of 2022. Thus, the year should be a bit more back and loaded than usual.

For construction equipment, we anticipate some of the same supplier constrained production in the first half of 2022.

Thus the year should be a bit more backend loaded than usual.

Speaker 3: Some of the typical seasonality gets distorted by demand from contractors starting projects funded by the North American Infrastructure Bill. While demand is high, significant upside to our North American estimates, which represent nearly 50% of the construction business, will likely be constrained by labor availability.

Some of the typical seasonality gets distorted by demand from contractors starting projects funded by the North American infrastructure Bill.

While demand is high significant upside to our north American estimates, which represent nearly 50% of the construction business will likely be constrained by labor availability.

Speaker 3: With solid in market demand continuing to butt up against difficult supply chain constraints, especially for semiconductors and specifically for the first half, our 2022 guidance for industrial activities is as follows.

With solid end market demand continuing to butt up against difficult supply chain constraints, especially for semiconductors and specifically for the first half our 2022 guidance for industrial activities is as follows.

We expect full year net sales of industrial activities to grow between 10, and 14% including currency translation.

Speaker 3: We expect full-year net sales of industrial activities to grow between 10 and 14% including currency translates.

Speaker 3: We will continue to invest to improve our business, but still expect to keep SGNA at or below seven and a half percent of net sales.

We will continue to invest to improve our business, but still expect to keep SG&A at or below seven 5% of net sales.

We anticipate free cash flow for industrial activities to exceed $1 billion and combined.

Speaker 3: We anticipate free cash flow for industrial activities to exceed $1 billion and combined R&D and CAPEX will be approximately $1.4 billion for the year versus $1 billion in 2021.

<unk> R&D and Capex will be approximately $1 4 billion for the year versus $1 billion in 2021.

While we were pleased with the performance of the team and the healthy momentum from 2021, we expect continued supply chain challenges primarily through the first two quarters of 2022, but likely diminishing in the back half of the year.

Speaker 3: While we were pleased with the performance of the team and the healthy momentum from 2021, we expect continued supply chain challenges primarily through the first two quarters of 2022, but likely diminishing in the back half of the year. As these subside, we expect production and retail sales to increase above normal seasonality in some cases, as production ramped up to partially replenish channel inventory and satisfy strong customer demand. Pricing remains healthy and accreted.

As these subside, we expect production and retail sales to increase above normal seasonality in some cases as production ramped up to partition to partially replenish channel inventory and satisfy strong customer demand.

Reising remains healthy and accretive.

Speaker 3: As we wrap up the call, I would like to preview our capital market stay, which we're holding two weeks from now in Miami Beach. In addition to the weather being much nicer than what most of us are currently enduring, the event will highlight our updated pure play, Ag and Construction Strategic Business Plan.

As we wrap up the call I would like to preview our capital markets day, which we are holding two weeks from now in Miami Beach. In addition to the weather being much nicer than what most of US are currently enduring event will highlight our updated pure play AG construction strategic business plan.

Speaker 3: Several members of our leadership team will join Adoni and me in detailing C&H industrial's long-term priorities, technology roadmap, financial outlook, segment blueprints, and sustainability targets. The venue is the historic Fillmore Theater, and I encourage you to join us in person as we will be displaying several pieces of our Ag and Construction portfolio, which will not only be a unique experience, but also an historical first for the Miami Beach community. I hope to see you there on February 22nd.

Several members of our leadership team will join <unk> and me and detailing <unk> Industrial's long term priorities technology roadmap financial outlook segment blueprints and sustainability targets.

The venue is the historic Fillmore theater, and I encourage you to join US in person as we will be displaying several pieces of our AG AG and construction portfolio.

Which will not only be a unique experience, but also in historical first for the Miami Beach community I hope to see there on February 20 <unk>.

Speaker 3: That concludes our prepared remarks and we can now open it up for questions. Sandra, please open the line.

That concludes our prepared remarks, and we can now open it up for questions. Sandra Please open the line.

Thank you.

Speaker 1: Thank you. We will take a first question. It comes from the line of David Russell from Evercourt UC Group. Please go ahead.

I'll take the first question. It comes from the line of David Raso from Evercore ISI Group. Please go ahead.

Speaker 4: Thank you for the time. I was curious how you thought about the fourth quarter three months ago seemed to imply revenues for the standalone.

Hi, Thank you for the time I was curious how you thought about the fourth quarter three months ago seemed to imply revenues for the Standalone off Highway company as well to beat down obviously, you did a lot better than that and I just wanted to get some color on what changed as the quarter went along and then if you can give us any perspective.

Speaker 4: Obviously, it did a lot better than that. I just want to get some color on. What change as the quarter went along and then if you can give us any perspective of how you're thinking about margins?

How are you thinking about margins for 'twenty two beyond just the SG&A comment. Thank you.

Speaker 3: and david i i would like to just give a shout out to daryk nielson and tom verboten and our entire ag and operations team because what what happened in the fourth quarter

And David I would like to just give a shout out to Derek Nielsen and Tom are bought and then our entire AG and operations team because what what happened in the fourth quarter really the first two and a half months played out more or less like we expected.

Speaker 3: really the the first two and a half months played out more or less like we expected uh... but you know very strong negotiations in coordination with one of our key suppliers as i mentioned uh... in my prepared remarks gave us a large delivery of simic conductors the last week of the year so we were able to actually

But very strong negotiations in coordination with one of our key suppliers as I mentioned.

My prepared remarks gave us a large delivery of semiconductors. The last week of the year. So we were able to actually.

Speaker 3: You know fulfill the the final completion of a large number of our fleet units across the portfolio and get those units out to customers and dealers that Really needed them. So that that really was how we were able to outperform

Fulfill the the final completion of a large number of our fleet units across the portfolio and get those units out to customers and dealers that really needed them. So that really was how we were able to outperform.

Speaker 3: But it's kind of what happened all year. The team just did a really nice job of managing a very difficult supply chain situation. And as we talked about, it was mostly in the fourth quarter related to semiconductors.

But it's kind of what happened all year. The team just did a really nice job of managing a very difficult supply chain situation.

We talked about it was mostly in the fourth quarter related to semiconductors.

Speaker 3: You know, we're not going to get into too much margin discussion. I think we do see good momentum, you know, carrying through into 2022, but we're also, as we were quite clear, I think, God, we do see some pressures in the first-

We're not going to get into too much margin discussion I think we do see good momentum carrying through into 2022, but we're also as we were quite.

Clear I think we do see some pressures in the first half of the year, but overall, we've got confidence that the team is going to continue to see year over year improvements.

Speaker 3: of the year but overall we've got you know confidence that the team is going to continue to see your year improvements. Can I just clarify one thing now if at the

Can I just clarify one thing, though if at the end of the quarter you got the chip delivery and I assume those went into a lot of red tagged pieces of equipment or equipment that was only missing.

Speaker 4: We got the chip delivery and I assume those went into a lot of red tagged pieces of equipment or any equipment that was only missing.

Speaker 4: Is that correct? That's correct.

A couple of parts is that correct that's correct.

Yes.

So this was a chip that said, though that means that wave of revenue at the end of the quarter probably came in with low incremental margins right. They were already absorbed having been built partially before the fourth quarter is there any way to quantify that revenue impact from those red.

Speaker 4: That said though, that means that wave of revenue at the end of the quarter probably came in with low incremental margins, right? They're already absorbed having this

Speaker 4: Is there any way to quantify that revenue impact from those?

Speaker 4: red tag shipments just I'm just trying to get a sensor run rate margins because obviously those revenues at the end of the quarter obviously drove absolute levels of ebit higher, but probably dampen

The Red Tag shipments just so I'm, just trying to get a sense of run rate margins, because obviously those revenues at the end of the quarter, obviously drove absolute levels of EBIT higher, but it probably dampen the incrementals a bit.

Speaker 3: I don't think many of them were built prior to the fourth quarter. I mean, it's, but it, and it also remember it was, it wasn't just the all highway segment that we were having this issue with. It was a lot of trucks and buses as well. So really, probably not a, a don't know how you can comment if you want, but I don't think that you can back into that, that margin impact much kind of restário.

I don't think many of them were built prior to the fourth quarter I mean, it's but it also remember it was it wasn't just the off highway segment that we were having this issue with it was a lot of the.

The trucks and buses as well so.

Probably not I don't know you can comment if you want but I don't think that you can back into that that margin impact, but very easily.

Speaker 2: Yeah, I mean, we have, we definitely have higher cost because of, you know, managing these units at the end of the line and reworking the plants as we say. And therefore, we had lower margin in the fourth quarter, as you can also see on our numbers. I mean, that was a good contributor of the lower margin. It was the fact that we really had to run in the plants behind the production schedule too.

Yeah, I mean, we have we definitely have higher costs.

Cause of managing these units at the end of the line and rework in the plants as we say.

And therefore, we had lower margin in the fourth quarter as you can also see on that.

Our numbers I mean that was a good contributor of the lower margin was the fact that really hassle running the plants.

Behind.

Behind the production scandal.

Speaker 2: to repair and rework on these units. And I will say not the driver for the lower market.

To reap their rewards from these units and I would say that's the driver for the lower margin.

Okay. Thank you very much I appreciate it.

Speaker 1: Thank you. Next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Daniela.

Thank you next question comes from the line of Daniel.

<unk> Costa from Goldman Sachs. Please go ahead.

Daniela.

Daniela Costa from Goldman Sachs are you on mute.

Okay <unk>, we will go for the next question. It comes from the line of Tami Zakaria from Jpmorgan. Please go ahead.

Speaker 1: It comes from the line of Tommy Sekaria from JP Morgan. Please go ahead. Daniella, if you can hear me press star 1 again so that we can put you back.

If you can hear me press star one again, so that we can piggy back on the queue. Thank you.

Speaker 5: Hi, thank you so much for taking my question. My question is around the strong order books. How are you thinking about the risk to price cost in 2022? Or are these mostly dealer orders where pricing can be adjusted if raw material prices continue to go up?

Hi, Thank you so much for taking my question my.

My question is around the or strong order books.

How are you thinking about the risk to price cost.

And China intended to or are these mostly dealer orders.

<unk> can be adjusted if raw material prices continue to go up.

I'd like to again give a tremendous shot out to Derek and his global team because they've managed pricing very very well in 2021.

Speaker 3: you know i i'd like to read again give uh... tremendous shout out to to darrick and his his global team because they've managed pricing very very well in 2021 um... and you know part of that was just making sure the dealer units were were able to have the price flexibility we we we feel very confident in and what's in the order book that we are protected uh... from price throughout from most of the year

And you know part of that was just making sure that the.

<unk>.

Units, where we're able to have the price flexibility, we feel very confident in what's in the order book that we are protected from price throughout most of the year.

Got it understood. Thank you so much.

Yes.

Thank you next question comes from the line of Steven Fisher from UBS. Please go ahead.

Speaker 1: Thank you. Next question comes from the line of Steven Fisher from UBS. Please go ahead.

Speaker 6: Thanks, good morning, just to follow up on that. And I know you don't want to talk about margins specifically, but maybe just the thoughts on pricing and both ag and construction and how you see the cadence of that price versus cost over the course of the year. The fact that it was still positive in Q4, I thought was pretty impressive. So just curious what we should be expecting as kind of cadence of that over the course of 2022.

Thanks, Good morning, just to follow up on that and I know you don't want to talk about margins, specifically, but maybe just the thoughts on pricing in both AG and construction and how you see the cadence of that price versus cost over the course of the year.

The fact that it was still positive.

Q4, I thought was pretty impressive. So just curious what we should be expecting is kind of cadence of that over the course of 2022.

Yes.

Donna do you want to not answer that.

Speaker 2: Yes, look we we have carry over pricing on the other book that will still still have to flow to the PLL We Commended about the fact that we expect

Okay.

Yeah.

Yes.

Look we have carryover pricing on the order book that will still still has to flow through the P&L.

We commented about the fact that we expect the first half of the year still to be complicated from a supply chain standpoint, so scale have these headwinds higher freight costs.

Speaker 2: first half of the year still to be complicated from a supply chain standpoint. So still have these headwinds, higher freight coasts, some rewards in the plan.

Somebody walks in the plants.

Speaker 2: And then we expect that to ease in the second part of the year.

And then we expect that believes in the second part of the year.

Yeah.

Speaker 6: Okay, thank you for indulging that. So then maybe thoughts on the broader ag cycle in the sky, you know, made reference to some of the factors that are supporting the ag prices today, the geopolitics, and then Brazil growing conditions. So maybe you can just talk about.

Okay. Thank you for indulging that.

And then maybe.

Thoughts on the broader AG cycle and as Scott you made reference to some of the factors that are supporting the AG prices today, the geopolitics and then Brazil.

Growing conditions so.

Maybe you can you just talk about.

Speaker 6: how that commodity strength is influencing your thoughts perhaps on 2023 and where the cycle could go. I think previously you were kind of thinking about 2022 as if it might be the peak. Are you thinking that maybe it could have more legs from now and that how that would influence your thoughts about kind of overproduction versus retail.

How that commodity strength is influencing your thoughts, perhaps on 2023, and where where the cycle could go I think previously you were kind of.

Thinking about 2022 as if it might be the peak or are you thinking that maybe it could have more legs from now and then how that would influence your thoughts about kind of overproduction versus retail.

Yeah, well obviously.

Speaker 3: Well, obviously, with getting ready for our capital markets they we've spent a lot of time thinking about and analyzing what we expect from the cycle. And that means having a lot of conversations with people that are much smarter than I am on that concept. And as we've done those deep dives, it does give us a little more confidence. Some of the factors we talked about with the greater adoption of precision, the two decade old fleet age.

We're getting ready for our capital markets day, we spent a lot of time thinking about and analyzing what we expect from the cycle and that means having a lot of conversations with people that are much smarter than I am on that concept and as we've done those deep dives. It does give us a little more confidence some of the factors, we talked about with the greater.

Option of precision the two decade old fleet age.

Speaker 3: here in North America. So I do think 2023 is looking better now than I'd originally thought maybe even three months ago as we get a little more into it. But that said, we're being very, very disciplined. I mean, obviously our supply constraints are causing it in our production. But our dealers do appreciate they desperately want more inventory now. But I think they appreciate what can happen with pricing specifically as they maintain a tighter inventory. And we'll continue to try to do that as we go forward and not not let

Here in North America. So I do think 2023 is looking better.

Now than I had originally thought maybe even three months ago as we get little more into it but that said, we're being very very disciplined I mean, obviously, our supply constraints are causing it.

And our production but.

Our dealers do appreciate they desperately want more inventory now, but I think they appreciate what can happen with pricing specifically as they maintain a tighter inventory and we will continue to try to do that as we go forward and not let you know.

Speaker 3: you know things get ahead of ourselves and you know that does take discipline but i i would you should expect us to have that discipline so when the cycle does slow we don't find ourselves in a and a big problem of oversupply but no at at this point

Things get ahead of ourselves and that does take discipline, but I would you should expect us to have that discipline. So when the cycle does slow we don't find ourselves in.

A big problem of oversupply, but at this point what I've learned is the 2023 has probably got a little bit more legs to it than I would've expected a while ago.

Speaker 3: What I've learned is that 2023's probably got a little bit more legs to it than I would have expected a while ago.

Yeah.

Terrific, Thanks very much.

Yeah.

Thank you next.

Speaker 1: Question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Our next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Hi, Good afternoon, I Hope you can hear me now.

Speaker 7: Hi, good afternoon. I hope you can hear me now. I hope hope all is well. I have three questions. The first one was regarding Precision Act in Raven, and now that you have the assets, sort of how shall we think about the growth paths from here on Precision Act to close the gap with peers between organic, increasing organic investments versus continuing to sort of a bolt-on or even not bolt-on M&A strategy.

Hopefully.

I have three questions.

First one was regarding.

Precision AG and Raisin and now that you have the assets.

Shall we think about the growth paths from here on precision AG to close the gap with peers between organic.

Creating organic investments versus continuing to sort of a bolt on or even not bolt on M&A strategy.

Speaker 7: That's question number one. And then you two others are more focused on the near term. I wanted to check first on your comment that you've been able to order a bit more semis and maybe then you would have originally expected on Q4. And can you comment then?

That's question number one and then two others are more focused on the near term I wanted to check first on your comment that you've been able to order a bit more maybe than you would have originally expected on Q4 and can you comment then.

Speaker 7: In terms of like the margin performance on Q4 specifically, did you end up overproducing or actually you still had some disruption impact and if you could help quantify basically how much that was versus what would have been a normal margin, that would be helpful. And the third one just on the growth target, the 10 to 14%, which seems to be mainly pricing, but anyways, how much visibility on that do you have already in the backlog? You mentioned you were fully booked on some lines. So here is on that.

In terms of like the margin performance on Q4, specifically did you end up overproducing or actually you still had some disruption impacts and then if you could help quantify basically how much that was but what would have been a normal margin that would be helpful and the third one just on the growth target 10% to <unk>.

14%, which seems to be mainly pricing, but anyway, how much visibility on that you have already in the backlog. You mentioned you are fully booked on some line.

So I'm curious on that thank you all.

Speaker 3: all right well i'll take the first one give a doni the second to but you know we are uh... we're thrilled to get the acquisition of rave and closed uh... in November and you know that really

Alright, well I'll take the first one and give it Tony the second too, but we are we're thrilled to get the acquisition of Raven closed.

November and really.

Speaker 3: exciting work of driving that integration and now understanding what our combined companies can do together You know they have an incredibly strong team and a straitably strong engineering customer focus a lot of stuff That's why we talk about a reverse integration is because we're so pleased with basically that overall business

Exciting work of driving that integration and understanding what our combined companies can do together they have an incredibly strong team on <unk> strong engineering customer focus a lot of stuff. That's why we talk about a reverse integration is because we're so pleased with basically that overall business.

Speaker 3: But we've been working with them for more than a decade where they're largest customers, so we know them reasonably well. But the synergies that we have to accelerate what we can deliver for our customers and dealers is really exciting. Prague Guard who joined us in the spring, really is leading that integration. And where we help be speaking at Capital Market today in Miami and really provide a clear roadmap. But what we're most excited about is being able to deliver.

But we've been working with them for more than a decade, we're their largest customers. So we know them reasonably well, but the synergies that we have to accelerate what we can deliver for our customers and dealers is really exciting.

Guard, who joined us in the spring.

<unk> is leading that integration and where we hope to be speaking at.

At capital markets day in Miami, and really provide a clear roadmap, but what we're most excited about is being able to deliver.

Speaker 3: you know better automation and ultimately autonomy.

Automation and ultimately autonomy.

Speaker 3: you know to our customers uh... and i think as we give them those tools and really it's what we're saying a desperate desire almost for productivity and yield from our farm customers and that's exactly what ravein delivers for us and you know because we have such a close working historical relationship but we're going to be able to bring new products to market much faster than i think some people were able to expect and that'll be exciting for prog to talk about

To our customers.

And I think as we give them those tools I mean really it's we're seeing a desperate desire almost for productivity in yield from our farm customers and Thats exactly what Raven delivers for us.

<unk>, we have such a close working with historical relationship we're going to be able to bring new products to market much faster than I think some people were able to expect and that'll be exciting for product to talk about.

Speaker 3: uh... next month you know as far as you know continuing to do both on m&a i think you'll still see that raven did it for many years before we acquired them we've you know continue to do it uh... we just had the augment the team in here you know partner for us and and uh... precision spraying and we're just excited about you know what what our overall portfolio can do but we'll certainly add to that

Next month as far as continuing to do bolt on M&A I think youll still see at Raven did it for many years before we acquired them. We've continued to do it we just had the augmented team in here.

Our partner for us in precision spray and we're just excited about what what our overall portfolio can do but we will certainly add to that as necessary and not only with acquisitions, but sometimes with partnerships in and just good overall relationships. So we feel good about that and probably will go into more details, but don't you want to cover the other two.

Speaker 3: as necessary and not only with acquisitions but sometimes with partnerships and and just good overall relationships. So we feel good about that in Prague. We're going to more details. I don't even want to cover the

Speaker 2: Yeah, so it's you for, I mean, we underproduced retail, but that's pretty normal for you to for, but also we produced less than what we wanted to produce because of this general lack of components and including the setting conductors.

Yeah, So in Q4.

Underproduce retail.

<unk> for Q4, but also we produce less than what we wanted to produce.

Because of this general lack of components and including the semiconductors.

Sure.

Speaker 2: There was an impact in the margin, as we said before, mainly because of reworks and additional work in the plants, to get these unfinished goods out of the plants into our customers when these any conductors that they pass around.

There was an impact in the margin as we said before mainly because of.

Reworks and.

And additional work at the plants to get these I'm finished goods out of out of the plants into our customers.

With the semiconductor side.

Alright.

Speaker 2: In terms of growth for next year, I will split between a pricing component that is definitely there, but also increase capacity in our production facilities until ability to produce more and the four cells more.

In terms of growth for next year.

I will split between a pricing component that is definitely there.

But also increase capacity in our production facilities.

And so our ability to produce more <unk> more.

Speaker 2: And this is a combination of having improved our capacity and also having work with our suppliers to get more components next year compared to New Zealand.

And this is a combination of having.

Improve.

Our capacity and also having worked with our suppliers to get.

More components next year compared to an easier.

Thank you.

Speaker 1: Thank you. Next question from the line of Rose Gelardi from Bank of America. Please go ahead.

Thank you next question from the line.

Gilardi from Bank of America. Please go ahead.

Hey, good morning, guys.

Yeah.

Speaker 6: Yeah, I just want to clarify, so of the 10 to 14% revenue guide, roughly how much of that is priced, and what are you embedding for AFX? I would assume with the price increase.

Good morning.

Yes, I just wanted to clarify so of the 10% to 14% revenue guide.

Roughly how much of that is price and what are you what are you embedding for FX.

I would assume with.

The price increases that are.

Speaker 4: They're announced out there. It doesn't seem like you're assuming all that much in terms of volume growth. And then, are we at that fully our guide in the first half or is the revenue growth gonna be below that, the first half and above that in seconds?

They are announced out there it doesn't seem like you are assuming all that much in terms of volume growth and then.

Are we are we at that full year guide.

The first half or is that revenue growth going to be below that in the first half and above that in second half.

Well I mean.

Speaker 3: Well, I'll let it don't give you the specifics. But remember, our backlog is incredibly high. So what you're seeing from a growth standpoint is what we can manage through our supply chain.

I'll, let Tony give you the specifics, but remember our backlog is incredibly high so what youre seeing from a growth standpoint, as what we can manage through our supply chain.

Speaker 3: And again, we'll be better in the second half than we are in the first half. But we're coming off of a really strong year of growth. So I think with moderate price and in moderate single digit organic growth, we think we'll be okay.

And again, we will be better in the second half and we are in the first half, but we're coming off of a really strong year of growth. So I think with moderate pricing and moderate <unk>.

Digit organic growth, we think we'll be okay.

Speaker 3: but really we're limited by what we can get from the supply chain more than anything else.

But really we're limited by what we can get from the supply chain more than anything else.

Speaker 2: I don't even want to cover the rest. Yeah, and I mean, I would say pricing will be a component of it. Mix would be another component, right? We say that in the fourth quarter, we wear these advantages, we make because we didn't produce some of the medium and heavy tractors that our customers and we are waiting for. So we will have more of that. So we will have a better mix.

And the only way to cover the rest.

I mean, I would say pricing will be a component of it mix would be another component right. We said that in the fourth quarter. We were disadvantaged makes because we didnt produce some of the medium and heavy tractors that we that our customers need and we're waiting for so we will have more of that so we'll have a better mix.

Speaker 2: in the overall production. Effects is not significant in the growth of the...

A deal that'll production.

FX is not significant integrals.

Pete.

Our guidance is calculated with a 120 euro dollar exchange rate.

Speaker 2: Our guidance is calculated with a 120 Euro dollar exchange rate, but the component there is.

But the component there is meaningful.

Speaker 4: Okay, and then Scott, you did say at the end of David's response, the David's question that yet overall confidence and year on year margin improvement was with that up.

Okay, and then Scott you did say at the end of David.

Your response to Davids question that debt.

Yet overall confidence in year on year margin improvement was with data.

Speaker 4: a full year operating margin comment and is it, you know, in a year like this where you've still got a lot of supply chain strains.

Full year operating margin comment.

In a year like this where you still got a lot of supply chain strengths.

Speaker 4: is a 25% incremental margin framework, which has been sort of your historic norm, at least for the act, as is that appropriate to think about for this year.

Is it 25% incremental margin framework, which has been sort of your historic norm at least for the AG business is that appropriate.

To think about for this year.

Speaker 3: uh... i mean i i was somewhat vague in my comment because i i intended to be we do expect overall actually in most years there's gonna be obviously times what happens uh... you know productivity is incredibly important to us and we will seek to drive

I mean I.

I was somewhat vague in my comment because I I intended to be I mean, we do expect overall I mean actually in most years theres going to be obviously times, whether or not it happens.

Productivity is incredibly important to us and we will seek to drive <unk>.

Speaker 3: margin expansion that this year's just tricky because of the supply chain.

Margin expansion. This year is just tricky because of the supply chain.

Speaker 3: constraints uh... and it's it's hard to call with incremental margins are going to be because you know we've got higher labor cost you know i mentioned in my prepared remarks specifically around construction uh... where we're having just difficulty having enough labor to meet demand uh... you know and obviously with the material inflation and we do expect inflation to lag in the second half of the year not just supply chain get better but we do expect

Constraints.

And it's hard to call what the incremental margins are going to be because we've got higher labor cost you know I mentioned in my prepared remarks, specifically around construction, where we're having just difficulty having enough labor to meet demand.

And obviously with the material inflation that we do expect inflation to lag in the second half of the year not just supply chain could get better, but we do expect the downturn. There. So overall I think our again and the team does a really good good job of managing margins in minutes.

Speaker 3: downturn there so you know overall i think our again and the team does have really good night good job of managing margins and it's uh... it's kind of impressive to see the focus that they get to whether it's discipline pricing you know with good supplier negotiations uh... and we see you know better opportunity over the long term uh... but certainly in the short term i think i i feel comfortable that uh... just giving year over year improvement in margins will be a struggle with the team will certainly probably deliver that

It's kind of impressive to see the focus that they get them, whether its disciplined pricing with good supplier negotiations.

And we see a better opportunity over the long term.

But certainly in the short term I think I feel comfortable just giving year over year improvement in margins will be a struggle, but the team will certainly probably deliver that.

Speaker 4: Okay, great. And then just on some of the below the line items, and then if you just clarify what the tax rate should be for, you know, remain co-op, but just, you know, the run rate on...

Okay, Great and then just.

And some of the below the line items and then if you could just clarify what the tax rate should be for remain co, but just the run rate on.

Speaker 4: corporate expense and interest expense from 2021 that you're showing in your results. Are those broadly appropriate for 2022? And any reason why FIN co-earnings wouldn't be up in 2022 versus 2021 given that it's a growth year?

Corporate expense and interest expense from 2021 that youre showing in your results are those broadly appropriate for 2022 and any reason why <unk> been co earnings wouldn't be up in 2022 versus 'twenty, one given that it's a growth year.

Speaker 2: So let me start from the from so Finco or Erning.

So let me start from the from so think or earnings.

Speaker 2: will respect to be moderately up in the year because of the growth of the portfolio these year, which will reflect in growth next year. Of course, you need to consider the part of the Finca would be with on either, right? So to start with the spin off, I mean, with what remains in C&H investor, which is the majority of it, is North America, South America, and the Trump Cubula.

We expect to be moderately up in the year.

Net.

Cause of the growth of the portfolio Dcs right, which was reflecting growth next year of course, you need to consider that part of the <unk> would be without either so to start with the.

With the spin offs spun out I mean with the with what remains in CNA industrial which is the majority of it is North America South America.

<unk>.

And a chunk of Europe .

In terms of interest expenses.

Speaker 2: I would expect something similar to what you have in the Carval in 2022, as we have most of our, most of our bonds will be still be there.

I would expect something similar to what you will have in the carve outs in 2022.

As we will have most of our.

Most of our bonds.

Will be still be there.

Speaker 2: Then you'll have a question about the old-in cost. I will book a booklet. Yeah.

Then you had a question about the holding cost.

That will conclude.

Yes, sorry.

So colby.

Speaker 2: Corporate expenses. Yes, I will think corporate expenses between the round 35 to 40 medium per quarter.

Corporate expense.

Yes, I will think corporate expenses between.

At around $35 million to $40 million per quarter.

Speaker 2: And the tax rate, we have a lot of benefits from having more profit in jurisdictions where we didn't have tax assets. We expect that to normalize over the years. So to come to a more normal 20, mid 20, tax rate.

And.

And then the tax rate.

We have a lot of.

Benefit from.

From having more profit in jurisdictions, where we didn't have that asset.

We expect that to normalize.

Over the years to come to a more normal 20 mid 20% tax rate.

Okay.

Speaker 1: Pastor Lord and the line of François Robillard, inter-Monte, please go.

Thank you next question comes from the line of Scott.

Please go ahead.

Speaker 8: Hi, good morning and good afternoon everyone. Just one question on labor costs. You mentioned it as a potential entry for your construction equipment at PTT. And if I'm not mistaken, I will have as well some renegotiations with Union in some of your US agricultural production facilities.

Hi, Good morning, and good afternoon, everyone. Just one question on labor costs, you mentioned it as a potential headwind for your construction equipment activity.

If I'm not mistaken you will help us with some renegotiations with our union.

In some of your U S agricultural production facility.

Speaker 8: Can you just give us a bit more color on what to expect this year in terms of first labor availability and on which which pressures? Thank you very much.

Can you just give us a bit more color on what to expect this year in terms of.

First labor.

And on which wage pressures. Thank you very much.

Yes, we are.

Speaker 3: We feel reasonably comfortable with our ability to manage Labor is a small portion of our cogs, but certainly providing

We feel reasonably comfortable with our ability to manage labor is a small portion of our Cogs, but certainly providing a good work environment is the most important thing we can do because retaining talent and retaining our workers as really as important as anything right now, but the overall were.

Speaker 3: a good work environment is the most important thing we can do because retaining talent and retaining our workers is really as important as anything right now but the overall we're you know the union negotiation represents a relatively small portion of our North American labor force so we think that you know we'll be able to we've got a good relationship there we'll seek to manage and maintain that going forward but we feel like comfortable with our ability

The Union negotiation represents a relatively small portion.

Our North American labor.

Labor Force. So we think that we'll be able to we've got a good relationship there, we'll seek to manage and maintain that going forward, but we feel like comfortable with our ability to.

Speaker 3: to, to, I mean, we talked about the ability to expand margins and that assumes the fact that that we are going to see rising labor costs, but nothing on an overall basis and it took complete cost of goods sold, not a dramatic impact.

I mean, we talked about the ability to expand margins and that assumes the fact that we are going to see rising labor costs, but nothing on an overall basis.

Complete the cost of goods sold not not a dramatic impact.

Thank you.

Speaker 1: Thank you. Next question, concerns of Korni Yekhovonis from Morgan Stanley , please go ahead.

Thank you next question comes from the line of Courtney <unk>.

From Morgan Stanley . Please go ahead.

Hi, good morning, guys.

Speaker 9: Maybe, you know, I know you don't want to comment on margins too specifically, but can you just kind of frame from the supply chain perspective?

Maybe I know you don't want to comment on margins too specifically, but can.

Can you just kind of frame from the supply chain perspective.

Speaker 9: Do you see it getting worse in the first quarter, staying the same or a slight improvement? I was just a little confused by the moving parts.

Do you see it getting worse in the first quarter staying the same or a slight improvement I was just a little confused by that then moving parts.

Speaker 9: And then maybe if we can just go back to the common undeadler inventory, I think you'd mention, you obviously do dealers want more inventory, but.

And and then maybe if we can just go back to the comment on dealer inventory I think you had mentioned obviously the dealers want more inventory.

Speaker 9: When you look at the dealer inventory levels today, whether it's as month of sales or whatever, can you just comment on how big of a restocking you could see or do you feel like they are potentially?

When you look at the dealer inventory levels are today, whether it's as months of sales or whatever can you just comment on them.

How big of a restocking you could see or do you feel like they are.

<unk>.

Speaker 9: you know should be at a lower level than they have historically been uh... if you can just comment on how you're thinking about your mentor levels uh... over the long term thanks believe not those are two relatively easy questions uh... for first of all

Should be at a lower level than they have historically been.

If you can just comment on how youre thinking about dealer inventory levels over the long term. Thanks.

I believe it or not those are two relatively easy questions.

First of all Q4, and Q1 are going to likely be quite similar in that we're still constrained by by semiconductors. It might switch suppliers that are shorting us at the time, but that literally is the key driver and really the overall supply chain is not yet getting better and we've talked about a week.

Speaker 3: q4 and q1 are going to likely be quite similar in that you know we're still constrained by by semiconductors you know it might switch suppliers that are shorting us at the time but that that literally is the the key driver and really the overall supply chain is not yet getting better and we've talked about a week's very clear running development there

The second is improvement throughout the year really a better second half than first half, but so I think in terms of how to think about the first quarter. It's much more like the fourth quarter. Then we would expect the rest of the year or some of all of last year to me.

Speaker 3: the second is improvement throughout the year really a better second half than uh... then first half but so i think in terms of how to think about the first quarter it's much more like the fourth quarter than we would expect the rest of the year or some of a lot of last year at the uh... and as far as dealer inventory um... you know obviously it's going to go up from here and we are not we we just don't have the inventory that they need to properly serve their customers uh... and so it will go up from here and i think getting back to you know

And as far as dealer inventory.

Obviously, it's going to go up from here I mean, we are not we just don't have the inventory that they need to properly serve their customers.

And so it will go up from here and I think getting back to.

Relatively normal level is good I think what has happened typically in the past.

Speaker 3: A relatively normal level is good. I think what has happened typically in the past, and happens across industries, is that in good times you just overproduce and then you end up having too much in it. And we're just trying to try to be very disciplined, shorten our lead times to make sure that we can maintain the proper levels with our dealers. Because they're gonna continue to order and order and order to try to maintain demand and get their allocation in it. And we just gotta be disciplined as we manage through that and we will be.

Happens across industries is that in good times, you just overproduce and then you end up having too much and we're just going to try to be very disciplined shorten our lead times to make sure that we can maintain the proper levels with our dealers because they're going to continue to order in order in order.

To try to maintain demand and get their allocation and we've just got to be disciplined as we manage through that and we will and we will be.

Speaker 9: Okay, great, that's helpful. And then just on, I think you've historically given adjusted DPS guidance. Should we be interpreting that as, you know, it's just, you know, because of the supply chain right now and at some point we will?

Okay, Great. That's helpful. And then just on I think you've historically given adjusted EPS guidance should we be interpreting that as it's just because of the supply chain right now and at some point we will.

Speaker 9: have adjusted EPS guidance resumed or you know and if you can just pair for us any commentary you know obviously you've given us the sales guidance it sounds like you know we can't anticipate some margin improvement over the course of the full year but how that would you know pair back to EPS I think you'd give and Ross some of the you know other below the line item.

Adjusted EPS guidance presumed or.

And if you can just pair for us any commentary, obviously, you've given us the sales guidance. It sounds like we can't anticipate some margin improvement over the course of the full year.

But how that would pair back to EPS I think you had given Ross some of the other below the line items.

Speaker 3: you know last couple of years because of the situation we've just framed up the key components of the frame into it and i kind of suspect that's where well i don't want to say never but i think that the better way of looking at it uh... then providing specific eps guidance the don't even convince me otherwise at some point but i think that's probably the the way we're likely to do it for the future don't you want to put a more color on the blog line stuff

Last couple of years because of the situation. We have just kind of framed up the key components that frame into it and I kind of suspect thats, where well I don't want to say never but I think that's a better way of looking at it then providing specific EPS guidance. So Donny may convince me otherwise at some point, but I think thats, probably the way we're likely to do it for the future.

Donna you want to provide a more color on the below the line stuff.

Speaker 2: Yes, I did the main one is probably tax where we had the 90% tax rate in 211 and I would expect that to normalize a little bit and In 2022 for the visibility we have right now

Yes, I mean, the main one is probably tax where we have a 90% vaccinating plenty plenty one.

And.

I would expect that to normalize a little bit.

In 2022 for the visibility we have right now.

So we will.

Speaker 2: move the guidance, I mean we have been updated items last year, corner by corner, and I think we will likely do the same these year.

Most of the guidance I mean, we have been updated guidance last year quarter by quarter and I think we will likely do the same this year.

Okay. Thank you.

Next question comes from the line of Larry de Maria from William Blair. Please go ahead.

Speaker 1: Next question comes from the line of Larisa Maria from William Blair. Please go ahead.

Speaker 10: Thanks. Good morning, everybody. I obviously talked a lot about this, but in terms of...

Thanks, Good morning, everybody.

Obviously, you've talked a lot about this but in terms of the supply chain issues.

Speaker 10: So, I guess my first question, what came to the confidence that the dishes will ease? I mean, are you getting that visibility from the semiconductor suppliers that they are going to ease following that fourth quarter?

Do you have.

My first question is what gives you the confidence that these issues will ease I mean are you getting that visibility from the semiconductor suppliers.

Eve following that fourth quarter drop it to give you and related to that and just to clarify based on the comments you just made.

It's fair to say that all quarters will have year over year sales growth.

More challenging in the first half so.

That's probably more of a concern.

Yes, I mean, what gives you what gives us confidence again is just watching.

Speaker 3: yeah i mean what gives what gives us confidence again is just watching and you know participating in and how the teams manage through the the situation and it's not just the suppliers getting better a lot of times it's it's adapting and adopting different methodologies for ourselves to be able to manage through things um... you know obviously you can read anywhere the supply overall

Participating in and how the teams manage through the situation and it's not just the suppliers getting better a lot of times, it's adapting and adopting different methodologies for ourselves to be able to manage through things.

You can read anywhere the supply overall.

Supply for semiconductors is going to be below demand for most or all of 2022. It does get better in the second half, but we're.

Speaker 3: supply for semiconductors is going to be below demand for most of the overall of 2022. It does get better in the second half, but we're still probably 9 to 12 months away from having being able to meet demand. It's not further for overall chip demand. But I think our team is, we've just developed a really good process for managing through that and that gives us confidence.

We're still a probably nine to 12 months away from having being able to meet demand if not further for overall chip demand, but I think our team is.

We've just developed a really good process for managing through that.

And that gives us confidence the overall.

I think coming out of Covid. There were so many things that impacted suppliers ability to produce now lately, we've had energy issues in Europe , and we've had labor issues and we there's so many different issues, but we are seeing everybody start to get a little better at managing these things <unk> decreasing.

Speaker 3: many things that impacted suppliers' ability to produce. Now lately we've had energy issues in Europe and we've had labor issues and there's so many different issues. But we are seeing everybody start to get a little better at managing these things. COVID's decreasing a bit and overall. So I think just the overall supply chain remains challenging but we are seeing improvement and I think that will ultimately lead to lower inflation in the second half as well. all right thank friends.

And overall, so I think just the overall supply chain remains challenging, but we are seeing improvement and I think that will ultimately lead to.

Lower inflation in the second half as well.

Speaker 10: Thanks, and then show you over your growth in every quarter.

Thanks, and then for a year over year growth in every quarter is that fair to say.

Hey.

Speaker 3: I didn't answer that question on purpose.

I didn't answer that question on purpose.

Okay.

The next question comes from the line of Gabriela Gambardella from Banca <unk>. Please go ahead.

Speaker 1: next question, constant line of Gabriele Ganbarobo from Banca Accruz, please go ahead.

Yes. Good morning, Thanks for taking my questions a couple of adjustments.

Speaker 11: Yes, good morning and thanks for taking my questions. A couple of drafts.

Speaker 11: The couple, the first one is on the free cash flow guide now. So I was wondering if you could go through the moving parts and specifically on the role of working capital.

A couple the first one is on the free cash flow guidance. So I was wondering if you could go through the moving parts.

If you can be on the road.

Sure.

Working capital.

Speaker 11: In the second question, he's on the...

2022, and the second question is on.

Speaker 11: the top line growth guidance plus 10 plus 40 percent. There is also, I guess, raven, the consolidation. So, am I right in thinking that the lower end of the...

The top line growth guidance of plus 10, plus 14% to digital so I guess even the.

The consolidation.

So I may right.

Thinking that the low end.

No.

The guidance implies almost no organic growth because you have let's say strong price.

Speaker 11: the guidance implies almost no organic growth because you have a strong price improvement. We saw a 10% more or less in Q4 and then you are waiting for a couple of percentage points to point five.

Proven to be so at 10% or less in Q4, and then obviously then waiting for a couple of percentage points.

Hi.

Thanks.

So the free cash flow for the year I would say.

Speaker 2: So the Freakish Law for the year, I would say we have higher topics in the plan that we have, that we have this year. And I'm working capital, there may be some inventory buildup that we are considering in company inventory. So.

We have higher.

Capex in the plan that we had then we had this year.

And Anna.

And on working capital there may be some.

Inventory buildup.

That we are considering inc.

In.

In company veteran so.

Speaker 2: We are, I would say, we could see our conservative on that in considering it higher, but I will focus on the higher topics. The the three.

We are I would say.

We will consider.

Conservatives on that.

In considering any higher but I would focus on capex.

Capex.

<unk>.

On the.

The second question was on sorry last year.

Speaker 2: on the top line growth. The top line growth, yeah, sorry. Yeah, I mean, what the Raven contribution to the top line in the first year is, not that big, is consistent with the revenues of Raven last year. Then we have pricing and then, as I said, most of the top line growth will come from our capacity to produce more.

It was on the top line growth.

Yeah, Yeah, I mean, well.

The Raven contribution to the top line in the first year.

Is is not that big is consistent with the revenues are weighted last year.

Then we have pricing and then as I said.

Most of the topline growth will come from a cost neutral.

Produce more.

Okay. Thanks, Jeff.

Speaker 11: Do you think price increase will be the contribution will be high or vis-à-vis?

Just a follow up do you think.

Price increase be.

Production will be higher.

Speaker 11: volume increase, I mean it seems that you are assuming a very little volume increase. Please nod, I will say. No, it's not.

Volume increase I mean, you seem to that Youre assuming.

The volume increase.

Say wow.

Speaker 2: I will share equally between the two. Okay. Thank you. That we had considered a price increase these years, well, right?

I will share equally between the two.

Thank you Scott we had considered a price increase this year as well right.

Sure.

Okay. Thanks.

Thank you.

We now take our final question from the line of Kristen Owen from Oppenheimer. Please go ahead.

Speaker 1: We now take a final question from the line of Christen Owen from Oppenheimer. Please go ahead.

Speaker 12: Great, thank you. One question related to the Raven Transaction. I wanted to ask if you have any updated thoughts on...

Okay. Thank you.

One question related to the <unk> transaction.

He has any updated thoughts on.

Speaker 12: The Airstaur and the Engineer Films, businesses and higher thinking about those moving into.

Aerostar and engineered films.

Thinking about those.

In 2022.

Okay.

Speaker 3: No, we learned a lot about those businesses. We got through it and now that we own them, we feel better about what those businesses are, but probably not the best, we're not the best owner for those. And so we've got your process underway to find the best owner. And we're encouraged by the engagement we're seeing in that process, but that's where we are in the middle of it.

We learned a lot about those businesses, we got through it and now that we own them, we feel better about what those businesses are but.

Probably not the best we're not the best owner for those and so we've got a process underway to find the best owner and.

We are.

Encouraged by the engagement, we're seeing in that process, but that's where we are in the middle of it.

Speaker 12: Okay, great. And then I did want to ask about the industry outwork for

Okay, and then just one.

To ask about the industry outlook.

Sure.

Speaker 12: tractor and combine in South America. Just seems a little bit light relative to some of the peers. So I was wondering if you could provide just some additional commentary on what you're seeing in that region, how much of it.

In South America, just seems a little bit late.

Yes.

Just wondering if you could provide just some additional commentary on what youre seeing in that region, how much of that is.

Speaker 12: My name is Chirvin versus what we're seeing out of Harvard. Just any commentaries.

Any kidney.

Well listen that was part of it.

Any commentary you can provide on that guidance.

Speaker 3: yeah well i mean you certainly uh... you know we've got

Yes.

Certainly.

We've got.

Strong.

Speaker 3: leaders across the globe and Vilmar uh... sister all who runs the south american region for us really is done an outstanding job and you know you know being number one ag player and then all of brazil last year was a just a testament what they do and you know it shows up in that promoter scores all they do really the the limitation brazil and i mentioned in my prepared remarks is uh... we're just seeing a lot of issues

Leaders across the Globe and Bill Maher just draw who runs the South American region for US really has done an outstanding job in.

Being number one AG player in all of Brazil last year was just a testament, what they do and it shows up in net promoter scores all they do really the limitation in Brazil, and I mentioned in my prepared remarks is we're just seeing a lot of issues with incremental bad weather.

Speaker 3: with uh... incremental bad weather uh... and we we just cannot provide better guidance until we understand what that impact is going to be their on the overall demand is they're getting into the growing season uh... there it just we really need to make sure we understand what happens with weather before we commit to you know any higher growth rates there

And we just cannot provide better guidance until we understand what that impact is going to be.

They're on the overall demand as theyre getting into the growing season.

There it just we really need to make sure we understand what happens with weather before we commit to any higher growth rates there.

Speaker 1: That will conclude the question and answer session. I will now let you turn the call back to over to no our ways for any additional or close.

That will conclude the question and answer session I would now like to turn the call back over to Noah for any additional or closing remarks.

Yeah.

Speaker 13: Thank you very much for joining us today. That concludes our call.

Thank you very much for joining us today that concludes our call.

Speaker 1: that that that does conclude our conference for today. Thank you for participating.

That does conclude our conference for today. Thank you for participating you may all disconnect.

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Speaker 14: I.

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Speaker 14: The.

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Good morning, and good afternoon to everyone. We would like to welcome each of the webcast and conference call for C. N H industrial's full year and fourth quarter results for the period ending December 31, 2021. This call is being broadcast live on our website and is copyrighted by seen each industrial any other use recording or transmission.

Speaker 13: Good morning and good afternoon, Ted.

Speaker 13: We would like to welcome you to the webcast and conference call for CNH industrials full year and fourth quarter results for the period ending December 31, 2021.

Speaker 13: This call is being broadcast live on our website and is copyrighted by C-Nee.

Speaker 13: Any other use, recording or transmission of any portion of the broadcast without the express written consent of C&H industrial is strictly per

Of any portion of the broadcast without the express written consent of <unk> industrial is strictly prohibited hosting todays call are C and H industrial CEO , Scott wine and CFO Tony <unk>.

Speaker 13: Hosting today's call, our CNA Industrial CEO Scott Wein and CFO Adonius.

Speaker 13: They will use the material available for download from the C&H industrial.

They will use the material available for download from the <unk> industrial website, our company completed a significant transformation on January one 2022 today, we will illustrate full year and fourth quarter results for <unk> industrial prior to the spinoff or demerger of Zakho group as reported under U S. GAAP and later the successful spin off of <unk>.

Speaker 13: Our company completed a significant transformation on January 1, 2012.

Speaker 13: Today we will illustrate full year and fourth quarter results for CNH industrial prior to the spin-off or demurder of a veco group as reported under US gap. In light of the successful spin-off of the veco group entities, effective January 1, 2022, we will also discuss unordered pro forma results for CNH industrial

Echo group entities effective January one 2022 we will also discuss the unaudited pro forma results for CNA to industrial after the demerger, we are providing both reported and pro forma information in the materials. We are distributing today the newly listed company Iveco Group will host a conference call. Shortly after the conclusion of this call to <unk>.

Speaker 13: We are providing both reported and pro forma information in the materials. We are distributing.

Speaker 13: The newly listed company Yveseco Group will host a conference call shortly after the conclusion of this call to illustrate the full-year carve-out of their combined financial results. Therefore, we kindly ask you to save questions.

Illustrate the full year carve out of their combined financial results. Therefore, we kindly ask you to save questions related to that good group for their analyst call.

Speaker 13: Please note that any forward-looking statements we might be making during today's call are subject to the risk and uncertainties mentioned in the safe harbor statement included in the presentation.

Please note that any forward looking statements, we might be making during today's 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.

Speaker 13: additional information pertaining to factors that could cause actual results to differ materially. It's contained in the company's most recent report, 20F, an EU annual report, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission, and the equivalent authorities in the Netherlands.

The results to differ materially is contained in the company's most recent report 20-F and EU annual report as well as other periodic reports and filings with the U S Securities and Exchange Commission and the equivalent authorities in the Netherlands and Italy.

Speaker 13: The company presentation may include certain non-GAAP financial measures. Additional information, including records liations to the most directly comparable US GAAP financial measures, is

The company presentation may include certain non-GAAP financial measures additional information, including reconciliations to the most directly comparable U S. GAAP financial measures is included in the presentation material.

Speaker 13: Once again, our team is connecting from various locations. So please forgive us if there are moments of silence during the call when we manage the transistors between speakers.

Once again, our team is connecting from various locations. So please forgive us if there are moments of silence during the call what we manage the transistors between speakers I will now turn the call over to Scott.

Speaker 3: Thank you Noah and welcome to everyone joining our call. I would like to sincerely thank our CNH industrial team for their hard work and excune a clean and efficient demurder, which they accomplished while very effectively managing the lingering tail of COVID and ongoing but slightly improving supply chain disruptions.

Thank you Noah and welcome to everyone joining our call.

I would like to sincerely, thank our CNI industrial team for their hard work in executing a clean and efficient demerger, which they accomplished while very effectively managing the lingering tail of COVID-19 and ongoing but slightly improving supply chain disruptions.

Speaker 3: Our record financial results testified to the efficacy of the team's efforts, and today we will discuss how we delivered an excellent 2020-21, while also building a solid foundation.

Our record financial results testified to the efficacy of the team's efforts and today, we will discuss how we delivered an excellent 2000 2021.

While also building a solid foundation for the company's future.

Speaker 3: We marketed the demurger internally as twice as strong, and as we advance our own prospects as a pure play ag and CE company, we are also excited to see and cheer on the success of Garrett and the Aveco Group. Conversely, I am extremely pleased to welcome the Raven and Simperiana teams to our company, and I look forward to detailing their potential and much more at our capital markets day on February 22, 2022.

We marketed the demerger internally is twice as strong and as we advance our own prospects as a pure play AG and CE company. We're also excited to see and cheer on the success of Garrett and tobacco group. Conversely, I am extremely pleased to welcome the Raven and Sim Purion. It teams to our company and I look forward to detailing their potential.

And much more at our capital markets day on February 22022.

Speaker 3: Last year, we not only grew sales by double digits versus 2019, but our ag revenue accelerated faster than the overall industry.

Last year, we not only grew sales by double digits versus 2019, but our AG revenue accelerated faster than the overall industry.

Speaker 3: 2021 was also another great year for free cash flow as our operational excellence execution improved.

<unk> 2021 was also another great year for free cash flow as our operational excellence execution improved.

Speaker 3: Market-driven volume, discipline pricing, and the team's outstanding execution were all key contributors to our record earning.

Market, driven volume disciplined pricing and the team's outstanding execution were all key contributors to our record earnings.

Speaker 3: In 2021, we also devoted considerable effort toward making the company more innovative, sustainable, and efficient.

In 2021, we also devoted considerable effort towards making the company more innovative sustainable and efficient.

Speaker 3: Our AG Brands won numerous design awards, including sustainable tractor of the year 2022. For New Holland's T6 methane power, the world's first 100% methane power production track.

Our AG brands won numerous design awards, including sustainable tractor of the year 2022 for New Holland T. Six methane power the world's first 100% methane powered production tractor.

Speaker 3: When fueled with biomethane, this tractor is an integral part of the energy independent farm concept.

When fueled with Biomethane. This tractor is an integral part of the energy independent farm concept.

Speaker 3: KSIH also stood out by receiving a total of three American Society of Agriculture and Biological Engineers 2022 Innovation Awards.

Case age also stood out by receiving a total of three American Society of Agriculture, and biological Engineers 2022 Innovation Awards.

Speaker 3: Concerning sustainability, we recently received a gold medal from Standard and Pores for this year's Global Sustainability Yearbook. Additionally, for the 11th consecutive year, we were awarded a top score in the prestigious Dow Jones Sustainability Index.

Concerning sustainability, we recently received a gold medal from standard and Poors for this year's global sustainability yearbook.

Additionally for the 11th consecutive year, we were awarded a top score in the prestigious Dow Jones Sustainability Index. We're also one of only 57 companies globally to achieve the illustrious double a score for CDP water change. These recognitions confirm our dedication to reaching our ESG targets and maintaining our position as an industry leader and sustain.

Speaker 3: We're also one of only 57 companies globally to achieve the illustrious AA score for CDP water change. These recognitions confirm our dedication to reaching our ESG targets and maintaining our position as an industry leader in sustainability.

Ability.

Speaker 3: In terms of efficiency, we have completed the spin of the Aveco group entities, closed Raven, Sampiriana, and several other acquisitions, and accelerated the evolution of a leaner, more customer-focused corporate structure.

In terms of efficiency, we have completed the spin of the Iveco group entities closed rave and some purion and several other acquisitions and accelerated the evolution of a leaner more customer focused corporate structure.

Speaker 3: Over the next few years, we will drive increased value for our global supply base, apply lean methodologies holistically across our business, and continuously improve to drive world-class safety, quality, and deliver.

Over the next few years, we will drive increased value for our global supply base apply lean methodologies holistically across our business and continuously improve to drive world class safety quality and delivery.

Speaker 3: I will now turn the call over to Dona. Take you through some of our key financial details.

I will now turn the call over to donate to take you.

Through some of our key financial details.

Speaker 2: Thank you, Scott. Good morning, good afternoon. I will do a quick run through the whole company's pre-emerger for year financials. And then later in the presentations, spent some time on the performance material that will help us to run us on the historical figures for the nature industrial as a focus of the cultural and construction equipment entity. By providing the numbers for 2019, 2020 and 2021 for our business, I think we play from now on.

Thank you Scott good morning, and good afternoon, I'll do a quick run through the whole company is freedom of your full year financials and then later in the presentation spend some time on the pro forma P&L and will help us run offs on historical figures foreseen atrium das as a focused agricultural and construction equipment entity.

By providing the numbers for 2019.

19, 2020 in 2021 for our business I think we play from now on.

Speaker 2: For your net sales of industrial activities, pre-demurder, a 31.6 billion, we're at 28% for the year, and at $8.6 billion, we're at 9% for the fourth quarter of custom cards.

Full year net sales of industrial activities through the merger of $31 6 billion without 28% for the year and at $8 6 billion.

9% for the fourth quarter at constant currency.

Speaker 2: Fully a demand rebounded from COVID-19 depressed 2020. And solid price, five realization, contributed to strong role for cross-check.

Demand rebounded from COVID-19, the price 2020 and solid base.

Advisory utilization contributed to strong growth across segments.

Speaker 2: For growth profit, we achieved $5.7 billion at 2.2 billion versus fully at 2020, and at 1.2 billion versus 2019, as higher production levels and positive pricing of set significant role-materials supply chain cost increase.

The gross profit, we achieved $5 $7 billion to 2 billion versus full year 2021 .

One 2 billion versus 2019 at.

As higher production levels and positive pricing offset significant raw material supply chain cost increases.

Speaker 15: percentage terms, cross margin, give 350 basis points versus 2020.

In percentage terms gross margin.

50 basis points versus 2020.

Speaker 15: with our agricultural segment delivered in 22.4 gross margin 330 basis points better than 2020 and at 160 basis points versus 29.

Without going to cultural segment, delivering 22 for gross margin at 330 basis points better than 2020, and 160 basis points versus 2019.

Speaker 15: Fulira, just a little bit of 2.1 billion, up 1.6 billion dollars from 2020, was driven by profitability improvements across agriculture, construction, and commercial vehicle sites.

Full year adjusted EBIT of $2 1 billion $1 $6 billion from 2020 was driven by profitability improvements across agriculture, construction and commercial vehicles segment.

Speaker 15: The DBS margin at 6.7% was at 140 basis points versus 2020 and at 140 basis points versus 2019.

Adjusted EBIT margin at six 7% was up 140 basis points versus 2020, and 140 basis points versus 2019.

Speaker 15: In the last quarter of the year, EBITDA margin went down against strong Q4 comparable, because of the adverse mix in agriculture, as the reduction was constrained for median tractors in Europe , I reduced sales in power playing.

And the last quarter of the year EBIT margin was down against strong Q4 comparable because of the adverse mix in agriculture. As production was contained constraints for medium trucks are in Europe .

<unk> sales in powertrain.

Speaker 15: I will comment on the yearly and quarterly performance for agricultural and construction equipment, the two industrial segments that remain with the image industrial later in the presentation.

I will comment on the yearly and quarterly performance for agricultural and construction equipment. The two industrial segments that remain with CAH industrial later in the presentation.

For the entire group free cash flow from industrial activities was positive $1 8 billion for the year and for the quarter due to the strong operating performance throughout 2021, and working capital improvements in the fourth quarter.

Speaker 15: For entire group, free cash flow from industrial activities was positive 1.8 billion for the year and for the quarter due to the strong operating performance throughout 2021 and worth the capital improvements in the fourth quarter.

Speaker 15: Industrial activity net cash and the 288 medium at the increase of 455 million from September 30, 2021. After this verse, more than 2.3 billion for M&A activities.

Industrial activities net cash ended at $288 million, a decrease of 455 million from September 32021.

After disbursing more than $2 3 billion before M&A activities.

Full year adjusted net income was $1 9 billion or $1 35, adjusted EPS the highest full year performance in the company history with an adjusted effective tax rate for the full year of 23% as a consequence of better mix.

Speaker 15: Fullyer, adjusted net income was 1.9 billion or $1.35 cents, adjusted EDS, the highest fully-efficiency in the company history, with an adjusted aesthetic tax rate for the full year of 23% because the consequence of better dual-efficient and mix of free tax earnings.

Mix of pretax earnings.

Speaker 15: Adjusting the income was 347 million for the quarter, resulting in the death and earnings of 24 cents per share for the quarter of 2021.

Adjusted net income was 347 million for the quarter, resulting in adjusted earnings of 24 cents per share for the fourth quarter. It's like you take that one.

Speaker 15: At the end of the year, our availability liquidity is to the $12.1 billion, down $3.67 billion from December 31, 2020, and our $1.3 billion from the end of the time.

At the end of the year, our available liquidity stood at $12 1 billion down $3 7 billion from December 31st wedding planning and a $1 3 billion from the end of September .

Speaker 15: A strong cast generation deported was countered by the MNA of late.

Our strong cash generation in the quarter was countered by M&A outlays.

Speaker 15: ahead of the 2022 unordered meeting. The Board of CNH Industrial intense recommend to the company shareholders and annual cash dividends of 28 euro cents per commercial, totally approximately 380 million euros and around for under 30 million dollars.

Ahead of the 2022 onwards is on meeting the board of CNI industrial intends to recommend to the company's shareholders and analyst cash dividends of 28 2008 cents per common share totaling approximately 380 million euros.

$430 million.

Yes.

Speaker 15: Moving now to slide six and our financial service business, again for the entire company, Freedom Murder. Net income was 420 million at 171 million compared to the full year 2020. Primarily driven by lower risk cost due to improved market outlook, improved pricing in North America, higher recovery of new equipment sales, and higher average portfolio balance.

Moving now to slide six in our financial service business again for the entire company pre the merger net income was $420 million up 171 million compared to the full year 2020.

Primarily driven by lower risk costs due to improved market outlook improved pricing in North America higher recoveries of equipment sales and higher average portfolio balance.

Speaker 15: For the year retail originations were 11.4 billion and a matter of preferring included in JVs at the end of the period was 26.7 billion.

For the year retail originations were $11 4 billion and our managed portfolio, including JV is at the end of the period was $26 7 billion.

Speaker 15: The linkages were again down sequentially and the earlier to 1.7% that remain at historically low levels. As a reminder, financial service was separated with a demurder and the portfolio remaining in C&H industrial financial services is 17.4 billion exclusivity.

Delinquencies were again down sequentially and year over year.

One, 7% and remain at historically low levels as a reminder, financial services and were separated with the merger and the portfolio remaining in <unk> industrial financial services is $17 4 billion excluding <unk>.

Speaker 15: Next on slide seven, we have the net financial position and financial performance for our industrial TV to be the merger.

Next on slide seven.

We have the net financial position free cash flow performance for our industrial activities pre the merger.

Speaker 15: C&NC industrial started the year with 786 million in net industrial cash and closed its operation as we have known them prior to the merger with 288 million in cash after having acquired Raven and Santiago Rana as well as all other smaller investments throughout the year.

<unk> started the year with $786 million and net industrial cash and closely its operation as we have known them prior to the merger with $188 million in cash after having acquired Raven in South Carolina as well as our other smaller investments throughout the year.

Free cash flow of industrial activities was positive $1 8 billion due to the strong operating performance and stable working capital in the year with finished goods inventories remain at low levels, but a higher manufacturing inventories and a higher take payables outstanding due to the elevated production volumes and constrained supply chain.

Speaker 15: Freak and short, with less activities, was positive 1.8 billion to the strong operating performance and stable working capital in the year, with finished builds and ventries remain at low levels, at a higher manufacturing ventries and a higher trade payable those spending due to the elevated production volumes and constrained supply chain.

Speaker 15: Cabin expenditure when excess of 700 million in the year, a 47% increase versus 20% increase.

Capital expenditure were in excess of $700 million in the year of 47% increase versus 'twenty plan.

Speaker 15: Despite the user's visual expectation of free cash flow in our business, industrial activities remain cash positive throughout the year, as you can see in the bottom right corner of the slide.

Despite the usual seasonal fluctuation of free cash flow in our business industrial activities remain cash positive throughout the year as you can see in the bottom right corner of the slide.

Yeah.

Speaker 15: Now, from this slide forward, we'll present a summary of the performance financial for CNH industrial after the demurder of the vehicle group's activities. The following slides are consistent with the performance pages that we posted on the website back in December . I will not cover them in detail today, but these pages in page 34 to 41 in the appendix have been designed for subsequent modeling process going forward.

Now from the slide forward will present, a summary of the pro forma financials for CNI industrial after the demerger of the vehicle group activities. The following slides are consistent with the pro forma pages that we posted on the website back in December .

Ill cover that in detail today, but these pages on page, 34% to 41 in the appendix have been designed to assist you in modeling process going forward.

Speaker 15: What I would like to highlight on page nine is that even though we have split the company, C&H industrial, is an almost 20 billion revenue entity with industrial net sales of 17.8 billion globally in 2021, growing almost 30% from 2019.

But I would like to highlight on page nine is that even though we have split the company <unk> industrial is an almost $20 billion revenue entity with industrial net sales of $17 8 billion globally in 2021 growing almost 30% from 2019.

Speaker 15: We perform a drastic debate of almost 1.8 billion for 2021 that the drastic debate margin of the new CNH industrial was just shy of 10% for the year.

With pro forma adjusted EBITDA of almost $1 8 billion for 2021, the adjusted EBIT margin of the new <unk> industrial was just shy of 10% for the year.

Speaker 15: Adjust an any income double from a performance of 2019. So be adjusted on it. So did adjust an any pressure at $1.28 in 2021.

Adjusted net income doubled from the pro forma for all of 2019. So the adjusted earnings adjusted earnings per share at $1 28 in 2021.

Speaker 15: I was anticipated with the murder net in the sell back at the beginning of 2022 was 1.1 billion after having funded the largest acquisition in companies.

As anticipated with the merger net industrial debt at the beginning of 2022 was $1 1 billion. After having funded the largest acquisition in company history.

Speaker 15: Let me now go more in detail on the performance of our industrial segments for the year and for the quarter. We will use a look at industrial activities adjusted a bit by driver and cyclist.

Let me now go more in detail on the performance of our industrial segments for the year and for the quarter with a user look I think that's the activities adjusted EBIT by driver and segment.

Speaker 15: A reculture achieved a adjusted EBIT of $1.8 billion and adjusted EBIT margin of 12.3%. Construction reported a adjusted EBIT of 90 million, an increase of 274 million from 20 points.

Agriculture achieved achieve adjusted EBIT of $1 8 billion and adjusted EBIT margin of 12, 3% construction reported adjusted EBITDA of $90 million, an increase of 274 million from 2020.

Speaker 15: Volumes and net pricing drove profitability growth for the full year, increased production cost, including raw material pricing increases.

Volume and net pricing drove profitability growth for the full year increased production cost, including raw material price increases.

Speaker 15: expedited trade and components of components and additional works at the end of the alcohol production lines were more than upset by price realization also in the fourth quarter of 2021.

Expedited freight and components of components and additional works.

At the end of the hour production lines were more than offset by price realization also in the fourth quarter of 2021 .

Speaker 15: The GNA balances reflect increased activity levels and higher valuable compensation, while R&D expenses through around 30% in the year as we invested more in developing our technology.

SG&A variances reflect increased activity levels and higher variable compensation, while R&D expenses grew around 30% in the year as we invested more in developing our technology.

Speaker 15: Looking at the individual segments, I recall since full year, 2021 address the limit increased 930 million due to the positive prioritization and favorable volume and mix, partially upset by higher product cost related to raw material and freight cost and higher valuable compensation.

Looking at the individual segments agriculture full year 2021, adjusted EBIT increased 930 million due to the positive price realization and favorable volume and mix, partially offset by higher product costs related to raw material and freight costs and higher variable compensation.

Speaker 15: Adjust the DB margin for the segment was 12.3% and adjust the gross margin was 22.4%.

Adjusted EBITDA margin for the segment was 12, 3% and adjusted gross margin was 22, 4%.

Speaker 15: Construction of just a debit which is 90 million for the full year 2021 with essentially the identical causes of fact in the act segments and had an adjusted image of 2.9 percent a strong recovery from a difficult 2020 but also 110 basic points increases margin from 29.

Construction adjusted EBIT reached 90 million for the full year 2021, with essentially the identical causal affecting the AG segments and had an adjusted EBIT margin of two 9% a strong recovery from a difficult 2020, and also 110 basis points increases in margin from 2019.

Speaker 15: For the quarter, a draft derivative of industrial activity was 378 million, and the margin was 7.6%.

For the quarter adjusted EBIT of industrial activity was $378 million and the margin was seven 6%.

Speaker 15: As we anticipated, the quota was affected by numerous interruption to our production cycle due to missing components, many semiconductors. Price realization in both cycles.

As we anticipated the quarter was affected by numerous interruption to our production cycle due to missing components, mainly semiconductors.

Price realization in both segments was once again.

Speaker 15: higher than increasing overall product cost. I did not reduce the amount of product compared to the previous quarter.

Higher than increase in overall product cost a bit on a reduced manner compared to the previous quarters.

Speaker 15: Problem mixed played unfavorable on our airlines as we were able to ship less medium and heavy factors than needed. You just let me come back to shortage.

Product mix and unfavorable on a lag lines as we were able to ship less medium and heavy tractors the needed due to semiconductor shortages.

Speaker 15: raw materials that freight cars continue to wait on our production expenses and we expect these to continue in the first part of 2020.

Raw materials and freight costs continued to weigh on our production expenses and we expect this to continue in the first part of 2022.

Speaker 15: On its DNA, the impact of our ever-compensation was stronger in the fourth quarter than in previous period.

On SG&A the impact of variable compensation was stronger in the fourth quarter than in previous periods.

Speaker 15: On a performer basis, the C&H in the business started 2021 with 900 million net debt position. On the back of a strong operating performance, three cash flow for industrial activity was positive 1.9 billion for a year, with working capital further improving despite higher manufacturing.

On a pro forma basis, the <unk> industrial business started 2021 with $900 million net debt position on the back of our strong operating performance free cash flow for <unk> activity was positive $1 9 billion for the year with working capital further improving despite higher manufacturing inventories.

Net debt ended at $1 1 billion, primarily due to the cash out for the acquisition of 100% in revenue industry and 90% interest in Parana has discussed when talking about the reported figures.

Speaker 15: And that ended up 1.1 billion primarily due to the cash out for the acquisition of 100% in the Raven industry and 90% in the interest of Santirana as discussed when talking about the report.

Speaker 15: You will see in the appendix, it was like 40, the total third party that for the company after the merger was 20.9 billion at December 31st, 2021, and was 22.9 billion at December 31st, 2020. With 15.6 billion and 15.7 billion respectively, belonging to our financial services operation.

You will see in the appendix on slide 40, the total third party debt for the company. After the merger was $20 9 billion at December 31st 2021, and was $22 9 billion at December 31, 2020, with $15 6 billion and $15 7 billion, respectively belonging to our financial services operations.

Speaker 15: With the spin-off, C&H Industre is retaining the entirety of the former C&H Industre tour palette that and the entirety of the Androa revolving 30 facility, giving an available liquidity position above 10 billion at the end of 2021.

With the spinoff CNN conductor is retaining the entirety of the pharmacy in AG Industrial third party debt and the entirety of the Undrawn revolving credit facility.

<unk> available liquidity position above 10 billion at the end of 2021.

Speaker 2: We will give you another idea of the long term trajectory of these figures in two weeks of our capital market day. But let's just say for now that we feel we are well positioned, we strongly created the invisible path to unhaving that recast position in the near future.

We will give you a better idea of the long term trajectory of these figures in two weeks at our capital market day, but let just say for now that we feel we are well positioned with strong liquidity and visible path. One net industrial cash position is the near term.

That's not the least on January 4th 2032, Fitch ratings raised its long term issues that for rating agency energy and Dr. <unk>, who will take will be plus some capably behind us.

Speaker 15: That's when the list on January 4, 2022, which rating is its long term issues, the forwarding of CNH index and V to 3B plus from 3B minus.

Speaker 15: Teach also upgraded CNH industrial finance Europe as a senior and secure rating from triple B, two triple B plus, plus from triple B minus, and stable outlook. The upgrade follows the merger of...

Each also upgraded <unk> industrial finance Europe is facing or a senior unsecured rating from people to triple B pass plus from Triple B minus and stable outlook.

The upgrade follows that the merger of the vehicle group.

With this I will turn back to Scott.

Speaker 15: With this, I will turn back to Scalp. Yeah, who... who... Take us to the remainder of the prepare by.

Okay. So the remainder of the prepared remarks.

Thanks, Sudan, a at the end of November we completed our purchase of Raven industries. Our teams are diligently performing the vital tasks necessary to make this reverse integration as productive as possible.

Speaker 3: Thanks, Rodone. At the end of November , we completed our purchase of Raven Industries. Our teams are diligently performing the vital task necessary to make this reverse integration as productive as possible.

Speaker 3: We will very soon demonstrate how San H industrial strong engineering heritage will leverage Raven's technology to introduce best in class products and solutions, delivering enhanced productivity and yields for farmers and growers.

We will very soon demonstrate I'll say, an H industrial strong engineering heritage will leverage Ravens technology.

To introduce best in class products and solutions, delivering enhanced productivity and yields for farmers and growers.

Speaker 3: Furthermore, just prior to year end, we completed the purchase of 90% of the capital of Sampiriana, a construction equipment company specializing in developing and manufacturing, earth moving machines, particularly with many and many excavators. Their Eurocomact product range will significantly enhance our construction equipment portfolio, and will lead to notable improvements in our products and technology.

Furthermore, just prior to year end, we completed the purchase of 90 purchase of 90% of the capital of some Purion M. A construction equipment companies specializing in developing and manufacturing Earth moving machines, particularly with many X mini and mini excavators Theyre Euro commack product range will significantly enhance our construction equipment port.

Palio and will lead to notable improvements in our products and technologies, we entered 2022 as a simpler and stronger <unk> industrial with a laser focus on our customers and dealers.

Speaker 3: We enter 2022 as a simpler and stronger C&H industrial with a laser focus on our customers and dealers.

Speaker 3: The ag machinery industry was strong throughout 2021. Farm income levels remained high, benefiting from favorable commodity prices, which drove many to replace aging fleets with more advanced precision equipment.

The AG machinery industry was strong throughout 2021 farm income levels remained high benefiting from favorable commodity prices, which drove many to replace aging fleets with more advanced precision equipment.

Speaker 3: From a demand perspective, it was a particularly strong year for combine harvesters with year-over-year industry deliveries up 25% in North America, and slightly less in other regions. High horsepower tractor deliveries notably increased in North America, and in most regions, 2021 tractor demand exceeded 15%.

From a demand perspective, it was a particularly strong year for combine harvesters with year over year industry deliveries up 25% North America and.

And slightly less in other regions high horsepower tractor deliveries, notably increased in North America and in most regions 2021 tractor demand exceeded 15%.

Speaker 3: Backlogs remain high as order books across OEMs increased, with KSI H a new Holland order books up year over year, more than two times for tractors, and one and a half times for combat.

Backlogs remain high as order books across Oems increased with case, IH and new Holland order books up year over year more than two times Retractors and one five times for combines.

Worldwide.

Speaker 3: Worldwide, both light and heavy construction equipment grew versus 2020. Light demand was largely driven by strength and residential construction, while heavy benefited from increased contracted demand and preparations for the US infrastructure bill.

Both light and heavy construction equipment grew versus 2020 light demand was largely driven by strength in residential construction, while heavy benefited from increased contracted man and preparations for the U S infrastructure Bill.

Speaker 3: South American demand was particularly high of 87% led by Brazil while North America and Europe increased 23% and 19% respectively.

South America demand was particularly high up 87% led by Brazil, While North America, and Europe increased 23% and 19% respectively.

Speaker 3: Construction equipment retail cadence was also quite strong with light equipment up approximately 10% in most geographies aside from South America which was up 25%. For heavy retail in North America was up approximately 20% trailing Europe and South America which were up 37% and 25% respect.

Construction equipment retail cadence was also quite strong with light equipment up approximately 10% and most geographies aside from South America, which was up 25%.

For heavy retail in North America was up approximately 20% trailing Europe , and South Africa, South America, which were up 37% and 25% respectively.

Speaker 3: Given our existing order backlog, which now extends far into 2022, our agriculture segment should continue to perform well.

Given our existing order backlog, which now extends far into 2022, our agriculture segment should continue to perform well.

Speaker 3: Some of our equipment is essentially sold out for the year at current production rate.

Some of our equipment is essentially sold out for the year at current production rates.

Almost the same can be said for our construction order book, which more than doubled year over year, driven by strong increases in North America and Europe .

Speaker 3: Almost the same can be said for our construction order book, which more than doubled year over year driven by strong increases in North America and Europe .

Speaker 3: Well, we expect these businesses to return to more normal seasonality during 2022. It may be a bit concealed in the first half by supplier-related production constraints.

While we expect these businesses to return to more normal seasonality during 2022, it may be a bit concealed in the first half by supplier related production constraints.

Speaker 3: The team reacted quickly to very late deliveries of Semiconductors at the end of the fourth quarter to ship a sizable portion of our accumulated fleet inventory. Overall, channel inventory remains low across product lines. The team reacted quickly to very late deliveries of Semiconductors at the end of the fourth quarter to ship a sizable portion of our accumulated fleet inventory.

The team reacted quickly to very late deliveries of semiconductors at the end of the fourth quarter to ship a sizable portion of our accumulated fleet inventory overall channel inventory remains low across product lines.

We expect global AG industry demand remained solid with limited grain and oilseed stocks unfavorable weather conditions in South America, and geopolitical upward pressures, particularly on wheat.

Speaker 3: We expect global ag industry demand to remain solid with limited grain and oil seed stocks, unfavorable weather conditions in South America, and geopolitical upward pressures, particularly on wheat.

Speaker 3: As a result, farmer sentiment, although down slightly from last year, remains positive, driven by elevated commodity prices and supportive farm incomes. In addition, new and used equivalent inventories are at historically low levels, and average fleet age in North America is at a two-decade high.

As a result of farmer sentiment, although down slightly from last year remains positive driven by elevated commodity prices and supported farm incomes. In addition, new and used equipment inventories are at historically low levels and average fleet age in North America is that a two decade high.

Speaker 3: There are of course plenty of headwinds to these positive trends with input cost inflation and limited equipment availability leading away. However, we believe that high prices for nitrogen, seed, and other inputs should be a catalyst to accelerate precision ag adoption as farmers expect to turn more efficient and sustainable methodologies.

There are of course plenty of headwinds to these positive trends with input cost inflation and limited equipment availability leading away. However.

However, we believe that high prices for nitrogen seed and other inputs should be a catalyst to accelerate precision AG adoption as farmers expect to turn more efficient and sustainable methodologies.

Speaker 3: If you compare 2022 industry demand with the same slide from a year ago, some of these increases look small. While the main ag markets continue to be very healthy, the comps get slightly more difficult as capacity constrained industry production is outstripped by demand.

If you compare 2022 industry demand with the same slide from a year ago. Some of these increases look small.

While the main AG markets continue to be very healthy the comps get slightly more difficult as capacity constrained Andy production industry production is outstripped by demand.

Speaker 3: For construction equipment, we anticipate some of the same supplier constraint production in the first half of 2022. Thus, the year should be a bit more back and loaded than usual.

For construction equipment, we anticipate some of the same supplier constraint production in the first half of 2022.

The year should be a bit more backend loaded than usual.

Speaker 3: Some of the typical seasonality gets distorted by demand from contractors starting projects funded by the North American Infrastructure Bill. While demand is high, significant upside to our North American estimates, which represent nearly 50% of the construction business, will likely be constrained by labor availability.

Some of the typical seasonality gets distorted by demand from contractors starting projects funded by the North American infrastructure Bill.

Demand is high significant upside to our North American estimates, which represent nearly 50% of the construction business will likely be constrained by labor labor availability.

Speaker 3: With solid in market demand, continuing to butt up against difficult supply chain constraints, especially for semiconductors and specifically for the first half, our 2022 guidance for industrial activities is as follows.

With solid end market demand continuing to butt up against difficult supply chain constraints, especially for semiconductors and specifically for the first half our 2022 guidance for industrial activities is as follows.

Speaker 3: We expect full-year net sales of industrial activities to grow between 10 and 14% including currency translation.

We expect full year net sales of industrial activities to grow between 10, and 14% including currency translation.

Speaker 3: We will continue to invest to improve our business, but still expect to keep SGNA at or below 7.5% of net sales.

We will continue to invest to improve our business, but still expect to keep SG&A at or below seven 5% of net sales.

Speaker 3: We anticipate free cash flow for industrial activities to exceed $1 billion and combined R&D and CAPEX will be approximately $1.4 billion for the year versus $1 billion in 2021.

We anticipate free cash flow for industrial activities to exceed $1 billion and combined R&D and Capex will be approximately $1 4 billion for the year versus $1 billion in 2021.

Speaker 3: While we were pleased with the performance of the team and the healthy momentum from 2021, we expect continued supply chain challenges primarily through the first two quarters of 2022, but likely diminishing in the back half of the year. As these subside, we expect production and retail sales to increase above normal seasonality in some cases, as production ramped up to partially replenish channel inventory and satisfy strong customer demand. Pricing remains healthy and accreted.

While we were pleased with the performance of the team and the healthy momentum from 2021, we expect continued supply chain challenges primarily through the first two quarters of 2022, but likely diminishing in the back half of the year.

As these subside, we expect production and retail sales to increase above normal seasonality in some cases as production ramped up to partition to partially replenish channel inventory and satisfy strong customer demand.

Reising remains healthy and accretive.

Speaker 3: As we wrap up the call, I would like to preview our capital market stay, which we're holding two weeks from now in Miami Beach. In addition to the weather being much nicer than what most of us are currently enduring, the event will highlight our updated pure play, Ag and Construction Strategic Business Plan.

As we wrap up the call I would like to preview our capital markets day, which we are holding two weeks from now in Miami Beach. In addition to the weather being much nicer than what most of US are currently enduring event will highlight our updated pure play AG construction strategic business plan.

Speaker 3: Several members of our leadership team will join Adoni and me in detailing CNH industrials, long-term priorities, technology roadmap, financial outlook, segment blueprints, and sustainability targets. The venue is the historic Fillmore Theater, and I encourage you to join us in person as we will be displaying several pieces of our Ag and Construction portfolio, which will not only be a unique experience, but also an historical first for the Miami Beach community. I hope to see you there on February 22nd.

Several members of our leadership team will join the <unk> and me and detailing <unk> Industrial's long term priorities technology roadmap financial outlook segment blueprints and sustainability targets. The venue is the historic Fillmore Theater and I encourage you to join US in person as we will be displaying several pieces of our AG AG and construction portfolio.

Which will not only be a unique experience, but also in historical first for the Miami Beach community I hope to see there on February 22nd.

Speaker 3: That concludes our prepared remarks and we can now open it up for questions. Sandra, please open the line.

That concludes our prepared remarks, and we can now open it up for questions. Sandra Please open the line.

Speaker 1: Thank you. We will take a first question. It comes from the line of David Russell from Evercourt E.C. Group. Please go ahead.

Thank you we'll take our first question. It comes from the line of David Raso from Evercore ISI Group. Please go ahead.

Speaker 4: Thank you for the time. I was curious how you thought about the fourth quarter three months ago seemed to imply revenues for the standalone.

Hi, Thank you for the time I was curious how you thought about the fourth quarter three months ago seemed to imply revenues for the Standalone off Highway company as well to be down obviously, you did a lot better than that and I just wanted to get some color on what changed as the quarter went along and then if you can give us any perspective.

Speaker 4: Obviously, you did a lot better than that. I just want to get some color on what changes the quarter went along and then if you can give us any perspective of how you're thinking about margins.

How are you thinking about margins for 'twenty two beyond just the SG&A comment. Thank you.

Speaker 3: And David, I would like to just give a shout out to Derek Nielsen and Tom Verbotten and our entire ag.

And David I would like to just give a shout out to Derek Nielsen and Tom are bought and then our entire AG and operations team because what what happened in the fourth quarter really the first two and a half months played out more or less like we expected.

Speaker 3: and operations team because what what happened in the fourth quarter

Speaker 3: really the the first two and a half months played out more or less like we expected uh... but you know very strong negotiations in coordination with one of our key suppliers as i mentioned uh... in my prepared remarks gave us a large delivery of simic conductors the last week of the year so we were able to actually

But very strong negotiations in coordination with one of our key suppliers as I mentioned in my prepared remarks gave us a large delivery of semiconductors. The last week of the year. So we were able to actually.

Speaker 3: You know fulfill the final completion of a large number of our fleet units across the portfolio and get those units out to customers and dealers that really needed them. So that really was how we were able to outperform.

Fulfill the the final completion of a large number of our fleet units across the portfolio and get those units out to customers and dealers that are really needed them. So that that really was how we were able to outperform.

Speaker 3: But it's kind of what happened all year. The team just did a really nice job of managing a very difficult supply chain situation. And as we talked about it, it was mostly in the fourth quarter related to stomach conductors.

But it's kind of what happened all year. The team just did a really nice job of managing a very difficult supply chain situation.

As we talked about it was mostly in the fourth quarter related to semiconductors.

Speaker 3: You know, we're not going to get into too much margin discussion. I think we do see good momentum, you know, carrying through into 2022, but we're also, as we were quite clear, I think, God, we do see some pressures in the first-

Not going to get into too much margin discussion I think we do see good momentum carrying through into 2022, but we're also as we were quite clear.

Clear I think we do see some pressures in the first half of the year, but overall, we've got confidence that the team is going to continue to see year over year improvements.

Speaker 3: of the year but but overall we've got you know confidence that the team is going to continue to to see your year improvements. Can I just clarify one thing now if at

Can I just clarify one thing, though if at the end of the quarter you got the chip delivery and I assume those went into a lot of red tagged pieces of equipment or equipment that was only missing.

Speaker 4: We got the chip delivery and I assume those went into a lot of red tagged pieces of equipment or any equipment that was only missing.

Speaker 3: of couple parts, is that correct? That's correct, an A part, yes. In it, are there.

A couple of parts is that correct that's correct.

Yes.

So this was a chip that that said, though that means that wave of revenue at the end of the quarter probably came in with low incremental margins right. They were already absorbed having been built partially before the fourth quarter is there any way to quantify that revenue impact from those red.

Speaker 4: That said though, that means that wave of revenue at the end of the quarter probably came in with low incremental margins, right? They were already absorbed having

Speaker 16: Is there any way to quantify that revenue impact from those?

Speaker 16: red tag shipments just what i'm trying to get a sensor run rate margins because obviously those revenues have been to the quarter obviously drove absolute levels of of ebit higher but probably damn

Red Tag shipments just I'm, just trying to get a sense of run rate margins, because obviously those revenues at the end of the quarter, obviously drove absolute levels of EBIT higher, but it probably dampen the incrementals a bit.

Speaker 3: I don't think many of them were built prior to the fourth quarter. I mean, it's, but it, and it also remember it was, it wasn't just the all-file-way segment that we were having this issue with. It was a lot of trucks and buses as well. So really, probably not a, don't know. You can comment if you want, but I don't think that you can back into that, that margin impact much, please.

I don't think many of them were built prior to the fourth quarter I mean, it's but it also remember it was it wasn't just the off highway segment that we were having this issue with it was a lot of <unk>.

Trucks and buses as well so.

Really probably not a I don't know you can comment if you want but I don't think that you can back into that that margin impact might very easily.

Speaker 2: Yeah, I mean, we have, we definitely have higher cost because of, you know, managing these units at the end of the line and reworking the plants as we say. And therefore, we had lower margin in the fourth quarter, as you can also see on our numbers. I mean, that was a good contributor of the lower margin, was the fact that we really had to run in the plants behind the production scale too.

Yeah, I mean, we have we definitely have higher cost because.

So managing these units at the end of the line and rework in the plants as we say.

And therefore, we had lower margin in the fourth quarter as you can also see on that.

Numbers I mean that was a good contributor of the lower margin was the fact that really had to run in the plants.

Behind.

Behind the production scandal.

Speaker 2: to repair and reward from these units. And I will say not the driver for the lower margin.

To reap their rewards from these units and I would say that's the driver for the lower margins.

Okay. Thank you very much I appreciate it.

Thank you next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Speaker 1: Next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Daniela.

Daniela.

Daniela Costa from Goldman Sachs or UN mute.

Yes.

Okay sorry.

We will go for the next question. It comes from the line of Tami Zakaria from Jpmorgan. Please go ahead Daniela if you can hear me press star one again, so that we can piggy back on the queue. Thank you.

Speaker 1: It comes from the line of Tommy Sekaria from JP Morgan. Please go ahead. Daniella, if you can hear me press star 1 again so that we can put you back.

Speaker 5: Hi, thank you so much for taking my question. My question is around the strong order books. How are you thinking about the risk to price cost in 2022? Or are these mostly dealer orders where pricing can be adjusted if raw material prices continue to go up?

Hi, Thank you so much for taking my question my.

My question is around the or strong order books.

How are you thinking about the risk to price cost.

And so any intended to or are these mostly dealer orders.

<unk> can be adjusted if raw material prices continue to go up.

Speaker 3: you know i i'd like to you again give uh... tremendous shout out to to darrick and his his global team because they've managed pricing very very well in 2021 um... and you know part of that was just making sure that uh... the dealer units were were able to have price flexibility we we we've built very confident in and what's in the order book that we are protected uh... from price throughout from most of the year

I'd like to again give a tremendous shot out to Derek and his his global team because they've manage pricing very very well in 2021.

And part of that was just making sure that the.

The dealer.

Units, where we're able to have the price flexibility, we feel very confident in what's in the order book that we are protected from price throughout most of the year.

Yeah.

Got it understood. Thank you so much.

Okay.

Thank you next question comes from the line of Steven Fisher from UBS. Please go ahead.

Speaker 1: Next question comes from the line of Steven Fisher from UBS. Please go ahead.

Speaker 6: Thanks, good morning, just to follow up on that. And I know you don't want to talk about margins specifically, but maybe just the thoughts on pricing and both Ag and construction and how you see the cadence of that price versus cost over the course of the year. You know, the fact that it was still positive in Q4, I thought was pretty impressive. So just curious what we should be expecting as kind of cadence of that over the course of 2022.

Thanks, Good morning, just a follow up on that and I know you don't want to talk about margins, specifically, but maybe just the thoughts on pricing in both AG and construction and how you see the cadence of that price versus cost over the course of the year.

The fact that it was still positive.

In Q4, I thought it was pretty impressive. So just curious what we should be expecting is kind of cadence of that over the course of 2022.

I don't know do you want to not answer that.

Speaker 2: Yes, look, we have carry over pricing on the other book that we'll still have to the P.L. We commented about the fact that we expect

[laughter] yeah.

Look we have carryover pricing on the order book that will still still has to flow through the P&L.

We commented about the fact that we expect the first half of the year still to be complicated from a supply chain standpoint, so still have these headwinds higher freight costs.

Speaker 2: first half of the year still to be complicated from a supply chain standpoint. So still have these headwinds higher freight coasts, some rewards in the plan.

Some rewards in the plants.

Speaker 2: And then we expect that to use in the second part of the year.

And then we expect that to lease in the second part of the year.

Speaker 6: Okay, thank you for indulging that. So then maybe thoughts on the broader ag cycle in the sky, you've made reference to some of the factors that are supporting the ag prices today, the geopolitics and then Brazil growing conditions. So maybe you just talk about.

Okay. Thank you for indulging that.

And then maybe.

Thoughts on the broader AG cycle and as Scott you made reference to some of the factors that are supporting the AG prices today, the geopolitics in Brazil.

Growing conditions so.

Maybe you can you just talk about.

Speaker 6: how that commodity strength is influencing your thoughts perhaps on 2023 and where the cycle could go. I think previously you were kind of thinking about 2022 as if it might be the peak, are you thinking that maybe it could have more legs from now and then how that would influence your thoughts about kind of overproduction versus retail.

How that commodity strength is influencing your thoughts, perhaps on 2023, and where where the cycle could go I think previously you were kind of.

Thinking about 2022 as if it might be the peak are you thinking that maybe it could have more legs from now and how that would influence your thoughts about kind of overproduction versus retail.

Yeah, well obviously.

Speaker 3: Well, obviously, with getting ready for our capital markets they we've spent a lot of time thinking about and analyzing what we expect from the cycle. And that means having a lot of conversations with people that are much smarter than I am on that concept. And as we've done those deep dives, it does give us a little more confidence. Some of the factors we talked about with the greater adoption of precision, the two decade old fleet age.

We're getting ready for our capital markets day, we spent a lot of time thinking about and analyzing what we expect from the cycle and that means having a lot of conversations with people that are much smarter than I am on that concept and as we've done those deep dives. It does give us a little more confidence some of the factors, we talked about with the greater adoption.

Our precision the two decade old fleet age.

Speaker 3: here in North America. So I do think 2023 is looking better now than I'd originally thought maybe even three months ago as we get a little more into it. But that said, we're being very, very disciplined. I mean, obviously our supply constraints are causing it in our production. But our dealers do appreciate they desperately want more inventory now. But I think they appreciate what can happen with pricing specifically as they maintain a tighter inventory. And we'll continue to try to do that as we go forward and not let.

Here in North America. So I do think 2023 is looking better.

Now than I had originally thought maybe even three months ago as we get little more into it but that said, we're being very very disciplined I mean, obviously, our supply constraints are causing it.

In our production but.

Our dealers do appreciate that they they desperately want more inventory now, but I think they appreciate what can happen with pricing specifically as they maintain a tighter inventory and we will continue to try to do that as we go forward and not let you know.

Speaker 3: you know things get ahead of ourselves and you know that does take discipline but i i would you should expect us to have that discipline so when the cycle does slow we don't find ourselves in a and a big problem of oversupply but no at at this point

Things get ahead of ourselves and you know that does take discipline, but I would you should expect us to have that discipline. So when the cycle does slow we don't find ourselves in.

And a big problem of oversupply, but no at this point what I've learned is that 2023 has probably got a little bit more legs to it than I would've expected a while ago.

Speaker 3: What I've learned is that 2023's probably got a little bit more legs to it than I would have expected a while ago.

Yeah.

Terrific, Thanks very much.

Thank you next.

Speaker 1: Question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

The next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Speaker 7: Hi, good afternoon. I hope you can hear me now. I hope hope all is well. I have three questions. The first one was regarding Precision Act in Raven and now that you have the assets, sort of how shall we think about the growth paths from here on Precision Act to close the gap with peers between organic, increasing organic investments versus continuing to sort of a bolt-on or even not bolt-on and the next strategy.

Hi, Good afternoon, I Hope you can hear me now Oh Copel is all I.

I have three questions.

The first one was regarding Chris.

Precision AG and Raven and now that you have the asset how shall we think about that.

The growth paths from here on precision acts to close the gap with peers between organic.

Increasing organic investments versus.

<unk> instead of a bolt on or even a couple torn M&A strategy.

Speaker 7: That's question number one. And then you two others are more focused on your term. I wanted to check first on your comment that you've been able to order a bit more, send these and maybe then you would have originally expected on cue four. And can you comment then?

That's question number one and then the two others are more focused on the near term.

To check first on your comment that you've been able to or are there a bit more certainty than maybe than you would have originally.

Expected on Q4 and can you comment then.

Speaker 7: In terms of like the margin performance on Q4 specifically, did you end up overproducing or actually you still had some disruption impact and if you could help quantify basically how much that was versus what would have been a normal margin, that would be helpful. And the third one, just on the growth target, the 10 to 14%, which seems to be mainly pricing, but anyways, how much visibility on that do you have already in the backlog? You mentioned you were fully booked on some lines. So here is on that.

In terms of like the margin performance on Q4, specifically did you end up overproducing or actually you still had some disruption impacting if you could help quantify basically how much that was but what would have been a normal margin that would be helpful and the third one just on the growth target the 10%.

14%, which seems to be mainly pricing, but anyway, how much visibility on that you have already in the backlog. You mentioned you are fully booked on some line.

So I'm curious on that thank you.

Speaker 3: All right, well I'll take the first one and give a doni the second two, but you know we are we're thrilled to get the acquisition of Raven closed in November and you know the really

Alright, well I'll take the first one and give it to only the second too, but we are we're thrilled to get the acquisition of Raven closed.

November and you know there really.

Speaker 3: exciting work of driving that integration and now understanding what our combined companies can do together you know they have an incredibly strong team and Strabley Strong Engineering customer focus a lot of stuff that's why we talk about a reverse integration is because we're so pleased with basically that overall business

Exciting work of driving that integration and understanding what our combined companies can do together they have an incredibly strong team strive really strong engineering customer focus a lot of stuff. That's why we talk about a reverse integration is because we're so pleased with basically that overall business.

Speaker 3: But we've been working with them for more than a decade where they're largest customers, so we know them reasonably well. But the synergies that we have to accelerate what we can deliver for our customers and dealers is really exciting. Prague Guard who joined us in the spring, really is leading that integration. And where we help be speaking at Capital Market today in Miami and really provide a clear roadmap. But what we're most excited about is being able to deliver.

But we've been working with them for more than a decade, we're their largest customers. So we know them reasonably well, but the synergies that we have to accelerate what we can deliver for our customers and dealers is really exciting.

Guard, who joined us in the spring.

Really is leading that integration.

Where are we.

Ill be speaking at.

At capital markets day in Miami, and really provide a clear roadmap, but what we're most excited about is being able to deliver.

Speaker 3: you know better automation and ultimately autonomy.

<unk> automation and ultimately autonomy.

Speaker 3: you know to our customers uh... and i think as we give them those tools and really it's what we're saying that desperate desire almost for productivity and yield for our farm customers and that's exactly what raven delivers for us and you know because we have such a close working historical relationship but we're going to be able to bring new products to market much faster than i think some people were able to expect and that'll be exciting for product talk about

To our customers and I think as we give them those tools I mean really it's we're seeing a desperate desire almost for productivity in yield from our farm customers and that's exactly what Raven delivers for us in <unk>.

<unk>, we have such a close working with historical relationship where we're going to be able to bring new products to market much faster than I think some people were able to expect and that'll be exciting for prior to talk about.

Speaker 3: uh... next month you know as far as you know continuing to do both on m&a i think you'll still see that raven did it for many years before we acquired them we've been a continue to do it uh... we just have the augment the team in here you know partner for us and and uh... precision spraying and we're just excited about you know what

Next month as far as continuing to do bolt on M&A I think youll still see at Raven did it for many years before we acquired them. We've continued to do it we just had the augmented team in here.

Our partner for us in precision spray and we're just excited about what what our overall portfolio can do but we will certainly add to that as necessary and not only with acquisitions, but sometimes with partnerships in and just good overall relationships. So we feel good about that and probably will go into more details, but don't even want to cover the other two.

Speaker 3: what our overall portfolio can do, but we'll certainly add to that.

Speaker 3: as necessary and not only with acquisitions but sometimes with partnerships and and just good overall relationships. So we feel good about that and Prague will go into more details. I don't know if you want to cover the

Speaker 2: Yeah, so in Q4, I mean, we underproduced retail, but that's pretty normal for Q4, but also we produced less than what we wanted to produce because of this general lack of components and including the setting conductors.

Yeah, So in Q4.

Underproduce retail.

<unk> for.

For Q4, but also we produce less than what we wanted to produce.

Because of this general lack of components and including semiconductors.

<unk>.

Speaker 2: There was an impact in the margin, as we said before, mainly because of a pre-works and additional work in the plants to get these unpunished goods out of the plants into our customers when these any conductors at the parts are run.

There was an impact in the margin as we said before mainly because of <unk>.

<unk> and <unk>.

And additional work at the plants to get DSM finished goods out of out of the plants into our customers.

With what the semiconductor device arrived.

Speaker 2: In terms of growth for next year, I will split between a pricing component that is definitely there, but also increase capacity in our production facilities and so ability to produce more and the four cells more.

In terms of growth for next year.

I will split between a pricing component that is definitely there.

But also at increased capacity in our production facilities.

And so our ability to produce more NDA for sagamore.

Speaker 2: And this is a combination of having improved our capacity and also having work with our suppliers to get more components next year compared to easier.

And this is a combination of having.

Improve.

Our capacity and also having to work with our suppliers to get.

More components next year comparison easier.

Thank you.

Thank you next question from the line of Ross Gilardi from Bank of America. Please go ahead.

Speaker 1: Thank you. Next question from the line of Rose Gelardi from Bank of America. Please go ahead.

Hey, good morning, guys.

Speaker 4: Yeah, I just want to clarify. So of the 10 to 14% revenue guide, roughly how much of that is priced? And what are you embedding for FAFACs? Because I would assume with the price increase.

Good morning.

Yes, I just wanted to clarify so of the 10% to 15% revenue guide.

Roughly how much of that is price and what are you what are you embedding for FX.

I would assume with that.

The price increases that are.

Speaker 4: you know, they're announced out there. It doesn't seem like you're assuming all that much in terms of volume growth. And then, you know, are we at that fully your guide in the first half or is the revenue growth gonna be below that the first half and above that in seconds?

They are announced out there it doesn't seem like youre, assuming all that much in terms of volume growth and then.

Are we at that full year guide and the and the <unk>.

First half or is the revenue growth going to be below that in the first half and above that in second half.

Well I mean.

Speaker 3: Well, I'll let it don't give you the specifics. But remember, our backlog is incredibly high. So what you're seeing from a growth standpoint is what we can manage through our supply chain.

I'll, let Tony give you the specifics.

Remember our backlog is incredibly high so what youre seeing from a growth standpoint, as what we can manage through our supply chain.

Speaker 3: And again, we'll be better in the second half than we are in the first half. But we're coming off of a really strong year of growth. So I think with moderate price and moderate single digit organic growth, we think will be OK.

And again, we will be better in the second half than we are in the first half, but we're coming off of a really strong year of growth. So I think with moderate price and moderate single digit organic growth, we think we'll be okay.

Speaker 3: but really we're limited by what we can get from the supply chain more than anything else.

But really we're limited by what we can get from the supply chain more than anything else.

Speaker 2: I don't even want to cover the rest. Yeah, and I mean, as I said, pricing will be a component of it. Mix would be another component, right? We said that in the fourth quarter, we were disadvantaged, we mixed because we didn't produce some of the medium and heavy tractors that our customers would be able to be waiting for. So we will have more of that. So we'll have a better mix.

And don't you want to cover the rest yeah, I mean, I would say pricing will be a component of it mix would be another component right. We said that in the fourth quarter. We were disadvantaged mix because we did produce some of the medium and heavy tractors that we that our customers were waiting for it so.

We will have more of that so we'll have a better mix.

Speaker 2: in the overall production. FX is not significant in the growth there.

A deal that old production.

FX is.

Not significant integrals.

<unk>.

Speaker 2: Our guidance is calculated with a 120 euro dollar exchange rate, but the component there is.

Our guidance is calculated with a 120 euro dollar exchange rate.

But the component there is meaningful.

Speaker 4: Okay, and then Scott, you did say at the end of David's, your response to David's question that you had overall confidence in year on year, margin improvement was with that up.

Okay, and then Scott you did say at the end of David Your response to Davids question that debt.

That overall confidence in year on year margin improvement was with data.

Speaker 4: a full year, operating margin, common, and is it, you know, in a year like this where you've still got a lot of supply chain strain.

Full year operating margin comment.

In a year like this where you still got a lot of supply chain strengths.

Speaker 4: is a 25% incremental margin framework, which has been sort of your historic norm, at least for the act as if that appropriate to think about for this year.

Is 25% incremental margin framework, which has been sort of your historic norm at least for the AG business is that appropriate.

To think about for this year.

Speaker 3: uh... i mean i i was somewhat vague in my comment because i i intended to be we do expect overall actually in most years there's gonna be obviously times what happens uh... you know productivity is incredibly important to us and we will seek to drive

Well I mean I.

I was somewhat vague in my comment because I intended to be I mean, we do expect overall I mean actually in most years theres going to be obviously times, whether or not it happens.

Productivity is incredibly important to us and we will seek to drive <unk>.

Speaker 3: margin expansion that this year's just tricky because of the supply chain.

Margin expansion. This year is just tricky because of the supply chain constraints.

Speaker 3: constraints uh... and it's it's hard to call within criminal margins are going to be because you know we've got higher labor cost you know i mentioned in my prepared remarks specifically around construction uh... where we're having just difficulty having enough labor to to meet demand um... you know and obviously with the material placement that we do expect inflation to lag in the second half of the year not just supply chain get better but we do expect

And it's hard to call what the incremental margins are going to be because we've got higher labor costs and I mentioned in my prepared remarks, specifically around construction.

We're having just difficulty having enough labor to meet demand.

And obviously with the material inflation that we do expect inflation to lag in the second half of the year not just supply chain could get better, but we do expect the <unk>.

Speaker 3: downturn there so you know overall i think i'm again and the team does a really good night good job of managing margins and it's uh it's kind of impressive to see the focus that they get to whether it's discipline pricing you know with good supplier negotiations um... and we see you know better opportunity over the long term uh... but certainly in the short term i think i i feel comfortable that uh... just giving year over year improvement in margins will be a struggle with the team will certainly probably deliver that

Downturn there. So you know overall I think our again and the team does a really good good job of managing margins I mean, it's a it's kind of impressive to see the focus that they get them whether its disciplined pricing.

With good supplier negotiations and we see a better opportunity over the long term.

But certainly in the short term I think I feel comfortable just giving year over year improvement in margins will be a struggle, but the team will certainly probably deliver that.

Speaker 4: Okay, great. And then just on some of the below the line items, and then if you just clarify what the tax rate should be for, you know, remain co-op, which is the run rate on...

Okay, Great and then just.

And some of the below the line items and then if you could just clarify what the tax rate should be for remain co, but just the run rate on.

Speaker 4: Corporate expense and interest expense from 2021 that you're showing in your results. Are those broadly appropriate for 2022? And any reason why FIN co-earnings wouldn't be up in 2022 versus 21 given that it's a growth year?

Corporate expense and interest expense from 2021 that youre showing in your results or are those broadly appropriate for 2022 and any reason why <unk> been co earnings wouldn't be up in 2022 versus 'twenty, one given that it's a growth year.

Speaker 15: So let me start from the from so think or earning.

So let me start from the from so think or earnings.

Speaker 2: were expected to be moderately up in the year because of the growth of the portfolio these year, right, which was reflecting growth next year. Of course, you need to consider the part of the Finca would be with On-I, right? So to start with the spin-off, I mean, with what remains in C&H, in the after, which is the majority of it, is North America, South America, and the Trump Coveura.

We expect to be moderate moderately app in the yet because of the growth of the portfolio. This year right, which was reflecting growth next year of course, you need to consider that part of the fee income would be with an IV right. So.

With the.

With the spin offs spun off with the with what remains in CNA industrial which is the better articulate It's North America, South America and.

And a chunk of Europe .

Speaker 15: in terms of interest expenses.

In terms of interest expenses.

Speaker 2: I would expect something similar to what you have in the Carval in 2022, as we have most of our, most of our bonds will be still be there.

I would expect something similar to what you have in the carve outs in 2022 as we'll have most of our.

Most of our bonds.

It will be still be there.

Speaker 2: Then you'll have a question about the old in cost. I will correct them with. Yep.

Then you had a question about the holding cost.

Before I conclude.

Yes, sorry.

So corporate to corporate.

Speaker 15: corporate expenditure. Yes, I will think corporate expenses between around 35 to 40 million per quarter.

Okay.

Yes, I will think corporate expenses between.

At around $35 million to $40 million per quarter.

Speaker 2: And the tax rate, we have a lot of benefits from having more profit in jurisdictions where we didn't have tax assets. We expect that to normalize over the years. So to come to a more normal 20, mid 20, that's right.

And.

And then the tax rate.

We had a lot of.

Benefit from.

From having more profit in jurisdictions, where we didn't have that asset.

We expect that to normalize.

Over the years to come to a more normal 20 mid 'twenty that's fake.

Okay.

Thank you next question comes from the line of.

Speaker 1: Thank you. Next question, can you find the line of France-Ora-Ruby years? In the mountains, please go.

Yes.

Please go ahead.

Hi, Good morning, and good afternoon, everyone. Just one question on labor costs, you mentioned it as a potential headwind for your construction equipment activity.

Speaker 8: Hi, good morning and good afternoon everyone. Just one question on labor costs. You mentioned it as a potential tech winery for your construction equipment activities. And if I'm not mistaken, you will have as well some renegotiations with Union in some of your US agricultural production facilities.

And if I'm not mistaken you will help us with some renegotiations with <unk>.

In some of your U S agricultural production facility.

Speaker 8: Can you just give us a bit more color on what to expect this year in terms of first labor Availability and on which which pressures? Thank you, and

Can you just give us a bit more color on what we are.

This year in terms of.

First labor.

And on which wage pressures. Thank you very much.

Yes.

Speaker 3: We feel reasonably comfortable with our ability to manage Labor is a small portion of our cogs, but certainly providing

We feel reasonably comfortable with our ability to manage labor is a small portion of our Cogs, but certainly providing a good work environment is the most important thing we can do because retaining talent and retaining our workers as really as important as anything right now, but the overall, where the union negotiation.

Speaker 3: a good work environment is the most important thing we can do because retaining talent and retaining our workers is really as important as anything right now. But the overall we're you know the union negotiation represents a relatively small portion of our North American labor force. So we think that you know we'll be able to we've got a good relationship there. We'll seek to manage and maintain that going forward. But we feel like comfortable with our ability

It's a relatively small portion.

Of our North American.

Labor Force. So we think that we'll be able to we got a good relationship. There will we will seek to manage and maintain that going forward, but we feel like comfortable with our ability to.

Speaker 3: to, to, I mean, we talked about the ability to expand margins and that assumes the fact that we are going to see rising labor costs, but nothing on an overall basis and it took complete cost of good sold, not a dramatic impact.

We talked about the ability to expand margins and that assumes the fact that we are going to see rising labor costs, but nothing on an overall basis.

Cost of goods sold not not a dramatic impact.

Thank you.

Speaker 1: Thank you. Next question, concerns of Korni Yekawonis from Morgan Stanley . Please go ahead.

Thank you next question comes from the line of Courtney <unk>.

From Morgan Stanley . Please go ahead.

Hi, good morning, guys.

Speaker 9: Maybe, you know, I know you don't want to comment on margins too specifically, but can you just kind of frame from the supply chain perspective?

Maybe I know you don't want to comment on margins too specifically, but can you just kind of frame from the supply chain perspective.

Speaker 9: Do you see it getting worse in the first quarter, staying the same or a slight improvement? I was just a little confused by the moving parts.

Do you see it getting worse in the first quarter staying the same or a slight improvement I was just a little confused by that then moving parts.

Speaker 9: And then maybe if we can just go back to the common undeadler inventory, I think you'd mention, you obviously, dealers want more inventory, but...

And then maybe if we can just go back to the comment on dealer inventory I think you had mentioned you know obviously the dealers want more inventory, but when you look at the dealer inventory levels are today, whether it's as months of sales or whatever can you just comment on them.

Speaker 9: When you look at the dealer inventory levels today, whether it's those months of sales or whatever, can you just comment on how big of a restocking you could see or do you feel like they are potentially?

How big of a restocking you could see or do you feel like they are potentially.

Potentially.

Speaker 9: you know should be at a lower level than they have historically been uh... if you can just comment on how you're thinking about the alert inventory levels uh... over the long term thanks believe not those are two relatively easy questions uh... for first of all

Should be at a lower level than they have historically been if you can just comment on how youre thinking about dealer inventory levels over the long term. Thanks.

I believe it or not those are two relatively easy questions.

First of all Q4, and Q1 are going to likely be quite similar in that we're still constrained by by semiconductors. It might switch suppliers that are shorting us at the time, but that literally is the key driver and really the overall supply chain is not yet getting better and we've talked about it we.

Speaker 3: q4 and q1 are going to likely be quite similar in that you know we're still constrained by by semiconductors you know it might switch suppliers that are are shorting us at the time but that that literally is the key driver and it and really the overall supply chain is not yet getting better and we've talked about a week's back

Speaker 3: the second is improvement throughout the year really a better second half than then first half but so i think in terms of how to think about the first quarter it's much more like the fourth quarter than we would expect the rest of the year or or some of the last year at the um and as far as dealer inventory um you know obviously it's going to go up from here i mean we are not we we just don't have the inventory that they need to properly serve their customers um and so it will go up from here and i think getting back to you know

The second is improvement throughout the year really a better second half than first half, but so I think in terms of how to think about the first quarter. It's much more like the fourth quarter. Then we would expect the rest of the year or some above last year to me.

And as far as dealer inventory.

Obviously, it's going to go up from here I mean, we are not we just don't have the inventory that they need to properly serve their customers.

And so it will go up from here and I think getting back to.

<unk>.

Speaker 3: A relatively normal level is good. I think what has happened typically in the past and happens across industries is that in good times, you just overproduce and then you end up having too much and we're just going to try to be very disciplined, shorten our lead times to make sure that we can maintain the proper levels with our dealers because, you know, they're going to continue to order and order and order to try to maintain demand and get their allocation and we just got to be disciplined as we manage through that and we will be.

Relatively normal level is good I think what has happened typically in the past and it.

Happens across industries is that in good times, you just overproduce and then you end up having too much and we're just trying to try to be very disciplined shorten our lead times to make sure that we can maintain the proper levels with our dealers because they're going to continue to order in order in order.

To try to maintain demand and get their allocation and we've just got to be disciplined as we manage through that and we will and we will be.

Speaker 9: Okay, great, that's helpful. And then just on, I think you've historically given adjusted DPS guidance, should we be interpreting that as, it's just because of the supply chain right now and at some point we will.

Okay. Great. That's helpful. And then just on I think you had historically given adjusted EPS guidance should we be interpreting that as it is just because of the supply chain right now and at some point we will have.

Speaker 9: have adjusted EPS guidance resumed or you know and if you can just pair for us any commentary you know obviously you've given us the sales guidance it sounds like you know we can't anticipate some margin improvement over the course of the full year but how that would you know pair back to EPS I think you'd give and Ross some of the you know other below the line items.

Adjusted EPS guidance presumed or.

And if you can just pair for us any commentary, obviously, you've given us the sales guidance. It sounds like we can anticipate some margin improvement over the course of the full year.

But how that would pair back to EPS I think you had given Ross some of the other below the line items.

Speaker 3: you know last couple of years because of the situation we've just for kind of framed up the key components of the frame into it and i kind of suspect that's where well i don't want to say never but i think that's a better way of looking at it uh... then providing specific eps guidance the donate may convince me otherwise at some point but i think that's probably the the way we're likely to do it for the future and i don't know you want to find more color on the below the line stuff

Last couple of years because of the situation. We've just from kind of framed up the key components that frame into it and I kind of suspect thats, where well I don't want to say never but I think that's a better way of looking at it then providing.

Specific EPS guidance Sedona may convince me otherwise at some point, but I think that's probably the way we are likely to do it for the future don't you want to provide more color on the below the line stuff.

Speaker 2: Yes, I did the main one is probably tax where we had the 90% tax rate in 2021 and I would expect that to normalize a little bit and In 2022 for the visibility we have right now

Yes, I mean, the main one is probably tax where we have a 90% vaccinating planning planning one.

And.

I would expect that to normalize a little bit.

In 2022 for the visibility we have right now.

So we will.

Speaker 2: move the guidance, I mean, we have been updated guidance last year, corner by corner, and I think we will likely do the same these year.

The guidance I mean, we have been updated guidance last year quarter by quarter and I think we will likely do the same this year.

Okay. Thank you.

Next question comes from the line of Norwegian Maria from William Blair. Please go ahead.

Speaker 1: next question comes from the line of Larisa Maria from William Blair please go ahead

Speaker 10: Thanks. Good morning, everybody. Obviously we've talked a lot about this, but in terms of this...

Thanks, Good morning, everybody.

Obviously, you've talked a lot about this but in terms of the supply chain issues.

Speaker 10: I guess my first question, what gives you the confidence that the dishes will ease? I mean, are you getting that visibility from the semiconductor suppliers that they are going to ease following that fourth quarter?

If you have I.

I guess my first question is what gives you the confidence that these issues will ease I mean are you getting that visibility from the semiconductor suppliers.

They are gonna Eve following that fourth quarter drop it to give you and related to that and just to clarify based on the comments you just made.

Is it fair to say that all quarters will have year over year sales growth.

Obviously, you're in a more challenging in the first half so.

To be more of a concern.

Yes, I mean, what gives you what gives us confidence again is just watching and participating in and how the teams manage through the situation and it's not just the suppliers getting better a lot of times, it's adapting and adopting different methodologies for ourselves to be able to manage through things. Obviously, you can read anywhere this.

Speaker 3: yeah i mean what gives what gives us confidence again is just watching and you know participating in and how the teams manage through the the situation and it's not just the suppliers getting better a lot of times it's it's adapting and adopting different methodologies for ourselves to be able to manage through things um... you know obviously you can read anywhere the supply overall

Supply overall.

Speaker 3: supply for semiconductors is going to be below demand for most overall of 2022. It does get better in the second half, but we're still probably 9 to 12 months away from having being able to meet demand. It's not further for overall chip demand. But I think our team is, we've just developed a really good process for managing through that and that gives us confidence.

Supply for semiconductors is going to be below demand.

Most of the or all of 2022, it does get better in the second half, but we're still a probably nine to 12 months away from having being able to meet demand if not further for overall chip demand, but I think our team is.

We've just developed a really good process for managing through that.

That gives us confidence the overall.

I think coming out of Covid. There were so many things that impacted suppliers ability to produce now lately, we've had energy issues in Europe , and we've had labor issues and we there is so many different issues, but we are seeing everybody start to get a little better at managing these things COVID-19 decreasing a bit.

Speaker 3: many things that impacted suppliers' ability to produce. Now lately we've had energy issues in Europe and we've had labor issues and we've had so many different issues. But we are seeing everybody start to get a little better at managing these things. COVID's decreasing a bit and overall. So I think just the overall supply chain remains challenging but we are seeing improvement and I think that will ultimately lead to lower inflation in the second half as well. two them our

Overall, so I think just the overall supply chain remains challenging, but we are seeing improvement and I think that will ultimately lead to lower inflation in the second half as well.

Speaker 10: Thanks, and then show you over your growth in every quarter.

Thanks, and then for a year over year growth in every quarter is that fair.

Okay.

Speaker 3: I didn't answer that question on purpose.

I didn't answer that question on purpose.

Okay.

The next question comes from that I know of.

Speaker 1: next question Saint- tao frombankahe debuted

Gunther <unk> from Banca <unk>.

Please go ahead.

Speaker 11: Good morning and thanks for taking my questions. A couple.

Good morning, and thanks for taking my questions a couple Joseph.

Speaker 11: The first one is on the free cash flow guide now. I was wondering if you could go through the moving parts and specifically on the role of working capital.

A couple the first one is on the free cash flow guidance. So I was wondering if you could go through the moving parts and specifically.

Specifically to working capital.

Speaker 11: 2022 and the second question is on

For 2022, and the second question that he is on.

Speaker 11: the top line growth guidance, plus 10, plus 14% there is also, I guess, raven, the consolidation.

The top line growth guidance of plus 10, plus 14% of diesel so I guess.

Even the consolidation.

Speaker 11: So I'm right in thinking that the lower end of the

So two things.

King.

And Oh.

The guidance implies almost no organic growth because you have strong price improvement, we saw at 10% or less in Q4, and then really then waiting for a couple of percentage points between two 5%.

Speaker 11: of the guidance implies almost no organic growth because you have a strong price improvement. We saw 10% more or less in Q4 and then you have raven waiting for a couple of percentage points to point five.

<unk>.

So on the free cash flow for the year I would say.

Speaker 2: So the free cash flow for the year, I would say, we have higher topics in the plan that we have, that we have this year. And I'm working capital, there may be some inventory buildup that we are considering in company inventory. So,

We have.

Hi.

Capex in the plan that we had that we had this year.

And and I'm working cap it out there may be some inventory buildup.

That we are considering inc.

In.

In company inventory so.

We are I would say.

Speaker 2: We are, I would say, we'll consider a conservative of that in considering it higher, but I will focus on the higher topics. The... three...

We will consider.

I will serve any of that.

In considering any higher but I would focus on capex.

Capex.

<unk>.

On the.

The final question was on Sunday last year.

Speaker 2: on the top line growth. The top line growth, yes, I mean, well, the Raven contribution to the top line in the first year is not that big, it's consistent with the revenues of Raven last year. Then we have pricing, and then, as I said, most of the top line growth will come from our capacity to produce more.

Two of them.

On the top line growth.

Yeah Yeah.

Well the Raven contribution to the top line in the first year is not that big is consistent with if revenues are weighted last year.

Then we have pricing and then as I said.

Most of the topline growth will come from our capacity.

Neutral.

Produce more.

Yeah.

Speaker 11: Do you think price increase will be the contribution will be higher?

Okay. Thanks.

Just a follow up do you think.

Price increase would be let's say the contribution would be higher visa.

Speaker 11: Volume increase I mean it seems that you are assuming a very little volume increase now. I will say

Volume increase.

Seems that youre assuming.

The volume increase.

Say wow.

I will share equally between the two.

Speaker 2: I would share equally between the two. Okay. Thank you, Zeta. We had considered it price increase these years, right?

I think you said that we have considered a price increase this year as well right.

Okay. Thanks.

Thank you.

Speaker 1: We now take a final question from the line of Christen Rowan from Oppenheimer. Please go ahead.

We now take our final question from the line of Kristen Owen from Oppenheimer. Please go ahead.

Speaker 12: Thank you. One question related to the Raven transaction. I wanted to ask if you have any updated thoughts on

Thank you.

One question related to the <unk> transaction.

Thank you.

You have any updated thoughts on.

Speaker 12: The Airstaur and the engineered films, the businesses and how you're thinking about those moving into.

The aerostar and engineered films.

Just how you're thinking about that.

In 2022.

Okay.

Speaker 3: No, we learned a lot about those businesses. We got through it and now that we own them, we feel better about what those businesses are, but probably not the best, we're not the best owner for those. And so we've got the process underway to find the best owner. And we're encouraged by the engagement we're seeing in that process. But that's where we are in the middle of it.

We learned a lot about those businesses, we got through it and now that we own them, we feel better about what those businesses are but.

Not the best we're not the best owner for those and so we've got a process underway to find the best owner than we are.

Encouraged by the engagement, we're seeing in that process, but that's where we are in the middle of it.

Okay, Great and then I just wanted to ask about the industry outlook.

Speaker 12: Okay, great. And then I did want to ask about the industry outlook for

Sure.

Speaker 12: tractor and combine in South America just seems a little bit light relative to to some of the peers So I was wondering if you could provide just an additional commentary on what you're seeing in that region. How much of that?

Tractor and combine in South America, just seems a little bit late.

Some of your peers.

Wondering if you could provide just some additional commentary on what youre seeing in that region, how much of that is money.

Speaker 12: My name is Chirvin versus what we're seeing out of service. Any commentaries?

Yes.

Well listen that was part of it.

Commentary you can provide on that guidance.

Speaker 3: yeah well i mean you certainly uh... you know we've got

Well I mean, certainly.

We've got <unk>.

Strong.

Leaders across the Globe and Bill Maher just draw who runs the South American region for US really has done an outstanding job in.

Speaker 3: leaders across the globe and Vilmar to straw who runs the South American region for us really has done an outstanding job and You know being number one ag player and all of Brazil last year was just a testament what they do and you know It shows up in that promoter scores all they do really the the limitation in Brazil and I mentioned it in my prepared remarks is We're just seeing a lot of issues

Being number one AG player in all of Brazil last year was just a testament, what they do and it shows up in net promoter scores all they do really the limitation in Brazil, and I mentioned it in my prepared remarks is we're just seeing a lot of issues with incremental bad weather.

Speaker 3: with incremental bad weather. And we just cannot provide better guidance until we understand what that impact's gonna be there on the overall demand. Is there getting into the growing season there? It just, we really need to make sure we understand what happens with weather before we commit to any higher growth rates there.

And we just cannot provide better guidance until we understand what that impact is going to be there on the overall demand as theyre getting into the growing season.

There it just we really need to make sure we understand what happens with weather before we commit to any higher growth rates there.

Speaker 1: That will conclude the question and answer session. I will now let you turn the call back to over to no our ways for any additional or close.

That will conclude the question and answer session I would now like to turn the call back over to Noah.

Any additional or closing remarks.

Speaker 13: Thank you very much for joining us today. That concludes our call.

Thank you very much for joining us today that concludes our call.