Q2 2023 CNH Industrial NV Earnings Call

July 28, 2023

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Hello, and welcome to the C M H in the second quarter earnings Conference call.

I'd now like to hand, the call over to Jason O'mara head of Investor Relations. Please go ahead.

Thank you Kevin Good morning, and good afternoon to everyone. We would like to welcome you to the webcast and conference call for <unk> Industrial second quarter results for the period ending June 32023.

This call is being broadcast live on our website and is copyrighted by <unk> industrial any other use recording or transmission of any portion of this broadcast without the express written consent of <unk> industrial is strictly prohibited.

Hosting today's call are <unk>, industrial CEO , Scott wine, and CFO , Donnie and cheese that.

They will use the material available for download from the <unk> industrial website.

Please note that any forward looking statements that 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 to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U S Securities and Exchange Commission and the equivalent reports and filings with the authorities in the Netherlands and Italy.

The company presentation includes 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.

I will now turn the call over to Scott.

Thank you, Jason and thanks to everyone for joining our call.

In the second quarter, we delivered a solid set of results with record margins in both agriculture and construction.

Impact of our <unk> business system is accelerating and we recorded our highest ever level of price over cost both in dollar and percentage terms.

To market by eliminating waste and rework and our new product development processes for margins.

We are improving our modular design concepts and Fritz <unk>, our new Chief Technology Officer brings a wealth of experience to help drive that effort.

Profitability was particularly strong in the second quarter with results executing are exceeding our 2024 margin targets.

Across our manufacturing plants, we are empowering our teams to refine processes to improve throughput and quality.

Our ability to deliver a record margins with moderate revenue growth is indicative of the earnings power we are building.

I would like to highlight a recent example at our <unk> plant in Brazil, where we're the team held a kaizen to improve their production throughput.

In June our EMEA team delivered record retail sales providing helpful momentum as we enter the second half.

The address logistics bottlenecks and implemented a standard inspection cieslik checklist, making the process significantly more efficient.

We also achieved our highest production of North American high horsepower tractors since 2015, but are still aggressively working to reduce backlog and restock our dealers in this fundamental product category.

The result was a 58% decrease in fleet inventory buildup, a 14% increase in the daily line rate and a total annual cost benefit of $2 $3 million.

Across the business strong execution and focus on serving customers drove our success.

This is only one example of the many kinds of things we're doing across the company and more than twice the rate of 2022, and we're starting to see the impact in our results and CBS continue to expand our results will as well.

Our lean manufacturing programs are developing more efficient processes across the company. These initiatives are rooted in expanding productivity, improving quality and eliminating waste and.

And have become a tenet of our culture.

Make it simple as one of my favorite cultural beliefs, and it is helping us streamline our business and you can see the early results in our earnings strength.

Now ill turn the call over to donate to take us through the financial results. Thank.

Thank you Scott and good morning, good afternoon to everyone on the call.

Second quarter net sales of industrial activities of almost $6 billion were up 7% year over year at constant currency.

Consolidated revenue for the company was $6 6 billion up 8% over last year's second quarter industrial net sales were up 6% year over year, reflecting a 19% increase in construction sales and improved shipments of high horsepower tractors in North America.

This was mainly driven by favorable mix in price and pricing in both equipment businesses and by higher shipments in construction.

Adjusted net income for the quarter was $711 million and adjusted diluted earnings per share of 52 sites up 9% on the back of the ongoing strong operating performance.

Agriculture saw less robust sales growth in Q2, but we still see solid overall AG fundamentals.

Our lighter AG sales in the second quarter were primarily driven by two factors first while our team in South America delivered strong retail share performance in the quarter and year to date.

The effective tax rate was 24% in the quarter and the full year tax rate will likely be in the 25% to 26% range.

Free cash flow from industrial activities in the quarter was nearly equal to last year up $386 million, while the first half cash absorption is about 370 million lower than last year.

Much like earlier in the year the demand environment in the second quarter was shaky.

With short term demand in Brazil, slightly lower than expected, we reduced shipments to maintain lean dealer inventories.

Looking at the segments Agriculture sales were $4 9 billion up 5% at constant currency supported by strong pricing improved factory deliveries for large equipment and favorable mix.

Second shipments of our new Patriot sprayer were delayed due to production ramp up issues and quality considerations.

We will get those products to our customers in the second half.

In North America first half combine demand was exceptionally strong.

Net sales in all regions, except South America contribution to global agricultural sales is down 18% from 20% last year.

We are proactively working with our dealers to spur retail sales of both new and used combines in the coming quarters to mitigate potential inventory growth.

Yeah.

Gross margin was a record 27% we are continuing our trajectory of very favorable price of our costs as we push now more of cost efficiencies and some of last year's inflationary headwinds go away.

We remain confident in our full year sales guidance guidance, even with targeted production cuts.

Industrial EBIT was up 26% on strong price over cost as we finished the quarter with an EBIT margin of almost 14%.

Although we still experienced unfavorable product cost for higher purchasing economics in EMEA and South America, we have the lower freight cost and multiple improvements in our operations as a result of our CBS efforts.

Earnings per share was <unk> 52 for the quarter and 87 for the first half marking our best ever start to the year.

Derek Nielsen and its agriculture teams set new quarterly records for gross and EBIT margins. This.

Hi, carryover pricing and cost inflation of RCC, but we would see both moderate as the year progresses with the price cost relationship remaining positive.

This is not just a record second quarter, but a record for any quarter. There are impressive execution across products brands and distribution, coupled with a determined elimination of waste from our production processes enabled us to better serve our dealers and customers.

Net prices will revert to the historical level and there is no intention of lowering lease prices.

Our construction segment also recorded record results in the second quarter for the first time generating net sales over $1 billion.

These apply to construction as well.

Increases in SG&A, and largely driven by labor and labor cost Inflations and R&D spend was higher as we invest in the future of our products.

<unk> and his team introduced a plethora of new products at Con Expo and they are increasing manufacturing throughput to improve customer delivery. We continue to see solid benefits from our SAB Purion acquisition.

Adjusted EBIT in agriculture increased by $150 8 million $3 $821 million with a margin of 68%.

We started taking orders in North America for model year, 'twenty cord products in June and production slots for 2023 are full for most products in most markets.

Up to 180 basis points, mostly driven by the gross margin improvement.

Okay.

Scott already spend some time covering our main achievements in our construction business I will focus on our financial Kpis for the last quarter.

High horsepower tractor production is now fully booked and assigned to retail customers throughout 2023 and global demand for this segment remains high.

We're $1 billion construction net sales were up 20% at constant currency, driven by better volume and mix it enough to make an effect offsetting lower sales in South America.

We're taking orders into 2024 now.

And we see order backlog like crashing normalizing above pre pandemic levels.

Gross margin was 16% up 120 basis points, mainly due to higher volumes and pricing adjusted EBIT was $72 million up 47% year over year with a margin of six 8%.

Our customers are increasingly asking for our suite of precision technologies precision components net sales contribution increased 21% year over year in the second quarter with a steady growth of factories fit elements.

For our financial services business net income was $94 million substantially flat compared to the second quarter of 'twenty later.

We continue to accelerate development and delivery of improved technical solutions for our customers.

We launched the new Holland straddle tractor, specifically designed for narrow vineyards that require extreme maneuverability and compact dimensions. These new tractors will bolster our commanding presence in the Orchard vineyard segments. When they ship later this year.

We experienced favorable volumes in all regions of these was offset by margin compression higher restocked and increased labor costs. We also had the lower tax rate compared to last year.

We did originations were $2 8 billion in the quarter, the managed portfolio, including JV at the end of the period was $26 million.

We also published our 2022 sustainability report during the quarter the multiple initiatives illustrated there provide.

The receivable balance greater than 30 days past due as a percentage of receivables was one 8% largely driven by delinquencies in Brazil.

Proof that our commitment to world class environmental and stewardship for our company our communities and our end customers.

The construction team is making impressive progress in their pursuit of profitable growth. Our 2024 construction EBIT margin target of five 5% to six 5% with a significant stretch from our previous low baseline, but we surpassed that at six 8% in the second quarter, and we will likely be in that target range for the full year.

With a large concentration of payments with you every may and creates a seasonal spike at the end of the second quarter.

We are confident that our collection efforts will bring the patios back to lower levels in the coming quarters.

Our capital allocation priorities continue to be investing in our business, maintaining a healthy balance sheet and credit ratings and returning money to our shareholders.

<unk>.

Superiority is proving to be the right investment for us It gives us both mini excavator IP and enhanced electrification capabilities that we're already integrating into other products.

Fleet at $98 million of share repurchases during the quarter, which is the highest level ever in one quarter and we are continuing to buy back shares.

We recently opened a new assembly facility in central Italy, expanding our production capacity for mini excavators and the new mini track loaders, both of which will we will soon export to North America.

Third quarter under our existing $300 million repurchase program started last year.

We have already announced that we intend to have an additional share buyback program in connection with the listing from the Milan stock exchange two events, we continue to be confident that the regulation changes needed for our people to leasing will come to fruition in the timeframe, allowing us to be singularly.

Construction continued to benefit from strengthening the north American market, especially for light equipment, we are leaning into the customer synergies, we have with our AG distribution network to create incremental construction sales opportunities with our new online brand.

On the New York stock exchange by the end of 2020.

All of this plus much more value, we're working to unlock to take margins still higher in years to come demonstrates why our construction business is an important part of our portfolio.

More specific details on the <unk> and the related stock buyback program will be shared as soon as possible.

And I will now turn it back to Scott.

Thank you Donna.

Yes.

Our company strategy is centered around five key pillars.

For our 2023 industry outlook most of our estimates remain unchanged, but we have slightly lowered our projections in South America for combines and heavy construction. We also expect heavy construction equipment in APAC to be slightly worse than originally expected.

Customer inspired innovation technology leadership brand and dealer strength operational actions excellence and sustainability stewardship.

Today I want to focus on our advances in operational excellence, especially our sandwich business system, where CBS , which is a key contributor to our $550 million plus cost reduction target by 2024.

On the other hand, we project slightly better full year industry demand for light construction equipment in both North and South America and for heavy equipment in Europe .

We are reaffirming our previous guidance levels we.

Cbs's set of tools and an aspiration to leverage lean to constantly improve the way, we run our business and serve our customers and our commitment to using <unk> to engage our employees and drive sustainable improvements.

We are catching up on our order backlog and staying vigilant to ensure that we keep a tight balance on dealer inventory it naturally.

<unk> seasonally but we are committed to taking the necessary actions to keep our dealers positioned for success this year and every year to come where.

Whenever I travel to our plants around the world I see consistent use of our daily management system to prioritize and solve systemic issues.

Where we land in the net sales guidance range will largely depend on retail sales levels, which is why retail sales execution is a primary focus in the second half.

Our leadership team uses strategy deployment to ensure rigorous execution of our most important priorities to to achieve breakthrough results. The overriding goals of CBS or margin expansion through operational excellence and revenue growth through constantly improving execution and innovation.

As previously announced we have cut factory production on low horsepower tractors, which were down about 20% in the second half.

We will of course continue to build as many high horsepower tractors as possible in North America.

What does this mean in practical terms as an example for revenue growth, we are accelerating our time to market by eliminating waste and rework and our new product development processes for margins.

We're also reaffirming our SG&A guidance of up 5% or less admittedly, we saw higher increase in the first half but cost of the last two quarters will be in line with or below the cost of the 2020 to second half.

We are improving our modular design concepts and Fritz <unk>, our new Chief Technology Officer brings a wealth of experience to help drive that effort.

Last quarter, we said that 2023, we may approach or even meet our 2024 EPS targets from capital markets day of $1 70 per share.

Across our manufacturing plants, we are empowering our teams to refine processes to improve throughput and quality.

I would like to highlight a recent example at our <unk> plant in Brazil, where we're the team held a kaizen to improve their production throughput.

With a strong first half behind US we now have more data to suggest that we will meet or exceed that target in 2023.

The address logistics bottlenecks and implemented a standard inspection checklist checklist, making the process significantly more efficient.

As we move into the back half of the year. We are encouraged by our results in agriculture and construction segments, we are well positioned to build off this momentum as we continue to optimize our business.

The result was a 58% decrease in fleet inventory buildup, a 14% increase in daily line rate and a total annual cost benefit of $2 $3 million.

Our new product offerings and tech stack are consistently improving and continuously expanding their contribution to profitable growth.

This is only one example of the many qiagen as we're doing across the company and more than twice the rate of 2022, and we are starting to see the impact in our results at CBS continue to expand our results will as well I'll now turn the call over to donate to take us through the financial results.

These developments take time, however, so our short term growth is more reliant upon market share performance in dealer inventory management, we held firm in market share in the first half and expect to gain in the rest of the year and we are confident that we are controlling dealer inventory and stressing retail execution as well as anyone in the industry.

Thank you Scott and good morning, good afternoon to everyone on the call.

We will increase the pace of CBS strategic sourcing and SG&A cost reduction programs, which will accelerate into 2024 and beyond.

Second quarter net sales of industrial activities of almost $6 billion were up 7% year over year at constant currency.

This was mainly driven by favorable mix in price and pricing in both equipment businesses and by higher shipments in construction.

In closing I would like to thank our entire <unk> team for their dedication hard work and inspiration.

That concludes our prepared remarks, and now open the line for questions.

Adjusted net income for the quarter was $711 million and adjusted diluted earnings per share of 52 sets up nicely on the back of the ongoing strong operating performance.

And if you would like to ask a question.

I think star one on your telephone keypad.

Please ensure that the mute function of your telephone is switched off to allow your signal to reach our equipment again it is star one.

The effective tax rate was 24% in the quarter and the full year tax rate will likely be in the 25% to 26% range.

Sure.

The first question today comes from Nicole <unk> of Deutsche Bank.

Cash flow from industrial activities in the quarter was nearly equal to last year up to $886 million, while the first half cash absorption is about 370 million lower than last year.

Yes. Thanks, good morning, guys good morning.

<unk>.

Maybe just starting with what happened with the North America for production in the quarter can we just get a little bit more detail on why the delayed start to production and whether or not you think you can kind of make up for that in the second half.

Looking at the segments Agriculture sales were $4 9 billion.

5% at constant currencies supported by strong pricing improved factory deliveries for logic and favorable mix.

Sure Nicole I'm really proud of <unk>, who took over the North American business this year.

We did a transition from the old sprayer to the new Patriots player, which we are really really excited about the features and benefits that it brings the model year changeovers are are often challenging we've had a much higher turnover in our Benson factory than we would normally have had and the transition did not go as well as <unk>.

Net sales in all regions, except South America, plus contribution to global agricultural sales is down 18% from 20% last year.

Gross margin was a record 27%, whereas the <unk> David.

Favorable price of our costs as we push now more of cost efficiencies and some of last year's inflationary headwinds go away.

<unk> rather than take risk on shipping.

<unk> through our dealers that didnt meet our quality standards, we halted production ensured that we had everything right. There now we are now shipping those products, we'll get them all out in the second half but.

Although we still experienced unfavorable product costs for Hyatt purchasing economics in EMEA and South America.

At the lower freight cost and multiple improvements in our operations as a result of our CBS efforts.

Really just a prudent effort by Bill Maher and his team to ensure that we're delivering the highest quality when you introduce a really good new product like that you want to make sure that thats whats delivered to our customer is not something that doesn't perhaps meet their standards your hours.

Hi, carryover pricing and cost inflation of RCC, but we would see both moderate as the year progresses with the price cost relationship remaining positive.

<unk> really.

Pleased that those are already starting to be delivered and we'll fulfill that in the second and the third and fourth quarter.

Net prices will revert to the historical level and there is no intention of lowering lease prices.

Okay understood. Thanks, Scott and then maybe just secondly on what's going on in South America are you guys now happy with your current dealer inventory levels, there or would you say, there's more to go with respect to inventory curtailments.

These apply to construction as well.

Increases in SG&A, and largely driven by labor and labor cost Inflations and R&D spend was higher as we invest in the future of our products.

No certainly nothing more we need to do on inventory curtailment. There I mean, we took our medicine in the quarter.

Adjusted EBIT in agriculture increased by $150 8 million $3 $821 million with a margin of 68%.

We really feel like the remember the fundamentals in Brazil are still quite strong.

Up to 180 basis points, mostly driven by the gross margin improvement.

Still a strong AG economy.

Farmer income was pressured a little bit because of the dollar weakening and some soft commodity prices.

Scott already spent some time covering our main achievements in the construction business I will focus on our financial Kpis for the last quarter.

Prices weakening, but overall the fundamentals for the market are quite solid and we are very well positioned.

We're $1 billion construction net sales were up 20% at constant currency driven by better volume and mix. It got to make an effect offsetting lower sales in South America.

We still have company inventory, because we didn't ship into our dealers. So it's not like we are at any risk of losing market share we had really good market share there.

In the quarter gained share in combines held their own in tractors and we feel like we're very very capable of performing better in the second half as we have already taken the word.

Gross margin was 16% up 120 basis points, mainly due to higher volumes and pricing adjusted EBIT was $72 million.

Up 47% year over year with a margin of six 8%.

Leaned out our inventories going into the second half.

For our financial services business net income was $94 million substantially flat compared to the second quarter of 'twenty later.

Thanks, Scott I'll pass it on.

Our next question comes from Mig <unk> of Baird.

We experienced favorable volumes in all regions of these was offset by margin compression higher restocked and encourage megawatt cost.

Yes, good morning, everyone.

Thanks for taking the question.

I guess I'm looking for a little more color if I may on how you see demand.

We also had the lower tax rate compared to last year.

In large AG playing out.

We gained originations were $2 $8 billion in the quarter, the managed portfolio, including JV at the end of the period was $26 million.

Sure.

Any.

Any any insight into how farmers are thinking into it.

2024, as well that'd be helpful. Thank you.

The receivable balance greater than 30 days past due as a percentage of receivables was one 8% largely driven by delinquencies in Brazil.

And.

What we're seeing in cash crop really globally is still continued positive demand signals as we said in our prepared remarks, we're going to make as many high horsepower tractors as we possibly can.

With a large concentration of payments with UAV Mei and creates a seasonal spike at the end of the second quarter.

The second half is always better for us than combines.

We are confident that our collection efforts will bring the past deals back to lower levels in the coming quarters.

There is what we've heard from dealers the used inventory none of our products, but of our competitive products on combined specifically has gone up is at a much higher level than it has been previously so we are being careful to make sure. We're dialing in the retail programs not only for new but for used products as well with our dealer.

Our capital allocation priorities continue to be investing in our business, maintaining a healthy balance sheet and credit ratings and returning money to our shareholders.

We completed $98 million of share repurchases during the quarter, which is the highest level ever in one quarter and we are continuing to buyback shares in the third quarter under our existing $300 million repurchase program started last year.

<unk>.

Donate financial services businesses is really.

<unk>.

Capable of and smart about how we do those things but.

We have already announced that we intend to have an additional share buyback program in connection with the listing from the Milan stock exchange. So events, we continue to be confident that the regulation changes needed for our people to leasing will come to fruition in a timeframe, allowing us to be single listed.

There's been a little bit of caution not to dealer dealer inventories are in good shape for our combines across but I think people are just anticipating what can happen is to use inventories start to grow and we're proactively getting after that so really the north American market for large AG still is very positive for us and.

On the New York stock exchange by the end of 2020.

More specific details on the <unk> and the related stock buyback program will be shared as soon as possible.

We don't see signs of that slowing down.

Understood.

And I will now turn it back to Scott.

Mentioned financial services.

Thank you Donna.

Pretty sizable increase in our managed portfolio. So I guess I'm sort of curious as to how you see that progressing going forward.

Also revenue as a percentage of the managed portfolio has remained fairly steady despite interest rate increases I guess, the way I am sort of interpreting that as.

You are you essentially trying to offer good financing deals for.

On the other hand, we project slightly better full year industry demand for light construction equipment in both North and South America and for heavy equipment in Europe .

For your end customers.

Is that.

Is that a proper interpretation are you essentially.

We are reaffirming our previous guidance levels we.

The tool.

We are catching up on our order backlog and staying vigilant to ensure that we keep a tight balance on dealer inventory it naturally.

The growth of the portfolio as it makes us nominal growth because we have higher prices of the equipment and also some increasing penetration. So we're financing more of the equipment to retail cut to end customers.

<unk> seasonally but we are committed to taking the necessary actions to keep our dealers positioned for success this year and every year to come where.

But also of course, we had some growth at the beta in inventories over the last.

Where we land in the net sales guidance range will largely depend on retail sales levels, which is why retail sales execution is a primary focus in the second half.

12 months, so we have volume growth rate there as well.

We've had of course, we had interest rates increasing all over toward as we all know.

As previously announced we've cut factory production on low horsepower tractors, which we down about 20% in the second half.

We have we have we tend to match our funding wed with our receivables. So we are increasing the price.

We will of course continue to build as many high horsepower tractors as possible in North America.

Costs for our customers. Unfortunately.

<unk>.

All financing that we're probably not doing it the full base and we have had some margin compression in particular loss.

Last year, when we were delayed.

Delay some of the deliveries by six to nine months of tractors and combines we have been generally honoring the condition that we had agreed with our customers what they order.

Last quarter, we said that 2023, we may approach or even meet our 2024 EPS targets from capital markets day of $1 70 per share.

With a strong first half behind US we now have more data to suggest that we will meet or exceed that target in 2023.

The tractor the complaint we will revert to that and we will have with Tiger the margin of around 2% on assets on financial services and I am confident we are going to get back there.

As we move into the back half of the year. We are encouraged by our results in the agriculture and construction segments, we are well positioned to build off this momentum as we continue to optimize our business.

Okay. Thank you.

Our next question comes from Steven Fisher of UBS.

Our new product offerings and tech stack are consistently improving and continuously expanding their contribution to profitable growth.

Okay.

Good morning can you just give us a sense for how the pricing was in AG by region I'm, just trying to figure out if the volumes were down in every one of your regions I know you talked about the <unk>.

These developments takes time, however, so our short term growth is more reliant upon market share performance in dealer inventory management, we held firm in market share in the first half and expect to gain in the rest of the year and we are confident that we are controlling dealer inventory and stressing retail execution as well as anyone in the industry.

Sprayers.

North America, and the South American.

Dynamics, but I guess I'm just wondering.

How broadly where the volumes down in which categories.

We will increase the pace of CBS strategic sourcing and SG&A cost reduction programs, which will accelerate into 2024 and beyond.

Why.

So in terms of unit.

Where.

Marginally down.

Globally, we were up on high horsepower tractors in North America up in combines in North America in terms of shipment.

In closing I would like to thank our entire <unk> team for their dedication hard work and inspiration.

That concludes our prepared remarks, and now open the line for questions.

We are in terms of nominal sales so.

And if you would like to ask a question thinking about rising star one on your telephone keypad.

<unk> sales were down only in South America compared to the second quarter of last year.

Ensure that the mute function of your telephone is switched off to allow your signal to reach our equipment again it is star one.

Okay, and sorry, what was Europe was volumes were.

Sure.

The first question today comes from Nicole <unk> Deutsche Bank.

Volumes were flat, but that wasn't a lot of pricing gains in Europe . So.

Yes. Thanks, good morning, guys good morning.

Unit volumes were flattish, but a lot of pricing so.

Sales were up in Europe .

But just a reminder, in Europe , we had our best June retail performance. So the team did a really nice job of creating opportunities for a better second half and then we're we're pleased about that momentum.

Sure Nicole.

Im really proud of Elmar fist role, who took over the North American business. This year.

Okay and then.

That's good good margins this quarter in AG volume is down I mean, how should we expect operating leverage to look as you actually get volumes growing again more broadly I mean to what extent is there even more margin upside from here when you get that positive leverage and more cost benefits.

<unk> rather than take risk on shipping products to our dealers that didnt meet our quality standards. We halted production ensured that we had everything right. There now we are now shipping those products, we'll get them all out in the second half but.

The second quarter is typically the quarter with the best margin in the year.

Wasn't the case on the on the last year, where we had a stronger third quarter with things, we got to revert to the normal seasonality. It easier. So I expect the third quarter to be sequentially lower than the second quarter in terms of margin, but in line or higher than last year.

Really just a prudent effort by Bill Maher and his team to ensure that we're delivering the highest quality when you introduce us a really good new product like that you want to make sure that that's what's delivered to our customer is not something that doesn't perhaps meet their standards of ours.

And what would be the biggest factor in the third quarter lower.

But really pleased that those are already starting to be delivered and we'll fulfill that in the second and the third and fourth quarter.

This region.

Regional mix.

Okay understood. Thanks, Scott and then maybe just secondly on what's going on in South America are you guys now happy with your current dealer inventory levels, there or would you say there is more to go out with respect to inventory curtailments.

Third quarter, typically we have European plants down.

We sell less in Europe .

So as mainly a mix and a sales story.

No certainly nothing more we need to do on inventory curtailment.

Okay. Thank you very much.

Thanks, Steve.

Curtailment, there I mean, we took our medicine in the quarter.

Yeah.

Our next question comes from Christopher Nolan of Oppenheimer.

We really feel like that remember the fundamentals in Brazil are still quite strong.

Okay.

Hi, Good morning. Thank you for the question a lot of puts and takes on the production commentary. So I was wondering if you can sort of consolidate that for us help us understand what the production cadence looks like across the high horsepower low horsepower combine and construction for the remainder of the year and then if you could put that in.

Bill a strong AG economy.

They farmer income was pressured a little bit because of the dollar weakening and some soft commodity prices.

Prices weakening, but overall the fundamentals for the market are quite solid and we are very well positioned.

We still have company inventory, because we didn't ship into our dealers. So it's not like we are at any risk of losing market share we had really good market share there.

Context of some of the retail execution that you mention how we should think about sort of mix of retail versus wholesale.

The quarter gained share in combines held their own in tractors and we feel like we're very very capable of performing better in the second half.

Going into the channel. Thank you.

Well for North America.

We had a Grand island is in new Holland, our combined plants and Theyre really ran.

We've already taken we've leaned out our inventories going into the second half.

Full for the first half of the year and I suspect they will continue to do so.

Thanks, Scott I'll pass it on.

With racing coming back online and I, just couldnt be more proud of the work that they're doing their two two.

Our next question comes from Mig <unk> of Baird.

Both improved production improve quality at the same time and Thats encouraging. They also supply our Fargo plant. So thats given them an opportunity. There. So we will continue to run basically our north American plants.

Yes, good morning, everyone. Thanks for taking the question.

I guess I'm looking for a little more color if I may on how you see demand.

Large AG playing out.

Add capacity for the remainder of the year.

Any.

Any insight into how all farmers are thinking into it.

Brazil, obviously, we've we've taken a little bit of a slowdown to match demand there but across across all of our regions. There Derek Nielsen and his team have really got.

2024, as well that'd be helpful. Thank you.

Okay.

What we're seeing in cash crop really globally is still continued positive demand signals.

Good strong retail execution plans in the second half of the year and with the products that we have introduced we're very confident in our share positions. So we think we think we will be able to take advantage of both markets being still solid and in better share performance. So we're we're encouraged about where we stand heading into the.

As we said in our prepared remarks, we're going to make as many high horsepower tractors as we possibly can.

Second half is always better for us than combines.

There is what we've heard from from dealers the used inventory not of our products, but of our competitive products on combines specifically has gone up is at a much higher level than it has been previously so we are being careful to make sure. We're dialing in the retail programs not only for <unk>, but for used products as well with our deal.

The second half.

Okay, and just to clarify the mix of retail versus wholesale I mean, you mentioned this focus on retail, but just as we're looking at the order book.

<unk>.

Donate financial services business is really.

Has that turned it back to normal just any color on that.

Capable of and smart about how we do those things but.

The order book is.

We just started taking orders in June .

Theres been a little bit of caution not to dealer dealer inventories are in good shape for our combines across but I think people are just anticipating what can happen is to use inventory start to grow and we're proactively getting after that so really the north American market for large AG still is very positive for us.

For cash crop, we're kind of booked out and then we'll start taking orders for 24 here shortly.

But no we've got six to nine months across the board. So we feel good about how we're standing from an order perspective, but even though there is an order in place. It takes a retail for dealers really to have spot for a new one so that's where we're putting a lot of our energy right. Now I think the team is dialed in on that and we feel good.

And we don't see signs of that slowing down.

Understood.

You mentioned financial services.

About the performance we had in June and the ability to continue that throughout the rest of the year.

Pretty sizable increase in our managed portfolio. So I guess I'm sort of curious as to how you see that progressing going forward.

Okay. Thank you very much.

Also revenue as a percentage of the managed portfolio has remained fairly steady despite interest rate increases.

Thank you.

Next question comes from David Raso Evercore ISI.

Hi, Thank you very much first question is on margins in the first half of the year your margins were up 170 bps.

The way im sort of interpreting that as.

Sure.

Essentially trying to offer good financing deals for.

For your end customers.

But in the first half your sales were up around nine and a half, but your SG&A was up 16.

Is that.

Is that a proper interpretation are you essentially yes.

Back half of the year, you're assuming revenue growth the same around not in the half, but SG&A down 4%.

Services are a tool.

The growth of the portfolio as it makes us nominal growth because we have higher prices of the equipment and also some increase in penetration. So we're financing more of the equivalent of the retail cut to end customers.

So just given that notable swing from SG&A up 16% in the first half to now down 4% in the second half.

Can you help us understand a little bit on the margins that we're talking to operating margins here.

But also of course, we had some growth at Davita in inventories over the last.

Should we expect a similar margin improvement.

What months, so we have volume growth rate there as well.

As we saw in the first half and I know the comps get a little harder, but I'm just trying to yes.

We've had of course, we had interest rates increasing all over toward as we all know.

Okay.

It's a question of comps our SG&A grew a lot last year and the second half.

We have we will tend to match our funding wed with our receivables. So we are increasing the price.

Where were much higher than the one in the first half.

So the comps are.

Costs for our customers. Unfortunately.

Easier.

In the second half getting to that level or at the G&A is not going to be easier for sure. I think we are looking at different angles on it but.

<unk>.

All financing.

We're probably not doing it the full base and we have had some margin compression in particular.

Last year, when we were delayed.

But we set these targets and we got to get there in the second half so thats for the SG&A.

Delay some of the deliveries by six to nine months of tractors and combines we have been generally honoring the condition that we had agreed with our customers what they order.

For the margin as I say, we expect the second quarter margins to be the highest.

In the year.

We expect EBIT margin to be at.

The tractor that comply we will revert to that and we will add.

The level if not.

With Tiger and the margin of around 2% on assets on financial services and I am confident we are going to get back there.

Last year in in the third quarter, which was abated.

Quarter end than like a higher in the fourth quarter.

Okay. Thank you.

Is it fair to say the margin is also supposed to reach the 'twenty four targets.

Our next question comes from Steven Fisher of UBS.

Thanks. Good morning can you just give us a sense for how the pricing was in AG by region I'm, just trying to figure out if the volumes were down in every one of your regions I know you talked about the.

Yes.

Alright, that's helpful and then on the pricing cadence.

Can you help us a little bit you made a comment I believe we do not expect a lower price for 'twenty four.

The sprayers and.

No I understand.

In North America, and the South American.

However, please sure.

Dynamics, but I guess I'm just wondering.

I don't think I'll comment.

How broadly where the volumes down and which categories and why.

I mean that could be incentives lower financing, we're not talking list, we're talking actual realized price.

So in terms of <unk>, we were <unk>.

The way you are approaching the 24 order books when they open up soon should we expect a price increase just trying to understand a little bit that would be the price does seem like it's coming down maybe a little faster than people thought obviously youre getting the cost outs and the price cost has been obviously very strong, but just so we literally get a sense of sort of a demand indicator how you feel about pricing can you.

Marginally down.

Globally, we were up on the highest power tactile see North America up in combines in North America in terms of shipments.

We are in terms of nominal sales sold.

<unk> sales were down only in South America compared to the second quarter of last year.

Give us a little more color.

With that kind of 2% to 3% price.

Pricing power price increase.

Okay, and sorry, what was Europe was volumes were.

Which is a mix of <unk>.

Volumes were flat, but that was a lot of pricing gains in Europe . So.

List price and discounts of course right.

Remember, we were very aggressive price leaders many of the quarters over the last so.

Unit volume more flattish, but a lot of pricing so.

Admittedly a prices are moving up from a very high level. So I think we're.

Sales were up in Europe .

We're certainly not at all thinking about driving them, but we recognize with.

Dealers are not.

Willing to accept continued double digit price increases so I think getting back to a normalized price is a good thing for everyone.

Okay and then.

Such good good margins this quarter in AG, but the volume is down I mean, how should we expect operating leverage to look as you actually get volumes growing again more broadly I mean to what extent is there even more margin upside from here when you get that positive leverage and more cost benefits.

Alright I appreciate it thank you.

Okay.

And our next question comes from Tami Zakaria of Jpmorgan.

Hi, good morning, Thank you so much.

I was wondering.

Can you maybe share some color on how much of the volume decline.

Okay.

Second quarter is typically the quarter with the best margin in the year.

It was due to the delayed manufacturing versus that.

In South America yourself.

It was probably two thirds, South America, and a third sprayer production give or take a little bit.

Got it that's very helpful. And then can you update us on that.

And what would be the biggest factor in the third quarter lower.

Over 550 million operational excellence savings.

This region.

I would expect one.

Regional mix.

And two guys next year.

Third quarter, typically we have European plants down.

No I think we might have mis communicated on that we still expect more of it to happen in 2024.

We sell less in Europe .

So as mainly a mix and a sales story.

I think it would be more like 20% this year.

And as we said were really encouraged by the CBS activities that we're getting really encouraged about pushing back on logistics costs that have crept in and some of the other cost, but really the ramp up of both Cvs activities, our SG&A takeout.

Okay. Thank you very much.

Thanks, Steve.

Our next question comes from Christopher Nolan of Oppenheimer.

Okay.

Our strategic sourcing starts to really hit the road so.

Most of that hits in 2024.

We will get it that's very helpful Alright.

Alright, thank you.

Text of some of the retail execution that you mention how we should think about sort of mix of retail versus wholesale.

Our next question comes from Gabrielle Gambro.

Thank god that growth.

Yeah.

Going into the channel. Thank you.

Yes. Thank you good morning for taking my questions. The first one.

Well for North America.

We had a Grand island is in new Holland, our combined plants and Theyre really ran.

If.

If I look at your performance in terms of revenues.

Over the last couple of quarters.

Full for the first half of the year and I suspect they will continue to do so.

Trade that youll competitors.

With racing coming back online and I, just couldnt be more proud of the work that they're doing their two two.

Uh huh.

And I was wondering if this has to deal with.

Your choices in terms of production basically and.

To both improve production improve quality at the same time and Thats encouraging. They also supply our Fargo plant. So thats given them an opportunity. There. So we will continue to run based square North American plants.

This trend is going to.

Possibly revert into second half of the year.

And the second one.

We view.

At capacity for the remainder of the year.

2023 free cash flow guidance.

Possible to understand what is your implied assumption in terms of working capital.

Brazil, obviously, we've we've taken a little bit of a slowdown to match demand there but across across all of our regions. There Derek Nielsen and his team have really got.

Delta change thank you.

For the first question on our revenue cadence vis vis our competitors I think the best place to look is just the second half guidance.

Our guidance because we've kept inventories lean we still have the opportunity to ship to demand or in some cases.

Replenish dealer inventory.

Those competitors that are taking down.

Second half.

If theyre, having a sequential decrease.

Okay.

Just to clarify the mix of retail versus wholesale I mean, you mentioned this focus on retail, but just as we're looking at the order book.

It means probably they've got too high dealer inventory and can chip in as much. So I think that explains how we got where we are don't you want to take that down of working capital.

Has that turned it back to normal just any color on that.

Sure.

Bradley on working capital on on <unk>.

The order book is at.

We just started taking orders in June .

Finished good inventories at the end of last year, So we're being a little bit more prudent at the end of <unk>.

For cash crop, we're kind of booked out and then we'll start taking orders for 24 here shortly.

What we expect will have at the end of this year of course with taking working capital out of the plants.

But no we've got six to nine months across the board. So we feel good about how we're standing from an order perspective, but even though there is an order in place. It takes a retail for dealers really to have spot for a new one so that's where we're putting a lot of our energy right now I think the team's dialed in on that and we feel good.

We are becoming more efficient there.

But we have some prudence on the overall balance of where we are going to be with end up with inventories at the end of the year also depending on where we want to update our inventors to be.

Okay. Thank you. Thank you very much.

About the performance we had in June and the ability to continue that throughout the rest of the year.

Our next question is from Jamie Cook of Credit Suisse.

Hi, good morning, nice quarter I guess.

Okay. Thank you very much.

Thank you.

<unk> one.

Our next question comes from David Raso Evercore ISI.

Can you just.

Talk to your approach to the waterfall for 2024, whether Youll just opening.

Hi, Thank you very much first question is on margins in the first half of the year your margins were up 170 bps.

Whether youll, just opened or opening close and match it throughout the year.

But in the first half your sales were up round not in the half, but your SG&A was up 16.

Pacifically within the within the farm equipment segment and then my second question get back on that $5 50 in 2024 can you just remind me.

Back half of the year, you're assuming revenue growth the same around not in the half, but SG&A down 4%.

That assumes sort of a flattish type market and if we have volume.

So just given that notable swing from SG&A up 16% in the first half to now down 4% in the second half.

Just trying to think about could we have above average incrementals in 2024, if the volumes are there or assuming you get that.

Can you help us understand a little bit on the margins that we're talking to operating margins here.

You already have the 550 <unk>. Thank you.

So just to answer your second question first because it's easy yes, we can absolutely if we get volume upside have upside to that number and I think the incrementals that we had in the second quarter kind of demonstrate what we can do and what will happen is we're going to have a little bit less price, but also a lot less cost. So the mix of how we get there could be different but certainly the.

Should we expect a similar margin improvement.

As we saw in the first half and I know the comps get a little harder, but I'm just trying to yes.

Okay.

It's a question of comps our SG&A grew a lot last year and the second half.

We're much higher than they were in the first half so.

<unk> to over deliver on the $5 50, if volume were to be higher is certainly there for the order books for 2024, we're going to be.

So the comps are.

Easier.

In the second half getting to that level or at the G&A is not going to be easier for sure. I think we are looking at different angles on it but.

We've gotten.

To the point, where we like maintaining some level of discipline and having strong visibility. So we will open up the entire year at one point, we will probably do the first half of the year.

But we set these targets.

And we got to get there in the second half so thats for the SG&A.

For the margin as I say, we expect the second quarter margins to be the highest.

And then go into the second half because we will have obviously the model year 'twenty five pricing will have to think about at that point, but I think it's more of a.

In the year.

We expect EBIT margin to be at that level if not.

Not necessarily quarter by quarter, but it certainly won't be wide open as we go into it but as we said with with cash crop in.

Last year in in the third quarter, which was a bank debt.

Quarter, and then like a higher in the fourth quarter.

The innovative products that we're bringing we feel real good about what.

Is it fair to say the margin for <unk> is also supposed to reach.

The order demand can be.

The 24 the targets.

Thank you.

Yes.

Alright, that's helpful and then on the pricing cadence.

Our next question comes from Daniela Costa of Goldman Sachs.

Can you help us a little bit you made a comment I believe we do not expect a lower price for 'twenty four.

Hi, good afternoon, Thanks for taking my question.

Just wanted to ask on <unk>.

Three things so quick but in terms of sort of capital allocation and just wondering if you could elaborate on how youre thinking about the buyback and then going forward once the current one.

No I understand.

However, please sure.

I don't think I'll comment.

Alright, that'd be incentives lower financing were or were not.

Talking list, we're talking actual realized price.

Initiatives, what are the priorities buyback versus M&A, maybe comment on that I will ask one at a time.

The way you are approaching the 24 order books when they open up soon should we expect a price increase just trying to understand a little bit because certainly the price does seem like it's coming down maybe a little faster than people thought obviously youre getting the cost outs and the price cost has been obviously very strong, but just so we literally get a sense of sort of a demand indicator how you feel about pricing can you.

Yes.

We have we set up this buyback program in July last year for $300 million, we're executing on that.

We are coming now pretty close to the end of it.

We what we are having a plan for the <unk> since we are doing the leasing from Milan and single listing in New York, We expect that there will be some.

Give us a little more color.

With that kind of 2% to 3% price pricing power a price increase.

All Florida Gulf are.

Which is a mix of <unk>.

Shares from European investors.

List price and discounts of course right.

There will be likely a higher demand for north American investors, but we are prepared and we discussed with the board last quarter and we are prepared to have a specific program that will be.

Remember, we were very aggressive maybe price leaders many of the quarters over the last so.

Admittedly a prices are moving up from a very high level. So I think we are.

Announcing where we announce when we get it in the final days of the <unk> and.

We're certainly not.

Not at all thinking about driving it but we recognize.

That will be a considerable size. So we are keeping some.

<unk>.

Dealers are not willing to accept continued double digit price increases so I think getting back to a normalized price is a good thing for everyone.

Some balance sheet available for that.

One of my questions I was actually going to be for an update on the timing of your listing which you've said sort of slightly before end of year last time, if thats still on track.

Alright I appreciate it thank you.

Okay.

And our next question comes from Tami Zakaria of Jpmorgan.

I think with things that we are.

We have all the elements for being.

Hi, good morning. Thank you so much so I was wondering.

In line on track with this end of year.

Maybe share some color on how much of the volume decline.

Okay. Thank you and then a final one just on the on delinquencies I guess, what do you show in the chart is still much longer much lower maybe than periods over history, but it has started to creep up whether do you think this is in any shape related to demand or interest rate situation or just.

It was due to the delayed Graham manifesting thats isn't that.

Weakness in South America yourself.

It was probably two thirds, South America, and a third spare production.

Normalized <unk> look it's mainly linked to the Brazilian portfolio, we don't see any increase in India, others any other portfolios.

Give or take a little bit.

Got it that's very helpful. And then can you update us on the over 550 million.

We have some in India, but it's a very small portfolio, that's mainly Brazil, Brazil, we have a concentration of payments in the month of May and with typically have higher yields in the second at the end of the second quarter.

<unk> excellent saving.

Do you still expect one third this year.

And two guys next year.

No I think we might have miss communicated on that we still expect more of it to happen in 2024.

I think it would be more like 20% this year.

Which would typically that typically reduce.

As the quarters move on and we are confident that we are going to get back to the lower levels.

And as we said were really encouraged by the CBS activities that we're getting really encouraged about pushing back on logistics costs that have crept in and some of the other cost but.

Next couple of quarters, but there is there is really on the.

The ramp up of both Cvs activities, our SG&A takeout and our strategic sourcing starts to really hit the road. So.

North American and European portfolio, we don't see we don't see any creeping up that emphasis.

Got it thank you very much.

Okay.

Most of that hits in 2024.

The next question today comes from Michael Feniger of Bank of America.

We will get it that's very helpful Alright.

Okay.

Hey, guys. Thanks for taking my questions. Scott can we just frame it kept the 2023 sales guide, but you highlighted.

Alright, thank you.

Our next question comes from Gabrielle Gambro.

Thank God.

The sprayer issue in Brazil, just curious if you can kind of frame how much of an impact that's having on the full year year guide.

Yeah.

Yes. Thank you good morning for taking my questions. The first one is.

On Youll see.

Zero impact on the full year guide.

Am I looking for four months in terms of revenues.

We.

Over the last couple of quarters.

Or like I said in the prepared remarks, and some of them are follow on questions. The sprayer issue.

You've traded that Youll competitors.

Uh huh.

And I was wondering if this has to deal with.

It was a short term issue done for the right reasons, but we will make up we're already shipping those sprayers and we'll get the full.

Your choices in terms of production basically.

This trend is going to.

<unk> met out to customers.

Possibly revert into second half of the year.

In the third and probably some into the fourth quarter, so that was that.

And the second one.

We took our medicine in Brazil in the quarter. So we don't have to take it again, so dealer inventories, it's really about driving retail performance roughly around a team down there are really doing a nice job on market share. We've got great plans I think to continue to accelerate share gains in the second half. So therefore with leaner inventories and.

We view.

2023 free cash flow guidance.

Possible to understand what is your implied assumption in terms of.

Our working capital.

Delta change thank you.

For the first question on <unk>.

Our revenue cadence vis vis our competitors I think the best place to look is just the second half guidance.

Better share we should also get better performance so.

We feel.

Our guidance because we've kept inventories lean we still have the opportunity to ship to demand or in some cases.

Neither one of those.

It will be repeat in the second half in fact, they did their tailwind that actually for going into the second half.

Great and Scott just it seems like you are taking the proactive approach on inventories. The slide you show with the different equipment categories in your company and dealer inventories when we get to the fourth quarter. How do we how does that chart look in terms of dealer inventories on a year over year level, when we think of those equipment categories.

Replenish dealer inventory.

Those competitors that are taking down.

If theyre, having a sequential decrease.

It means probably they've got too high dealer inventory and can't ship. It as much. So I think that explains how we got where we are or do you want to take that down of working capital.

Sure.

Yeah.

Bradley on working capital on.

We are anticipating that.

Finished good inventories at the end of last year, So we're being a little bit more prudent at the end of what.

They're kind of it.

Peak levels remember on some of the cash crop we're still behind so what will happen is we'll decreased low horsepower inventory and will increase still some high horsepower inventory, but on balance.

What we expect will have at the end of these year of course, we're taking working capital out of the plants.

As we are becoming more efficient there.

But we have some prudence on the overall balance of what are we going to be with end up with inventories at the end of the year also depending on where we want the data inventors debate.

We're trying to keep what we've seen the benefits of it right when we keep our inventories lean we get better customer.

Attachment rates on the other side, we get the whole price better. It's just it's a lot of goodness lower dealer.

Okay. Thank you. Thank you very much.

Flooring costs so.

Our next question is from Jamie Cook of Credit Suisse.

We will.

Part of what we have included in our guidance is continued healthy management or in some cases improved healthy management of dealer inventory.

Hi, good morning, nice quarter, I guess, just two questions one.

Can you just.

Talk to your approach to the waterfall for 2024, whether Youll just opened by region, whether you'll just opened the order book.

Just a follow up with that Scott.

Next year is production in line with with retail sales you think next year, obviously, we'll have to see how retail plays out but just in terms of how youre thinking of your production for <unk>.

Or opening and closing it and manage it throughout the year.

Specifically within the within the farm equipment segment and then my second question get back on that $5 50 in 2024 can you just remind me.

First your retail in 2024.

That's where we would like to be.

It's hard to tell but that that is an efficient way to run the business and how we would like to run it.

I think that assumes sort of a flattish type market and if we have volume.

I mean, obviously, if I could I would just running on a direct pull system, we cant necessarily just it's complicated with our long logistics lead times and whatnot, but that would be the aspiration.

Trying to think about could we have above average incrementals in 2024, if the volumes do their horse you mean.

The majority of the 550 <unk>. Thank you.

Thank you.

The next question comes from Larry de Maria of William Blair.

Hi, Thanks, good morning, everybody.

Morning.

Hey, good morning.

<unk>.

Are you, taking any planter and sprayer orders for next year, just yet and just curious if there's any programs out and now they are looking they are out there and related to that with this one smart spray.

The mix of how we get there could be different but certainly the opportunity to over deliver on the $5 50, if volume were to be higher is certainly there for the order books for 2024.

<unk> when is the commercial launch for Green on Green targeted spring I think some competitors around next year with that.

We're going to be.

We've gotten.

To the point, where we like maintaining some level of discipline and having strong visibility. So we will open up the entire year at one point, we'll probably do the first half of the year.

Yes. So we are taking into the first quarter pardon me, the first and second quarter for sprayers.

So that's good.

We are we have not disclosed and it's partly because I don't think we know how quickly we're going to have that one spray solution.

And then go into the second half because we will have obviously the model year 'twenty five pricing will have to think about at that point, but I think it's more of a.

Integrated <unk>.

Just a reminder, the Raven is a they are experts at sprayer technology. So in.

Not necessarily quarter by quarter, but it certainly won't be wide open as we go into it but as we said with with cash crop and the.

And they had a relationship.

With Bosch, even before us so I feel confident that we will not be delayed in any but we don't have a scheduled launch for that yet, but we recognize there is a competitive need to get that end market as quickly as we can.

The innovative products that we're bringing we feel real good about what they.

The order demand can be.

Thank you.

Okay. Thank you and then.

Our next question comes from Daniela Costa of Goldman Sachs.

I know you refresh your tractor lineup and then obviously that deal with the strike.

Hi, good afternoon, Thanks for taking my question.

Like you said youre running kind of full tilt into the yearend on tractors, but can you talk a little bit about <unk>.

Wanted to ask on <unk>.

Three things so quick but in terms of sort of capital allocation and just wondering if you could elaborate on how youre thinking about the buyback and then going forward once the current one.

Sure and if you think you can regain some of that.

Sure given the interruption or if that's a multiyear event or can you just talk about some of the trends there.

No we're already seeing our ability to get some of that share back.

Initiatives, what are the priorities buyback versus M&A, maybe comment on that I will ask one at a time.

We feel really good about the stickiness of our customers there.

Yes.

We have we set up this buyback program in July last year for $300 million, we are executing on that.

We are coming now pretty close to the end of it.

We what we are having a plan for the year since we are doing with <unk>.

We're getting back to a I wouldn't even call it an acceptable share, but we were at an egregious low level. We've gained I think.

<unk> from Milan and single listing in New York, We expect that will be some.

In the month of June about.

All Florida Gulf are.

500 basis points. So we saw that start to creep up.

Shares from European investors.

And we believe that we've got the opportunity to to <unk>.

There will be likely a higher demand for north American investors, but we are prepared and we discussed with the board last quarter and we are prepared to have a specific program that will be.

To advance again from from low levels, but back to the level and then we're going to continue to invest that product. It's an incredibly important product category for us. So both on the iron side and the technology side, Yes, Youll see us continue to lead in but we feel really good about where we are currently with that magnum product in and what the team is doing to get.

Announced that where we announce when we get it in the final days of the <unk> and that will be a considerable size. So we are keeping some.

More and more of them out to our customers.

Some balance sheet available for that.

Okay. Thank you good luck.

Alright, My one of my questions I was actually going to be for an update on the timing of your listing which you've said sort of slightly before end of year last time, if thats still on track.

Thank you.

The next question is from Mark <unk> of Bahrenburg.

Hi, Good morning, I would just add.

I think with things that we are.

If you could provide a little bit.

We have all the elements for being.

Colorado.

With camera indicators in front of you. It appears that does that negative for this year for the region.

Online on track with it is that number yet.

Okay. Thank you and then a final one just on the on delinquencies I guess, what you show in the chart is still much longer much lower maybe than periods over history, but it has started to creep up whether do you think this is in any shape related to demand or interest rate situation or just.

At CNA.

Well I think it was flattish volume developments year to date.

Due to the product.

So, it's a broader marketing rather normalizing with potential.

Cycling maybe next year.

Benefits from that next year or just continue with moderate performance had been before.

Normalized <unk> look it's mainly linked to the Brazilian portfolio, we don't see any encase and indeed, others any other portfolios.

And then I have one.

Yes.

Yes that does.

Some interruption in the line, but I would say it.

Mixed picture in Europe , many countries different different zones, and also we have middle Eastern Africa, and Europe and of course, we haven't trained.

Which which is.

Which would typically that typically reduce.

Potentially a large market.

As the quarters move on.

Unfortunately disrupted.

And we are confident that we are going to get back to the lower levels.

<unk>.

So I would say south in Europe was most deep more difficult.

Next couple of quarters, but is there is really on the <unk>.

This year and of course, we have a large presence there so Spain, Italy.

North American and European portfolio, we don't see we don't see any creeping up that emphasis.

Some upfronts.

Northern Europe was stronger.

Got it thank you very much.

But we feel that we are doing.

Okay.

The next question today comes from Michael Feniger of Bank of America.

Good work, we've been doing a good work with our dealers in the second quarter of this year and we're still encouraged by the results. We had in particular in the month of June I think it was at the beginning of the prepared remarks from.

Okay.

Hey, guys. Thanks for taking my questions. Scott can we just frame it kept the 2023 sales guide, but you highlighted.

Scott So we think that we will.

The sprayer issue in Brazil, just curious if you can kind of frame how much of an impact that's having on the full year year guide.

Stimulated in retail there.

And we will improve.

<unk> significantly.

Thank you and then moving to financial services and some of the modified savvy Joseph Thank you can.

Zero impact on the full year guide.

We.

Or like I said in the prepared remarks, and some of the follow on question the sprayer issue.

Can you do anything in terms of adjustments to help the farmers today.

It was a short term issue done for the right reasons, but we will make up we're already shipping those sprayers and we'll get the full.

Meg.

And I.

I think there is somebody in the line that needs to go because we are hearing at least from our side, we are leading to license to get so you were talking about Brazil.

<unk> met out to customers.

In the third and probably some into the fourth quarter, so that was that.

Marta.

And about the <unk>.

Yes.

More into <unk>.

How are you managing that and whether you can do.

Do something was there any kind of adjustments.

To protect a little bit.

Stimulate the demand at the same time.

Well.

As always in financial services, We act, both without dealers with wholesale financing and end with our customers with what we call the retail financing.

Better share we should also get better performance so.

We feel.

Neither one of those.

It will be repeat in the second half in fact, they did their tailwind that actually for going into the second half.

Brazil retail financing is also influenced by.

Government subsidies and.

As you know.

Programs for governance as it is are becoming smaller and smaller and they get consumed ready.

Quickly in the year.

We are extremely competitive.

Sure.

Very fast service store customers until our data is and.

We are anticipating that.

<unk>.

Thank you.

They're kind of it.

But we kind of we had a real help in getting in fetching. The subset is for the customers that are interested in getting them. So.

We see ourselves.

As a service function to our dealers and to our brands to.

We're trying to keep what we have seen the benefits of it right. When we keep our inventories lean we get better customer.

Support their sales.

Thank you Adam.

Hi.

Attachment rates on the other side, we get the whole price better. It's just it's a lot of goodness lower dealer.

And as there are no further questions at this time that does conclude the <unk> industrial second quarter earnings Conference call. Thank you all for your participation and you may now disconnect.

Flooring costs so.

We will.

Part of what we have included in our guidance is continued healthy management or in some cases improved healthy management of dealer inventory.

Okay.

[music].

Just a follow up with that Scott.

Next year is production in line with with retail sales you think next year, obviously, we'll have to see how retail plays out but just in terms of how youre thinking of your production for <unk>.

Okay.

First your retail in 2024.

That's where we would like to be.

It's hard to tell but that that is an efficient way to run the business and how we would like to run it.

Okay.

Uh huh.

Okay.

[music].

I mean, obviously, if I could I would just running on a direct pull system, we cant necessarily just it's complicated with our long logistics lead times and whatnot, but that would be the aspiration.

Thank you.

The next question comes from Larry de Maria with William Blair.

Hi, Thanks, good morning, everybody.

Morning.

Hey, good morning.

<unk>.

<unk> when is the commercial launch for Green on Green targeted spring I think some competitors around next year with that.

Yes. So we are taking into the first quarter pardon me, the first and second quarter for sprayers.

So that's good.

We are we have not disclosed and it's partly because I don't think we know how quickly we're going to have that one spray solution.

Integrated <unk>.

Just a reminder, the Raven is a they are experts at sprayer technology. So.

And they had a relationship.

Okay. Thank you and then.

I know you refresh your tractor lineup and then obviously you have to deal with the strike and now you're like you said youre running kind of full tilt into the yearend on tractors, but can you talk a little bit about <unk>.

Sure and if you think you can regain some of that.

Sure given the interruption or if that's a multiyear event or can you just talk about some of the trends there.

No we're already seeing our ability to get some of that share back.

We feel really good about the stickiness of our customers there.

But that is not really acceptable to me or anyone that we just get back to where we were because we felt like we were under punching our weight there so but we've seen with the deliveries to the quality improvements that we're getting back to a I wouldn't even call. It an acceptable share, but we were at an agreed <unk> low level.

We've gained I think the month of June about.

500 basis points. So we saw that start to creep up.

And we believe that we've got the opportunity to to continue to advance again from from low levels, but back to a level and then we're going to continue to invest that product. It's an incredibly important product category for us. So both on the iron side and the technology side, Yes, Youll see us continue to lead in but we feel really good about.

Where we are currently with that Magnum product in and what the team is doing to get more and more of them out to our customers.

Okay. Thank you good luck.

Thank you.

The next question is from Mark <unk> of Bahrenburg.

Hi, good morning.

Ask if you could provide a little bit.

Colorado.

With timber indicators and some of your peers does that negative for this year for the region at CNA.

Well. Thank you Cathy good volume development year to date.

Due to the product.

The broadband market you need so that they are normalized.

Thanks.

Cycling maybe next year.

Benefits from that next year or just continue with moderate performance had been before.

Yes.

Good morning.

Yes.

The sudden interruption in the line, but I would say it.

Mixed picture in Europe , many countries different different zones, and also we have middle East and Africa, and Europe and of course, we haven't trained.

Which which is.

Potentially a large market.

Unfortunately disrupted.

<unk>.

So I would say south in Europe was most deep more difficult.

This year and of course, we have a large presence there so Spain, Italy.

Some upfronts.

Northern Europe was stronger.

But we feel that we are doing.

Good work, we've been doing a good work with our dealers in the second quarter of this year and we're still encouraged by the results. We had in particular in the month of June and I think it was at the beginning of the prepared remarks from.

From Scott So would think that we will.

As stipulated in retail they're in.

And we will improve our.

<unk> significantly.

Thank you and then moving to financial services.

Some of the motor side of the pie of aegis.

Can we do anything in terms of adjustments.

Adjustments to help the farmers.

Yeah.

Meg.

And.

I think there is somebody in the line that needs to go because we are hearing at least from our side, we are leading to license to get so you were talking about Brazil.

Marta.

And about the <unk>.

Yes.

More into kind of housing.

How are you managing that.

Ken.

Do something was there any kind of adjustments.

Perfect a little bit.

And stimulate the demand at the same time.

Well.

As always in financial services, We act, both without dealers with wholesale financing.

And with our customers with what they called the retail financing.

Brazil retail financing is also influenced by.

Government subsidies and.

As you know.

The programs for governance asset as are becoming smaller and smaller and they get consumed ready.

<unk> in the year.

We are extremely competitive.

We offer.

Very fast service store customers toward data.

And.

And we think that.

But we kind of we had a real help in getting in fetching the subsidies for the customers that are interested in getting them. So.

We see ourselves.

As a service function to our dealers and to our brand store.

Support their sales.

Thank you. Thank you very much.

And as there are no further questions at this time that does conclude the <unk> industrial second quarter earnings Conference call. We thank you all for your participation and you may now disconnect.

Okay.

[music].

Okay.

Yes.

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