Q2 2025 CNH Industrial NV Earnings Call

Julie Ann: Good morning and welcome to the CNH 2025 second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will conduct a question and answer session. To ask a question, you will need to press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. As a reminder, this conference is being recorded. I will now turn the call over to Jason Omerza, Vice President of Investor Relations.

Good morning and welcome to the cnh 2025 second quarter results conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers are marks, we will conduct a question and answer session to ask a question. You'll need to press star followed by the number. 1 on your telephone keypad to withdraw your question. Please press star 1 again.

As a reminder, this conference is being recorded.

I will now turn the call over to Jason omeza vice president of investor relations.

Jason Omerza: Thank you, Julie Ann, and good morning, everyone. We would like to welcome you to the webcast and conference call for CNH's second quarter results for the period ending June 30, 2025. This live webcast is copyrighted by CNH, and any recording, transmission, or other use of any portion of it without the express written consent of CNH is strictly prohibited. Hosting today's call are CNH CEO Gerrit Marx and CFO Jim Nicholas, who joined CNH in April. They will reference the material available for download from our website. Please note that any forward-looking statements that we make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material.

Thank you Julianne and good morning everyone. We would like to welcome you to the webcast and conference call for cnh's. Second quarter results for the period ending June 30th 2025

This live webcast is copyrighted by cnh and any recording transmission or other use of any portion of it without the express, written consent of cnh is strictly prohibited.

Posting today's call are cnh, CEO Garrett, marks and CFO Jim. Nicholas who joined cnh in April.

They will reference the material available for download from our website.

Jason Omerza: 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. Our 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 Gerrit.

Please note that any forward-looking statements that we made. 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, 10K, as well as other periodic reports and filings with the US Securities and Exchange Commission.

Our presentation, includes certain non-gaap Financial measures additional information, including reconciliation to, the most directly comparable US. Gaap. Financial measures is included in the presentation material. I will now turn the call over to Garrett

Gerrit Marx: Thank you, Jason, and good morning to everyone joining the call. In line with expectations, market conditions in the quarter remained soft. Consistent with our decision to underproduce to the retail demand, we went through a financially muted quarter by design while reducing our channel inventories. Given the ongoing complexity and uncertainty in the macroeconomic environment, forecasting remained the careful scenario play. That is true for farmers, and so that is true for CNH. Underlying the current market are some soft commodity prices, relatively high key commodity stock levels, and uncertain end markets, particularly for U.S. farm production, which all make it difficult for farmers to buy equipment above their immediate replacement demand. Changing trade dynamics adds an additional layer of uncertainties and scenarios, which we carefully observe and reflect in our decisions.

Thank you, Jason, and good morning to everyone joining the call.

in line with expectations market conditions in the quarter remained soft consistent with our decision to underproduce to the retail demand, we went through a financially muted quarter by Design while reducing our Channel inventories

Given the ongoing complexity and uncertainty in the microeconomic environment, forecasting remaining, the careful scenario plate.

That's true for farmers and so that's true for cnh.

Underlying the current market are some are soft commodity prices. Relatively High key commodity, stock levels and uncertain end markets, particularly for us Farm production, which all make it difficult for Farmers to buy equipment above, their immediate replacement demand.

Changing trade dynamics adds an additional layer of uncertainties and scenarios, which we carefully observe and reflect on in our decisions.

Gerrit Marx: As such, we continue to work closely with our prepared and informed dealer network, keeping production very low to help reduce CNH dealer inventories and clear aged inventories while defending market share. Overall, industrial production hours were down 12% year over year in the quarter, with 12% down in agriculture equipment and 15% down in construction equipment. We are making good use of the down days and slow production pace to review our processes and take decisive actions to improve our manufacturing quality and consistency. Our agriculture equipment dealers continue to make progress in reducing their inventory with another $200 million plus reduction in the quarter. While the pace of reductions was in line with our expectations in several territories, it slowed down in EMEA, in part because of increased dealer and customer orders, especially in Eastern Europe, that we were able to fulfill through our own company inventory.

As such we continue to work closely with our prepared and informed dealer Network.

keeping production very low to help reduce the cnh dealer inventories and clear aged inventories, while defending market share

Overall industry production hours were down 12% year-over-year in the quarter with 12% down and again 15% down in construction.

We are making good use of the down days and slow production days to review our processes and take, decisive actions to improve our manufacturing quality and consistency.

Our act dealers continue to make progress in reducing their inventory. With another $200 million plus reduction in the quarter. While the pace of reductions was in line with our expectations in several territories. It slowed down in a Mia in part because of increased dealer and customer order.

Especially in Eastern Europe that we were able to fulfill through our own company inventory.

Gerrit Marx: We remain aligned with our global dealer base and are on track to achieve our target levels of newly built machine inventory by year-end, and we expect to produce in line with retail demand sometime in the second half and into 2026. As during the last two quarters, we continued to deploy targeted commercial actions on aged agriculture equipment inventory as well as on used machines. We are encouraged by the reductions we have seen in used inventories, not only at our own agriculture equipment dealers but across the industry. We have focused on clearing the yards to create space for the model year 2026 machines to come. Additionally, we remain relentlessly focused on driving operational excellence across the company, advancing cutting-edge technologies, and deepening the execution of our cost-saving initiatives with a great deal of discipline.

We we remain aligned with our Global dealer base and our own track to achieve our Target levels of newly built machine inventory by year end, and we expect to produce online with retail demand sometime in the second half and into 2026.

As during the last 2 quarters, we continue to deploy targeted commercial actions on, aged egg inventory as well as unused machines.

We are encouraged by the reductions. We have seen in used inventories, not only at our own Egg Dealers, but across the industry.

We are focused on clearing the yards to create space for the model year 2026 machines to come.

Additionally, we remain relentlessly focused on driving. Operational excellence across the company advancing Cutting Edge Technologies.

Gerrit Marx: Both price and costs were favorable in the agriculture and construction segment in the quarter. We do not, however, expect that this will necessarily continue in Q3 and Q4, as it depends on how and when the U.S. tariffs and potential retaliations will impact our industry. We took certain moderate pricing actions, but we do not know if we have covered the full tariff impact until we know the final trade agreements by country. In May, we announced a new collaboration agreement with Starlink, providing super fast and cost-efficient connectivity in all remote areas for our farmers, and I will touch on that a bit more in a moment. Finally, on May 8th, we held our Investor Day 2025, where we detailed our new strategic business plan. The feedback on our down-to-earth strategy that we outlined has been pretty positive.

The execution of our cost-saving initiatives with a great deal of discipline.

Both price and costs were favorable in the Agriculture and construction segment in the quarter.

We do not however expect that this will necessarily continue in Q3 and Q4 as it depends on how and when the US tariffs and potential retaliations will impact our industry.

We took certain moderate pricing actions, but we don't know if we have covered the full tariff impact until we know the final trade agreements by country.

In may, we announced a new collaboration agreement with Starling providing super fast, and cost-efficient connectivity in all remote areas for our farmers. And I'll touch on that a bit more in a moment.

Finally, on May 8th. We help our investor day 2025.

Gerrit Marx: We presented a no-nonsense approach to delivering leading products to our farmers and builders while growing our margins. Everything we presented is within our control, and we will be delivered as we focus on our homework, as I like to say. We appreciate your thoughtful engagement and continued confidence around the long-term priorities that we laid out. Of course, we will come back to you regularly with quarterly highlights and probably annually reporting back on our progress. With that, let us turn to the numbers. Q2 results reflect the expected and guided market headwinds and our conscious and painful decision to keep production low. I would like to send out a huge thanks to all our teams across our sites for turning the slow pace into an opportunity to rework our operations for the next phase.

Where we detail, our new strategic business plan, the feedback on our down to earth strategy that we outlined has been pretty positive.

represented a non nonland approach to delivering leading products to our farmers and Builders while growing our margins

Everything we presented is within our control and we will and will be delivered as we focus on our homework as I like to say.

We appreciate your thoughtful engagement and continued confidence around the long-term priorities that we laid out.

And of course, we will come back to you regularly with quarterly highlights and probably annually reporting back on our progress.

With that, let's turn to the numbers.

Q2 results reflect the expected and guided market headwinds and our conscience and painful decision to keep production low.

Gerrit Marx: We are taking deliberate and disciplined actions to navigate the current market conditions while simultaneously positioning the business for the next cycle upturn and long-term success. As Jim and I have stressed many times, we manage daily, we report quarterly, and position CNH for the next decade, even if it requires interventions in our operations and investments in our technologies that impact our reported financial returns in the near term. We are in this for the long term. Consolidated revenues for the quarter were down 14% at $4.7 billion. Our ag segment sales were down 17%, and ag North America was down 36%. North America has the highest industry profit pool in the world for agriculture equipment, and historically, that is where CNH has derived the highest share of its ag sales.

I would like to send out a huge thanks to all our teams across our sites for turning the slow pace into an opportunity to rework our operations for the next phase.

We are taking deliberate and disciplined actions to navigate. The current market conditions, while simultaneously, positioning the business for the next cycle, upturn, and long-term success.

As Jim and I have stressed, many times we manage daily. We report quarterly and position cnh for the next decade. Even if it requires interventions in our operations and investments in our technologies that impact our reported Financial returns in the near term.

We are in this for the long term.

Consolidated revenues for the quarter. We're down 14% at 4.7 billion dollars. Our act segment sales were down 17%.

Gerrit Marx: The lower North American industry retail demand, down 37% for high-horsepower tractors and down 23% for combines, and our dealer restocking efforts in the region have had very negative geographic mix effects on our results and decremental margins. Industrial adjusted EBIT was $224 million, down 55% compared to last year, and EPS for the quarter was 17%. At our recent Investor Day, we outlined our path to 2030 and how we are breaking new ground in iron and tech while expanding our mid-cycle margins. As part of that, we highlighted five key strategic pillars: expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence, and quality as a mindset. Today, I would like to draw your attention to an iron and tech advancement that was announced after the Investor Day was held.

And agnos America was down. 36% North America has the highest industry profit pool in the world for agricultural equipment and historically, that is where cnh has derived, the highest share of its act sales.

The lower North American uh industry retail demand down, 37% for high horsepower, tractors and down, 23% for combines and our dealer is stocking efforts. In the region, have had very negative Geographic mixed effects on our results and decremental margins.

Industrial. Adjusted ebit was 224 million down 55% compared to last year and EPS for the quarter was 17%.

At our recent investor day, we outlined our path to 2030 and how we are breaking new ground in iron and tech.

While expanding our mid-cycle margins.

as part of that, we highlighted 5 key, strategic pillars, expanding product leadership, advancing our iron and Tech integration driving commercial Excellence, operational excellence and quality as a mindset

Today, I would like to draw your attention to an iron and tech advancement that was announced after the investor day was held.

Gerrit Marx: On May 15th, we announced that CNH had reached an agreement to offer Starlink's satellite-based connectivity on Case IH and New Holland machines, where the Starlink service is available around the world. This connectivity option, which will be available both as factory fit as well as retrofit, is a great alternative for farmers where cellular connections may be weak or unreliable. With its seamless integration into FieldOps, Starlink will help farmers stay connected and enhance their productivity. We remain deeply committed to innovating with a farmer-first and soil health mindset, and this is just the latest in a long line of innovations that deliver meaningful value to those we serve. Starlink is just one example of how we are advancing the integration of iron and tech at CNH.

On May 15th, we announced that cnh had reached an agreement to offer starlink satellite based connectivity on kih and New Holland machines. Wherever Starling service is available around the world.

This connectivity option which will be available both as Factory fit as, as well as retrofit is a great alternative for Farmers where cell Cellular Connections, may be weak or unreliable.

With its seamless, integration into field Ops Starling will help farmers.

Stay connected and enhance their productivity, we remain deeply committed to innovating with the farmer first and soil, Health mindset. And this is just the latest in a long line of innovations that deliver meaningful value to those we serve.

Gerrit Marx: Our efforts to bring more of our tech in-house give us greater control over these very sophisticated solutions that we are delivering to farmers, which they can get both on a factory fit and a retrofit basis. At Agritechnica in November, you will experience our renewed pace and determination in this field, including our attention to soil health as the farmer's key asset. From here, we will deliver several updates and upgrades to our onboard and offboard digital technology every year, advancing our offering at a pace we could not have done before launching FieldOps. A huge shout out to our precision and tech teams who work tirelessly on getting the next stack of code ready for our farmers. With that, I will now turn the call over to Jim to take us through the details of our financial results.

Our efforts to bring more of our Tech in-house gives us greater control over these. Very sophisticated solutions that we are delivering to Farmers, which they can get both on a factory fit and the retrofit basis.

At Agri Technica in November, you will experience our renewed pace and determination in this field, including our attention to soil Health as the farmers key assets from here. We will deliver several updates and upgrades to our onboard and off-board digital technology every year advancing, our offering at a pace we could not have done before launching few dogs.

A huge shout out to our precision and Tech teams who worked tirelessly on getting the next stack of code, ready for our farmers.

Jim Nicholas: Thank you, Gerrit, and good morning, everyone. Second quarter industrial net sales were down 16% year over year to $4 billion. This decline was mainly due to lower shipment volumes and lower industry demand, compounded by reduced dealer inventory requirements year over year. Adjusted net income decreased by about half, with adjusted diluted earnings per share down from $0.35 to $0.17. Q2 free cash flow from industrial activities was $451 million, significantly better compared to Q2 of 2024, as improvements in working capital more than offset the lower industrial EBIT. In agriculture, Q2 sales were $3.2 billion, decreasing 17% year over year. As Gerrit mentioned, that includes a 36% decrease in our higher margin North American region. To put that in perspective, the North American sales decline represents over 90% of the total decline in ag sales.

With that, I will now turn the call over to Jim to take us through the details of our financial results.

Thank you, Garrett and good morning everyone.

Second quarter industrial. Net sales were down 16% year-over-year to corporate to 4 billion dollars.

This decline was mainly due to lower shipment volumes and lower industry demand compounded by reduced dealer inventory. Requirements year-over-year

Adjusted net income. Decreased by about half.

The adjusted diluted earnings per share are down from 35 to 17 cents.

Q2 free cash flow from industrial activities was 451 million.

Significantly better compared to Q2 of 2024.

As improvements in working capital, more than offset, the lower Industrial ebit.

In agriculture, 22 sales were 3.2 billion. Decreasing 17% year-over-year.

and as Garrett mentioned that includes a 36% decrease in our higher margin North American region,

To put that in perspective, the North American Sales decline represents over 90% of the total decline in a sales.

Jim Nicholas: The trend was mostly driven by lower shipments due to continued industry demand weakness and the network restocking. The exceptions to this dynamic were in EMEA, where, as Gerrit mentioned, dealer orders in the quarter were higher. Second quarter gross margin was 21.8%, down from the 24.4% in Q2 2024, affected by the lower production volumes and the very unfavorable geographic mix, partially offset by purchasing efficiencies and lower warranty expenses. Pricing was a bit better than neutral in the quarter as we continue our incentives for our dealers to retail aged and used inventories. For your pricing is still forecasted to be positive, especially as we start to see some benefit from the price adjustments that were effective on new orders after May 1st. Production costs were favorable, even though production hours were down 12%, as we didn't repeat some of the warranty adjustments from last year.

The trend was most driven by lower shipments due to continued industry, demand weakness.

And the networking stocking.

The exception to this Dynamic was an EMA where as Garrett mentioned dealer orders in the quarter were higher.

Second quarter. Gross, margin was 21.8% down from the 24.4% in Q2 2024 affected by the lower production volumes and the Very unfavorable Geographic. Mix.

Partially offset by purchasing efficiencies and lower warranty expenses.

Pricing was a bit better than neutral in the quarter. As we continue our incentives for our dealers to retail aged and used inventories.

For your pricing is still forecasted to be positive. Especially as we start to see some benefit from the price adjustments that were effective on new orders after May 1st.

Jim Nicholas: We still expect to see improvements in warranty expenses on a four-year basis. It's also important to note that most of the units sold in the quarter were not yet heavily impacted by additional tariff costs. Those impacts will come more in the second half, as that tariff-impacted inventory flows through our production system. Q2 R&D and SG&A expenses were lower year over year, reflecting our ongoing efforts to improve our cost base. As a reminder, SG&A will start to grow on a year-over-year basis starting in the third quarter, when we lap the variable compensation approval adjustments that we made last year. Foreign exchange impacts were $6 million negative in the quarter, and the remainder of other is mainly lower profits from our Turkish JV. Adjusted EBIT margin for agriculture equipment was 8.1%, a sequential improvement from the 5.4% recorded in Q1 2025.

Production costs were favorable, even though production hours were down 12% as we didn't repeat some of the warranty adjustments from last year.

We still expect to see improvements in warranty expenses on a full year basis.

It's also important to note that most of the units, sold in the quarter were not yet heavily impacted by additional tariff costs.

Those impacts will come more in the second half as that tariff impacted inventory, flows through our production system.

Q2 R&D and sgna expenses, were lower year-over-year reflecting our ongoing efforts to improve our cost base.

As a reminder sgna, will start to grow on a year-over-year basis, starting in the third quarter, when we lap the variable compensation approval adjustments that we made last year.

Foreign exchange impacts for 6 million negative in the quarter. And the remainder of other is mainly lower profits from our Turkish JV

Adjusted ebit margin for agriculture. Was 8.1% a sequential improvement from the 5.4% recorded in q1 2025.

Jim Nicholas: Moving on to construction equipment, second quarter net sales were $773 million, down 13% year over year, driven by lower shipment volumes, mostly in North America. Gross margin for the quarter was 15.7%, down from 16.5% in Q2 2024, mostly driven by the lower volumes. We recorded positive pricing and product costs year over year, which more than offset the FX headwind. Second quarter adjusted EBIT margin was 4.5%. For financial services, second quarter net income was $87 million. The year-over-year decrease was mainly driven by higher risk costs in Brazil. That was partially offset by margin improvement in North America and EMEA and by favorable volumes in all regions except EMEA. Retail originations in the first quarter were $2.7 billion, slightly down from last year, but flat on a constant currency basis, reflecting higher penetration rates in a lower equipment sales environment.

Moving on to Construction.

Second quarter, net sales were 773 million down, 13%, year-over-year.

In my lower shipment volumes mostly in North America.

Gross margin for the quarter was 15.7% down from 16.5% in Q2 2024, mostly driven by the lower volumes.

We recorded a positive pricing and product costs year over year which more than offset the FX headwind.

Second quarter. Adjusted ebit margin was 4.5%.

For financial services, second quarter, net income was 87 million.

Year-over-year, decrease was mainly driven by higher risk costs in Brazil.

That was partially offset by margin Improvement in North America and EMA. And by favorable volumes in all regions, except the Maya.

Jim Nicholas: The managed portfolio ended the quarter at nearly $29 billion. There was always a seasonal increase in delinquencies in Q2, as certain annual payments in Brazil are due in the month of May. So the increase we see in Q2 2025 is partially explainable by seasonality, but the remaining increase is a result of the cyclical downturn and did merit an increase in our risk reserves. At our Investor Day, we reaffirmed our capital allocation priorities of continuing to reinvest in our business while maintaining a healthy balance sheet. Our strategy is centered on a disciplined approach that supports both long-term growth and shareholder value, striking the right balance between reinvestment and capital returns. As such, during the quarter, we paid approximately $320 million for our annual dividend.

Retail originations in the first quarter were 2.7 billion dollars slightly down from last year, but flat on a constant currency basis, reflecting higher penetration rates in the lower equipment sales environment.

The managed portfolio ended the quarter at nearly 29 billion.

There's always a seasonal increase in delinquencies, in Q2 as certain annual payments in, Brazil are due in the month of May. So, the increase we see in Q2 2025 is partially explainable by seasonality.

But the remaining increase is a result of the cyclical, downturn and did Merit an increase in our risk Reserves.

At our investor day, we reaffirmed our Capital allocation priorities of continuing to reinvest in our business while maintaining a healthy balance sheet.

Our strategy is centered on a disciplined approach that supports both long-term growth and shareholder value.

Striking the right balance between reinvestment and capital returns.

As such during the quarter, we paid approximately 320 million for our annual dividend.

Jim Nicholas: At our annual shareholder meeting in May, shareholders reapproved and extended our share buyback authorization, and we are continuing to operate under the $500 million program that the board approved last year. Before I turn the call back over to Gerrit Marx, I want to review our exchange rate and tariff impact assumptions for the second half of the year. First, on foreign exchange, we have seen the euro strengthen against the U.S. dollar steadily since the beginning of the year. We now forecast the foreign currency translation impact on net sales to be minus 1% versus our previous assumption of minus 3%. The currency translation effect on our top line is different than on our bottom line. Approximately 15% of our overall industrial sales are transacted in euro, and when those euro sales are translated into the now liter dollar, they appear larger in nominal terms.

at our annual shareholder meeting in May

Shareholders reapp and extended our shared buyback. Authorization and we are continuing to operate under the million dollar program that the board approved last year.

Before I turn the call back over to Garrett, I want to review our exchange rate and tariff impact assumptions for the second half of the year.

First on Foreign Exchange, we have seen the Euro strengthened against the US dollar steadily, since the beginning of the year.

we now, forecast, the foreign currency translation impact on net sales to be minus 1% versus our previous Assumption of minus 3%,

The currency translation effect on our Top Line is different than on our bottom line.

Approximately 15% of our overall Industrial Sales are transacted in Euro.

Jim Nicholas: However, the profits from those sales don't look materially different, as the cost base for those products is also predominantly euro-denominated. While this natural hedge protects us against extreme exchange-related profit fluctuations, it can be a little deceptive when comparing the top line and bottom line impacts. This quarter, margins compressed slightly when the top line grew without a corresponding bottom line benefit from a foreign exchange impact. The overall negative translation effect on net sales is coming from other areas: Brazil, Australia, and Canada, for example. Now let's turn to tariffs. Last quarter, we outlined for you our tariff exposure on U.S. sales, and we reviewed what tariff assumptions will bake into our guidance. We've updated our tariff assumptions where specific agreements were reached as of July 31st. We are monitoring countries such as India and Brazil that have a risk based on recent comments by the U.S. administration.

And when those Euro sales are translated into the now weaker dollar, they appear larger in nominal terms.

However, the profits from those sales, don't look materially different as the cost based for those products is also predominantly Euro denominated.

Well this natural hedge protects us against extreme exchange related profit fluctuations. It can be a little deceptive When comparing the top line and bottom line impacts.

This quarter margins, compressed slightly, when the Top Line grew without a corresponding bottom line benefit from a foreign Exchange impact.

The overall negative translation effect on net sales is coming from other areas.

Brazil, Australia and Canada for example.

Now, let's turn to Terrace.

Last quarter, we outline for you, our tariff exposure On Us sales, and we reviewed, but Tiff assumptions were baked into our guidance.

We've updated our care assumptions, where specific agreements were reached as of July 31st.

We are monitoring countries such as India and Brazil that have a risk based on recent comments by the US Administration.

Jim Nicholas: On a net basis, the overall assumed tariff impact is roughly in line with the midpoint of our prior guidance. While tariffs on Chinese goods came down, steel and aluminum tariffs were doubled from 25% to 50%. While CNH procures about 95% of its direct steel needs from domestic sources, domestic steel prices have risen along with the increase in tariffs. Steel futures have increased about 30% since the beginning of the year. While we work with our suppliers to lock in our direct steel prices, a tier two supplier may have steel content that can impact our sourcing costs. We are still calculating the 2025 impact on our business from tariffs imposed on U.S. imports of copper and potentially on semiconductor chips. This will depend on the current inventory levels at our suppliers, and we will work closely with them to mitigate as much of the impact as possible.

On a net basis. The overall assumed tariff impact is roughly in line with the midpoint of our prior guidance.

While tariffs on Chinese Goods came down.

To steal an aluminum tariffs were doubled from 25% to 50%.

and while cnh procures about 95% of its direct steel needs from domestic sources,

domestic steel, prices have risen along with the increase in tariffs.

Steel. Futures have increased about 30% since the beginning of the year.

And while we work with our supplier of stock, in our direct sealed prices, a tier 2 supplier may have sealed content that can impact our sourcing costs.

We are still calculating the 2025 impact on our business. From tariffs, imposed on us, Imports of copper and potentially and semiconductor chips.

Jim Nicholas: Also, as they are unknown at this point, we have not included any potential retaliatory actions by other countries. As mentioned at our Investor Day, we continue to actively manage the impact of tariffs through a combination of strategic sourcing, pricing actions, and operational efficiencies. With that update, I will turn it back to Gerrit.

This will depend on the current inventory levels at our suppliers, and we will work closely with them to mitigate as much of the impact as possible.

Also, as they are unknown, at this point we have not included any potential retaliatory actions by other countries.

As mentioned at our investor day, we continue to actively manage the impact of tariffs through combination of strategic sourcing pricing actions and operational efficiencies.

With that update, I will turn it back to Garrett.

Gerrit Marx: Thank you, Jim. Now let's review our latest outlook for agriculture equipment in 2025. Overall, our global industry forecast is similar to our prior outlook, down around 10% from 2024. We still expect 2025 to represent a rough level of global market demand. We are reaffirming our net sales and EBIT margin guidance. As Jim mentioned earlier, our top line foreign exchange translation impact is less negative than previously expected. Full year pricing is expected to be positive, despite the need for additional targeted incentives to help continue the dealers' new and used unit restocking efforts. Q3 production slots are full, and Q4 slots are half full at this point, which is typical for this time of the year. In North America, Q4 slots are already nearly full for some products. We just opened up for model year 2026 orders about a month ago, and those begin shipping in Q4.

Thank you, Jim. Now, let's review our latest outlook for agriculture in 2025.

Overall, our Global industry forecasts is similar to our prior Outlook down around, 10% from 2024.

Expect 2025 to represent a trough level of global market demand.

We are reaffirming our net sales and even margin guidance as Jim mentioned earlier. Our Top Line, foreign exchange translation impact is less negative than previously expected. Fully pricing, is expected to be positive. Despite the need for additional targeted incentives to help continue the Dealer's new and used unit. The stocking efforts

Q3 production, slots are full and Q4 slots are half full at this point, which is typical for this time of the year.

In North America, Q4 slots are already nearly full for some products.

Gerrit Marx: At this point, we do not have enough information to make any prediction on 2026 demand levels. It is understandable that farmers in North and South America are waiting to see how the new universe of global trade deals will unfold, eventually allowing projections of commodity stock levels and plans for seeding and planting in the 2026 season. We are staying very close to our farmers to be ready to support our world-class machines, now with a converged tech stack of onboard and offboard solutions. Whereas our top line may skew a little above the midpoint of the guidance due to the less negative currency translation, the EBIT margin may skew a little below the midpoint as we absorb more tariff exposure than originally expected. The months of August and September should bring more clarity to our projections.

We just opened up for model year, 2026 orders about a month ago, and those begin shipping in Q4. At this point, we do not have enough information to make any prediction on 2026 demand levels.

It is understandable that farmers in North and South America are waiting to see how the new universe of global trade deals will unfold. Eventually allowing projections of commodity stock levels and plants for seeding and planting in the 2026 season.

We are staying very close to our Farmers to be ready to support our world-class machines. Now with a converge Tech stack of onboard and off-board solutions

Where is our Top Line. Made skew a little above the midpoint of the guidance due to the less negative currency translation. The ebit margin May skew a little bit lower than midpoint as we absorb more terrific exposure than originally expected.

Gerrit Marx: In construction equipment, overall industry volumes are expected to be down about 10% from 2024, especially due to our heavy exposure to the North American market. As a reminder, the construction industry tends to be more tied to GDP growth than agriculture is. As with ag, we are also reaffirming our prior guidance for construction sales and EBIT margin. Q3 production slots are full, and Q4 slots are half full at this point, which is what we typically see. Similar to ag, we don't have enough information on 2026 orders at this point to draw any conclusions about demand levels next year. As we have reaffirmed the guidance for the two industrial segments, we are also reaffirming the combined guidance for industrial activities.

The months of August and September should bring more clarity to our projections.

In construction, overall industry volumes are expected to be down about 10% from 2024, especially due to our heavy exposure to the North American Market.

As a reminder, the construction industry tends to be more tied to GDP growth than agriculture is.

As it act, we also reaffirming our prior guidance for construction, sales and ebit margin Q3 production. Slots are full and Q4 slots are helpful at this point, which is what we typically see.

Similar to act. We don't have enough information on 2026 orders at this point to draw any conclusions about demand levels next year.

Gerrit Marx: Our free cash flow will likely be closer to the upper end of the range, as we expect the favorable working capital management we have experienced in the first half to be maintained in the second half. We are also reaffirming our EPS guidance at the prior range of $0.50 to $0.70 U.S. cents. Let's finish with a look at our priorities for the remainder of the year. We continue to navigate the regional demand trends to ensure that we are responsive to ongoing shifts in the market, especially as we are dealing with the rapidly changing trade environment. We are working very closely with our supplier partners to ensure we can procure our parts from the best locations for our global manufacturing footprint at better terms and conditions.

As we have reaffirmed, the guidance for the 2 Industries, we are also reaffirming the combined guidance for industrial activities.

Our free cash flow will likely be closer to the upper end of the range. As we expect the favorable working Capital Management, we have experienced in the first half to be maintained in the second half.

We are also reaffirming our EPS guidance at the prior range of 50 to 70 US cents.

Let's finish with a look at our priorities for the remainder of the year.

We continue to navigate the regional demand Trends to ensure that we are responsive to ongoing shifts in the market, especially as we are dealing with the rapidly changing trade environment.

Gerrit Marx: We remain committed to driving operational efficiency by focusing on process improvements at our manufacturing plants and strategic sourcing to unlock more value. On that point, we are really encouraged by the momentum that we are seeing in our business in India. We have been investing in the region, not just for the market share improvements that we have enjoyed, but also because it is a great hub for engineering, sourcing, and exporting into other regions. Our presence in India is increasingly important to CNH. Our global production levels will remain intentionally lower while we adjust for some rebounds we see in some segments and regions, and we have a clear path to our dealer inventory target levels for both agriculture equipment and construction equipment.

We are working very closely with our supplier Partners to ensure. We can procure our parts from the best locations for our Global manufacturing footprint at better terms, and conditions,

We remain committed to driving operational efficiency, by focusing on process improvements at our manufacturing plants and strategic sourcing to unlock more value.

On that point, we are really encouraged by the momentum that we are seeing in our business in India.

We have been investing in the region, not just for the market share improvements that we have enjoyed, but also, because it is a great hub for engineering sourcing and exporting into other regions.

our presence in India is increasingly important to cnh

Gerrit Marx: By 2026, we will have aligned our production levels to the retail demand, and reaching our targeted dealer inventory levels first will set us up for traction and wholesale momentum in 2026. Otherwise, we continue with the relentless focus on our homework and executing the strategy that we presented to you in May. Delivering high-quality products and services to our farmers and builders is of paramount importance to us. Capturing efficiencies in our operations and upgrades in our overall quality drive us to our margin goals. We continue to invest in leading iron and tech development, and we are excited to showcase the latest to you at the Agritechnica show in November. That concludes our prepared remarks, and we are ready for the Q&A.

Our global production levels will remain intentionally lower while we adjust for some rebounds. We see this in some segments and regions, and we have a clear path to our dealer inventory and target levels for both A and construction.

By 2026, we will have aligned our production levels to the retail demand and reaching our targeted dealer inventory levels. First will set us up for traction and wholesale momentum in 2026.

otherwise we continue with the Relentless focus on our homework and executing the strategy that we presented to you and May

delivering high quality products, and services to our farmers and Builders is of Paramount importance to us.

I did agree to a technical show in November.

That concludes our prepared remarks and we are ready for the Q&A.

Julie Ann: Thank you. We will now begin the question and answer session of the call. To ask a question, you will need to press star followed by one on your telephone keypad. To allow time for as many participants as possible, please limit yourself to one question and then return to the queue for any follow-ups. Thank you. We will take our first question from Angel Castillo from Morgan Stanley. Please go ahead. Your line is open.

Thank you, we will.

Like to ask a question, you'll need to press star followed by 1 on your telephone keypad.

To allow time for as many participants as possible. Please limit yourself to 1 question, and then return to the queue for any follow-ups. Thank you. We'll take our first question from Angel. Castillo from Morgan Stanley. Please go ahead. Your line is open.

Angel Castillo: Good morning. Thanks for taking my question. I just wanted to touch here a little bit more on the production levels and the inventory, what you are seeing in the market. If I have it correctly, I think you had previously indicated last quarter that you maybe had like $900 million left of kind of too much inventory in agriculture equipment, and it looks like you might have reduced that by another kind of $200 million. So maybe can you just, one, is that correct? How should we think about how much product is left and which specific kind of product lines and regions? What gives you confidence in being able to achieve retail sales type of production by the end of the year?

Good morning. Thanks. Thanks for taking my question. Just wanted to touch, um, here a little bit more on the production levels and and the inventory of what you're seeing in the market. If I have it correctly, I think you had previously indicated last quarter that you maybe had like 900 million, I think left of of kind of too much inventory and a and it looks like you might have reduced that by another kind of 200 million. So maybe can you just 1 is that correct? And, and how should we think about how much product is left? Uh, in which specific kind of product lines and and, and regions and kind of what gives you confidence in being able to kind of achieve, uh, retail sales type of uh, production by the end of the year?

Gerrit Marx: Thanks for the question. Yes, we were about a billion too high. That is always obviously relative to our forecast of the rolling next 12-month sales. As that improves, obviously our, let's say, overstocking might be overstated. But yes, if you take the $1 billion we had, we have reduced another $200 million from that level, and we are continuing towards this path towards the end of this year. That is overall very much what we want to see. We push in parallel the used machines, which is a point of attention for all OEMs in the market as well. We have tailored programs for our dealers to have them sell out those units as well, including our financial services partner in our financial services business.

Well, um, thanks for the question. Um, yes, we were about $1 billion to, well, too high. That is always obviously relative to our forecasts of the rolling next 12 months sales.

And as that improves, obviously, our let's say, um, overstocking might, um, be overstated. But yes, if you take the 1 billion, we had, we have reduced, another 200 million from that level, and we are continuing um, towards this path towards the end of this year. So that is that is overall very much what we want to see.

Gerrit Marx: Areas where we have, let's say, higher stock levels are, for example, in North America when it comes to the small machines, like the small tractors, some of the medium tractors. Here, it's important to bear in mind that these machines are imported. So we have longer supply chains, and we took cautious actions, obviously, to keep a certain amount of stock in the region in light of uncertainties in global trade and tariffs. While these levels on smaller machines in North America are elevated, I'm not too concerned about those in light of the current situation around tariffs at the restart of global supply chains. In South America, we are, let's say, pretty much where we want to be. In Europe, we work through, particularly on the used side, some of that stock.

and uh, we push in parallel and obviously the used machines, which is a point of attention for all oems in the market, um, as well, and we have tailored programs for our dealers to help them sell out those units as well, including our financial services, um, partner in our financial services business,

Areas where we have, um, let's say, higher stock levels are, for example, in North America, when it comes to the small machines like the small tractors, uh, some of the medium attractors in here. It's important to bear in mind that these machines are imported. And so we have longer Supply chains and we took cautious, um, actions, obviously to keep a certain amount of stock in the region, in light of, um, uncertainties in global trade and and tariffs. So while these levels on smaller machines in North America are elevated, um, I'm not too concerned about those in light of the current situation around the tariffs at restart of Global Supply chains.

Gerrit Marx: But also here, we are getting ready for the launch of our new brand new short wheelbase generation, which is the lower end of the mid-range tractors, and you know the launch of the top end of our long wheelbase tractors, which is the high end of the mid-range. Those launches require obviously decent dealer stocks, I mean, you know, space in the dealer stocks. Also here, we see ourselves on a pretty good path on the sell out and hitting our targets by year-end. As we had in our prepared remarks, we saw some markets in Europe with an increasing retail speed, markets like Poland or Germany. Those markets have accelerated, and hence we had to intervene with the destocking efforts and backfill those orders with our company inventory. Overall, pretty well on track with what we set at the beginning of the year.

Um, in in South America, we are, let's say pretty much where we want to be. And in in Europe, we work through particularly on the youth side, some of that stock. But also here, we are getting ready.

For the, for the launch of our new brand new, uh, new short wheel base generation which is the lower end of the mid-range tractors and um, you know, the launch of the top end of our Longway based tractors, which is the high end of the mid-range, those launches require obviously a decent dealer stocks. I mean, um, you know, space in the dealer stocks. And also here we see ourselves on a pretty good path on the sellout, and hitting our targets, um, by year end. But as we had in our prepared remarks, we saw some markets in Europe with a um, increasing, uh, retail speeds markets, like, Poland or Germany, and those markets. Um, have accelerated and hence, we had to intervene with the docking efforts and backfill, uh, those orders with our company inventory. So overall, um,

We're pretty well on track with what we, um, what we said at the beginning of the year.

Julie Ann: Our next question comes from Kyle Menges from Citigroup. Please go ahead. Your line is open.

Our next question comes from Kyle Minguéz from Citigroup. Please go ahead. Your line is open.

Angel Castillo: Morning. Thanks for taking the question. Understand you are not quite ready to comment on 2026 yet, but your order books have been open for now a month. We just want to hear some of the color on what you are seeing so far in the order books, how they are trending in the month or so that they have been open. Thank you.

Morning, thanks for taking the question. Um,

Understand, you're not quite ready to comment on 2026 yet but um I'm in your order books have been open for now a month. So um we just want to hear some of the color on on what you're seeing so far in in the order books, how they're they're trending and the month or so that they've been open. Thank you.

Gerrit Marx: Thanks, Kyle. Look, I think the level of 2026, we expect a trough to be 2025. At this point, I have no reason to believe that this isn't the case. The trough is 2025. With 2026, I think there are a couple of boundary conditions and circumstances that need to happen in order to give us more certainty. First and foremost, obviously, the tariffs. I think the big, beautiful bill is very helpful for North America. There are some elements in there that will for sure mid-long-term drive demand, but not short term. That's my view at this point. When these bills come out in the U.S., usually farmers use the financial benefits to help their own balance sheets at first before engaging in new equipment purchases.

Thanks Kyle. Well, um, look, I think the, the, the level of 2026 uh, we expect to win. The trust will be 2025. And, um, at this point, I have no reason to believe that. This isn't the case. So trust is 2025 and width 2026. Um, I think there are a couple of

Gerrit Marx: I think the actions that we, the big, beautiful bill and other support actions will certainly pose positive elements for next year, but not for 2025. That's another positive, I would say. Uncertainty remains around tariffs, as I mentioned, and we need to see what that means. However, I think with the early signs in EMEA of, let's say, Europe in particular, Africa, Middle East has been very good for us anyway, and we are participating with very high market share there, Africa, Middle East. For Europe, I think there are early signs, and we'll see where this is going to take us in 2026. It's fair to also in that region to conclude this is definitely the trough in 2025 for Europe, and 2026 should show signs of more life on the retail side. In South America, that's a market we are ready to go.

I think the big beautiful bill is very helpful for North America. There are some elements in there that will for sure mid- long-term Drive demand, but not short term. That's my view at this point when these bills come out in, in the US, um, usually farmers use the, the financial benefits in, you know, to, you know, help their own balance sheets. Uh, first before engaging a new equipment purchases. And I think, uh, the the actions that we big, beautiful, build and other support actions will. Um, certainly pose a positive, um, elements for next year, but not for 2020. Um, 5, so that's another positive. Um, I I would say, uncertainty remains around tariffs. As I, as I mentioned, and we need to see what that means. However, I think with the early signs in Maya, um, of let's say Europe in particular Africa, Middle East has been very good for us, anyway, and we are participating with very high market shares their Africa, Middle East.

I mean.

So for Europe, I think, um, they are early signs and we'll see where this um, is going to take us in in 2026 but it's fair to have. Also in that region to conclude, this is, um, is definitely the trust in 2025, for Europe and 2026 should should sign. Should show show, show signs of of, you know, more life and on, on the on the retail side.

Gerrit Marx: I think we have our inventories at levels where we want them to be. We have a great engaged dealer network. We have a full line, a renewed full line of products locally made ready for our farmers. What's now missing is certainty. There is this question around the tariffs and the retaliation from Brazil towards the U.S. with 50%. That's not confirmed, but it's obviously in discussion. Then there's the other conversation that hasn't yet really revealed much detail, and that is the trade deal between China and the U.S. We have recently observed on our side that China has removed some 600 exemptions for tariff reductions from their import policy, and that could go both ways. This could mean that there will be a trade deal between China and the U.S. coming soon, also including commodities.

In South America. Yeah. That's, that's the markets, we are ready to go. I think we have, uh, you know, our inventories at levels where we want them to be, we have a great engage to dealer Network. We have a full line, renewed, full line of products. Locally made ready.

For Farmers. Um what's now missing sort of is uh certainty. You know there is this um question around the tariffs and the retaliation from Brazil uh towards the US um with 50%. That's not confirmed but it's you know obviously in discussion and then there's the other conversation that hasn't yet really revealed much detail and that is the trade deal between China and the US.

Gerrit Marx: But it could also mean that this is not anymore possible for the U.S. to import commodities to China. We don't know really how that will play. Both have obviously impact on the Brazilian farmers who will improve, I think, their financial health next year and who will continue to purchase maybe at higher levels also next year their machines. But we need these certainties, particularly Brazil-U.S. and China-U.S. when it comes to commodity imports and exports. That is what we need to know to better forecast. Then that, I think 2026, with production equaling retail pace towards the end of this year, as we forecasted already at the beginning of this year, once we are there, obviously, even in a flat market, we will increase production pace. With that wholesale, that should be a positive, helpful momentum for our own revenues. That is what we expect.

We have recently observed, um, on our side that China has removed, um, some 600 extensions, uh, for tariff reductions from their imports policy, and that could go both ways. This could mean that there will be a trade deal between China and the U.S. coming soon, also including commodities, but it could also mean that this is no longer possible for the U.S. to import commodities to China. So we don't really know how that would play, and both have obviously impacted the Brazilian farmers, who will improve, uh, I think, their financial, uh, health next year and who will, um, continue to purchase maybe at higher levels also next year their machines, but we need these.

Certainties, particularly regarding Brazil, the U.S., and China, when it comes to commodity imports and exports, are what we need to know to better forecast. But, net net, I think 2026.

Gerrit Marx: That is what you expect. This is still part of our plan as we are looking into 2026.

Um, with um, you know, production equal in retail Pace. Um, towards the end of this year. As we, you know, forecasted already beginning of this year once we are there obviously, even in a flat Market, you know, we will increase production pace and with that uh wholesale and that should be a positive uh, helpful. Um, you know, momentum for our own revenues. That is what we expect that is what you expect. And um, this is still part of our planet as we are looking into 2026.

Julie Ann: Our next question comes from Jamie Cook from Truist Securities. Please go ahead. Your line is open.

Our next question.

Angel Castillo: Hi. Good morning. Thanks for the question. I guess, Gerrit, I just wanted to build on the latter part of your answer. Understanding we cannot forecast what the markets can do, but can you talk to the different levers that you think CNH can pull to grow earnings in 2026 besides producing and starting to ramp production? Maybe the cost savings, if you could quantify some of those things. I guess my second question, I think the market is very interested in how you are dealing with pricing. It sounds like you want to price positive in 2026. Any color that you can provide on strategy and how to think about pricing by region? Thank you.

Your line is open.

Hi, good morning. Uh, thanks for the question and I guess Garrett, I just wanted to build on your the, the latter part of your answer. Um, understanding we can't forecast, what the markets can do. But can you talk to the different levers that you think, see in each can pull to grow earnings, um, you know, in 2026, besides, you know, producing and starting to, you know, ramp production, you know, maybe the cost savings, if you could quantify quality, some of those things and I guess my second question, I think the Market's very interested in how you're um, dealing with pricing. So it sounds like you want to price positive in 2026. Um, any color that you can provide on strategy and how to think about pricing by

Region, thank you.

Gerrit Marx: Thanks for the question. Look, pricing will be positive for the full year, for our entire year. We have obviously, as it is usually happening for the Q4 production, which is the model year 26 now, we have increased pricing, mainly driven by higher value functionality content, but also, let us say, for commercial imperatives, one of which is tariffs. With that, we have increased pricing for the model year 26. Part of it is going to cover the tariff impacts, of course, but we are always working on three ends countering tariffs. One is pricing. The second is, obviously, we work with our suppliers through their pressures, and there is a sharing involved, and we are doing that. The third is we are quite focused on cost discipline and cost reductions in our own value chain, of which, as I mentioned earlier, the sourcing part is clearly one.

Um, thanks for the question. Look um pricing will be positive for the for the for the full year um for our entire year.

And we have, um, obviously as its top, it's usually happening, um, for the Q4 production, which is the model year 2026. Now, we have increased pricing.

Gerrit Marx: Quality is another one, and I am happy to report out that our total year-to-date quality expenses are significantly below last year's quality expenses, and we continue to see a positive trend in this regard. A lot of self-help. Pricing is always, as always, two elements. One is then basically the boilerplate list price that you put out there, and then the second element is always the discount levels that you then apply in order to manage through the individual deals that are out there in the market, particularly when it comes to larger quantities of machines. That differs obviously by region. As I mentioned before, we see some countries in Europe with positive signs in retail, and that is obviously always the opportunity to materialize pricing when demand picks up.

No imperative imperative, you know, 1 of which is, is, is terrible. And so with that, we have increased pricing, um, for the model year 26. Uh, part of it is going to cover the terrorists. Impacts of course, but we are always working on on 3 ends, um, countering tariffs. Once it's pricing. The second is obviously we work with our suppliers through their pressures and there is a sharing involved and we are doing that. And the third is, we are quite um, focused on cost discipline and cost reductions on in our own value chain of which. Um, you know, as I mentioned already, the sourcing part is clearly 1 Quality is a is another 1 and I'm I'm happy to report out that our um total year to date quality. Expenses are significantly below last year's um, Quality expenses and we continue, um, to see a positive trend uh, in this regard. So a lot of self-help.

Pricing is always uh, as always 2 elements 1 is then basically, the boilerplate list price that you put out there. And then the second element is always the discount levels that you then apply in order to manage through. Um, you know, the individual deals that are out there in the market, particularly when it comes to larger quantity, uh, quantities of machines and that differs obviously. Um, by region, as I mentioned before, we see some countries in Europe with positive signs and Retail and that is obviously all

Gerrit Marx: While in markets that are rather going sideways, like in this case, the United States or North America in total, there is still pricing possible, but it is, let us say, more muted by, in the end, the demand and obviously also competitive behaviors by every player in our industry. We feel reasonably well positioned as we enter into 2026. We have all levers in our hands, most notably cost, quality, sourcing. Jim alluded also to elements around structure costs in CNH, but pricing, in the end, is two elements: headline and discounts. The net of those is very much determined in the markets where we play. Yet, as we also alluded to in the last quarter calls, every player in our industry is significantly impacted by some versions and some combinations of tariffs, whether this is in construction equipment or this is in agriculture equipment.

Always the opportunity to materialize pricing when demand picks up. Um while in markets that are rather going sideways, like, in this case, uh, the United States or North America in total, that is there's still pricing possible, but it's um, let's say uh, more muted by in the end the demand and obviously also competitive behaviors

Uh, by every player in our industry. So we feel reasonably well, positioned, as we intend to 2026, we have all levers in our hands, um, most notably cost quality sourcing, uh, Jim alluded also to, you know, elements around structure costs in in um, in cnh. But pricing in the end is 2 elements, headline and discounts and the net of those is very much determined in the markets where we play.

Gerrit Marx: This is driving pricing for our machines in the industry eventually as the market is picking up again even more so.

Yet as we also alluded to in the last quarter calls is every um every player in our industry is significantly impacted by some versions and some combinations of terrorists. Whether this is in construction or this is in agriculture and this is um, you know, driving pricing for our machines in the industry eventually as the markets is picking up again even more. So

Julie Ann: Our next question comes from Tim Thein from Raymond James. Please go ahead. Your line is open.

Our next question comes from Tim Sane from Raven. James, please go ahead. Your line is open.

Angel Castillo: Yeah, great. Thank you. Good morning. I just had a question on this notion of channel inventory and in your production relative to retail. Again, I am sure this chart can be misread in a bunch of different ways, given the different size ranges and geographies, etc. Just looking at the trend on the slide 19 in terms of the tractor production versus retail, I guess, with that being a big area of focus, why aren't we seeing more of a divergence there in terms of a production, again, relative to that retail? Just again, maybe that's different horsepower ranges that get included in this, but just given the focus on tractor inventories globally and trying to work those down, I am curious why we are not seeing more of a divergence.

Yeah, yeah, great, thank you. Um, good morning. Um, I just had a um, a question on this, this notion of of uh, Channel inventory and in your production relative to, to retail and and get a this, I'm sure this chart can be misread in, in a, in a bunch of different ways, given that different size, ranges and geographies Etc. But just looking at the, the trend on the slide 19 in terms of the tractor production versus retail, um I I guess is the it with that being a big area of focus, why aren't we seeing more of a Divergence there in terms of of a production? Um, again relative to that retail.

and just this um again maybe that's different horsepower ranges that get included in this but just given the the focus on

uh,

Gerrit Marx: You are already spot on. Thanks for the question. You are already spot on with your point on mix, basically, because what we are doing here is units, and the value would be quite different because, in the very high horsepower tractors, we are underproducing because this is mainly large cash crop North America. Same for combines. So we count them all with one. So every machine is counted with one entity. So I think if we had these lines, and we have these lines, but you know for value, this would look different. If you split it out across regions, obviously, that looks different. For example, when we are entering, when we entered now the second half in 2025 for euro, we are restocking on, for example, some combine lines in light of what the season will bring and what we see in the market. So that is enough.

You know, a tractor inventories globally, and and trying to work those down. I'm curious. Why? We're not seeing more of a, a Divergent time? Yeah, thank you. Yeah, you, you, you already spot on. Thanks for the question you already bought on with your, um,

With your, uh, point on mix, basically. Yeah, because what we're doing here is units and, um.

The, the value would be quite different because I mean, in the very high horsepower tractors. Uh, we are, we are under producing because this is mainly large, large cash, crop, North America, same for combines, so we count them all with 1. Yeah. So every machine is counted with 1 9 entry. So, I think, um, if we had these lines, um, and we have these lines. But, uh, you know, for for Value this, this would look different. And then, if you split it out, uh, across regions, obviously, that looks different for, for example, when we are entering, when we entered. Now, the the second half in 2025 for Europe,

Gerrit Marx: While in Latin America, we had, in order to further deplete the inventory that we have, we have underproduced retail pace there in terms of combines. For us, this is not like just a number. It is just not a line on units. This is what we report back to you. But the color is we are making good progress in the regions, in the respective product lines. The reason why, for example, your tractors and retail and production, it is pretty much on the same spot. This is units, not value, and it is very different by region. Where the regions start pulling, actually, production is above retail.

In light of, you know what, the season will bring and what we see in the market. So, that is enough while, um, in Latin America, we had, um, you know, in order to, you know, further deplete the inventory that we have, we have underproduced retail pace there in terms of combines.

So for us, this is not just a number. It's not just a line on units. This is what we report back to you, but the color is we are making good progress in the region in the respective product lines. The reason why, for example, attractors and the retail and production are pretty much in the same spot is that these are units, not value, and it's very different by region. Where the regions start pulling, actually production is above retail.

Julie Ann: Our next question comes from Kristen Owen from Oppenheimer. Please go ahead. Your line is open.

Our next question comes from Kristen Owen from Oppenheimer. Please go ahead. Your line is open.

Kristen Owen: Hi. Good morning. Thank you for taking the question. I just wanted to follow up on some of your European comments because they do strike me as interesting, particularly in light of your adjusted tractor outlook for the industry. So maybe just help understand where you're seeing green shoots. Is there something that's specifically working for CNH, maybe in terms of share gain or geographic differences? Just unpack some of the Europe commentary there, if you would, please.

Hi, good morning. Thank you for taking the question. Um, just wanted to follow up on some of your, your European comments because they, they do strike me as um, interesting. Particularly in light of your adjusted tracker outlook for the industry. So, um, maybe just help. Understand like where you're seeing green shoes, um, is there something that's specifically working for cnh, maybe in terms of sharing or or Geographic differences, just unpack some of the the the Europe commentary there. If you would please

Gerrit Marx: We perceive right now the demand trend to be playing out predominantly in tractors. It has not yet started in combines. Hence, my comment that we are expecting it to come. Hence, we have a bit of upstocking on the combine side in progress. This is mainly playing out on the tractor side. We have been quite effectively defending, and here and there, even slightly growing our shares in tractors in some countries with certain models. That has helped us, obviously, overall to reduce the inventory and keep the momentum in the market until we, again, launch end of November our new mid-range tractors quite a bit. Another comment is on Eastern Europe. We have seen Poland. They had a purchase program there. They have not only a good season, but they also have support.

Um, we perceive right now, um, the demand trend to be playing out predominantly in tractors. Um, it hasn't yet started in combined, hence my comment that we are expecting it to come. We have a bit of a backlog on the combined side, uh, in progress.

But this is mainly playing out on the tractor side, you know? And, uh, we have been, uh, quite effectively defending and here and there even slightly growing our shares in in tractors, uh, in some countries.

Gerrit Marx: That was a pretty strong tractor sales and combine sales quarter in the country of Poland in particular. So, it is spotty, I would say. It is here and there. It gets influenced by some government decisions here and there to support the farmers. But it is also a growing confidence, as you could see it in the confidence indexes that are being updated and distributed regularly, that farmers are regaining a positive attitude. Not hugely positive, but it is at least as a trough as well, I would say. Farmers are confident here in the future. With that, it is mainly tractors, and it is mainly, let us say, Germany and Poland. It was also here and there, we need to see driven maybe by a massive destocking by one out of participants in the markets.

With certain models. And that is as, as as as obviously, the overall to reduce the, um, inventory and and keep the momentum in the market. Until we, you know, again launch end of November, our new mid-range tractors quite a bit. Another comment is on Eastern Europe. Um, we've seen Poland. They had purchased program there, they have, um, you know, not only a good season, but they also have, um, you know, support and that was a pretty strong Tractor Sales and combined sales, um, quarter in in the country of Poland in particular. So it is spotty. I would say it's here and there, uh, it gets influenced by some government decisions here and there to support the farmers.

Um, but it is also a growing confidence that you could see it in the, in the confidence indexes that have been, you know, updated and distributed regularly that farmers are regaining. Um, you know, a positive attitude. Not not hugely positive, but it is at least as you know, trust as well. I would say Farmers confidence, uh, here, um, in the future. And with that, the it's mainly tractors and it's mainly, let's say, Germany, and and Poland

Gerrit Marx: Hence, whether this is a sustainable development remains to be seen in the market. So, we will see. But market shares are fine, and we are looking forward to 2026 where I would expect other countries also to jumpstart, maybe not suddenly, but gradually, their retail activities.

And uh, it was also here. And there we need to see, um, driven Maybe by a massive D stocking by 1, other participant in the market, uh, and hence whether this is a sustainable development remains to be seen in the market. So we'll we'll see. But market shares are fine.

And we are looking forward to a 2026 where I would expect other countries also to jumpstart, um, maybe not suddenly, but gradually their retail activities.

Julie Ann: Our next question comes from David Raso from Evercore ISI. Please go ahead. Your line is open.

David Raso: Hi. Apologies. I missed it, but the price cost for I thought the Q2 agriculture equipment price cost was impressive. For the full year, what are you expecting for price cost? To be clear, when we look at the waterfall charts, the tariff impacts, that will show up in that same bucket, that production cost. It will not be put into other, just so we make sure as we track it. We are talking agriculture equipment specifically.

Our next question comes from David Razo from evercore isi. Please go ahead. Your line is open.

Hi apologies if I missed it. Um, but the price cost for I I thought the second quarter of a price cost was impressive the full year. What are you expecting price cost and to be clear when we look at the waterfall, charts the Tariff impacts that will show up in that same bucket, that production cost, it won't be put into other just so we make sure as we we track it.

We're talking a specifically.

Jim Nicholas: Yeah, yeah. So we do expect it to be positive for the full year. This is Jim speaking. We've seen it year to date, and we expect that to continue for the full year. So it's tracking what we thought it would be. Given the low production levels, it's quite encouraging, and we expect that to continue.

Yeah, yeah. So it's uh,

We do expect it to be positive for the full year. It's Jim speaking. Um, and, uh, that's, that's, and we see that year to date, and we expect that to continue for the full year. So, um,

Uh it's it's tracking what we thought it would be and given the low production levels. It's it's it's quite incursion and we expect that to continue.

Gerrit Marx: As I can maybe comment, in Q1, you have seen a slightly negative price year-on-year performance. So Q2 is now positive, and you will see it for the remainder of the year, in fact, because we have increased adjusted price.

And as I can, maybe come and be on the first quarter in the first quarter you've seen and studied negative price on your performance in q1. Yeah. So Q2 is um,

Julie Ann: around May, in around May. We are doing, have done it already now for production in Q4. So there is positive pricing across the year. On the cost side, what you see in Q2 is, to some extent, helped. The positive cost side is to some extent helped by the FIFO in our materials, because, you know, some of the components were already impacted by the 10%, for example, the 10% flat tariff that we procured throughout the second quarter. But in light of FIFO, the machines we built and sold benefited from the lower cost before. A big part of the cost improvement, product cost improvement, is also quality related. So that is ours and structurally. We do not expect this FIFO impact that we had in Q2 to repeat in Q3 and Q4 for obvious reasons.

Remainder of the year. In fact, because we have increased adjusted prices around May in around May. And we have, uh, we are doing had done it already. Now, for production in Q4. So there is positive pricing across the year on the cost side. What you see in Q2 is, um, to some extent, um, helped the positive cost side is to some extent had via the 54 in our materials. Because, you know, some of the components were already impacted by the 10. For example, the 10% flat tariff, that we procured, uh, throughout the second quarter. But in light of 5-fold the machines we built and sold benefited from the lower cost before.

A big part of the cost Improvement product cost Improvement is also quality related, so that ours and and structurally. But we do not expect this 54 impact that we had in Q2 to repeat in Q3, and Q4 for obvious reasons.

Speaker 2: Our next question comes from Tami Zakaria from JPMorgan. Please go ahead. Your line is open.

Our next question.

Tammy Zakaria from JP Morgan, please go ahead, your line is open.

David Brown: Hey, good morning. Thank you so much for taking my questions. I wanted to get some color on the implied expectation for operating margin for the agriculture equipment segment as it relates to the third and the fourth quarter. Typically, we see a step down in Q3 versus Q2, and then it picks back up. Should we expect something similar, like a step down in Q3, even though much of your underproduction headwind is dissipating sequentially? Any thoughts on how to think about Q3 versus Q4 for the agriculture equipment segment?

Hey, good morning. Thank you so much for taking my questions. I wanted to get some clarity on the...

Uh, implied, uh, expectation for operating margin for the X segment as it relates to the third and the fourth quarter. Uh, typically we see a step down in Q3 versus Q2 and then it picks back up. Should we expect something similar? Um, like a step down in Q3 even though much of your underproduction headwind is dissipating sequentially. So, any thoughts on how to think about Q3 versus Q4 for the X segment?

Julie Ann: Yeah, so we do expect Q3 to have a little bit of a step down versus Q2, as is typical. Then, of course, a strong rebound in Q4. So the historical patterns and trends will repeat this year, getting us back to our full year guide that we put out for agriculture. So you're right about that. Q3, you'll have a slight step down, and you're rebounding strongly in Q4.

Yeah, so we do expect Q3 to have a little bit of a step down versus Q2 as is typical.

Um, and then, of course, a strong Rebound in Q4. So the historical patterns and Trends will repeat this year.

Um, getting us back to our full year guide that we we put out for agriculture. So you're right about that. Q3 you have a slight step down and your rebounding strongly in queue in Q4.

Speaker 2: Our next question comes from Mike Shlisky from D.A. Davidson. Please go ahead. Your line is open.

Our next question.

Please go ahead. Your line is open.

Jason Omerza: Good morning. Tami, this one's for you. I know you started just before the Investor Day, a few weeks prior, so maybe it's a little bit of an unfair question, but I'm not sure. I've been at CNH for a couple of months now. Do you have any thoughts on your travels on operating performance, master performance, and talking with folks within the company? Are there any new initiatives you may have in the hopper here at this point, or do you still plan to go with kind of what was presented just over in May in your first couple of quarters here?

Uh, good morning, um, Jim, maybe this 1's for you. Um, I know you've started just before the investor day a few weeks prior. So there's a little bit of an up for a question but

Julie Ann: Yeah, that's a great question. I think what we outlined in May at Investor Day was spot on. Quality is a primary focus, and it needs to be. We're well on our way towards improving that. You can see that in our numbers year to date, lower quality expenses that will continue for the full year, and I think in the years beyond. That is a tailwind going forward. It has knock-on effects, as you can imagine, not just the immediate price or immediate cost impacts, but resale values, net transaction pricing, perceived performance, et cetera. All that bleeds into improved P&L functions. Quality is job one. That's going to happen. That's the right spot to do it.

I mean, as you've been at, at cage for a couple of months. Now, do you have any thoughts on your travels on operating Performance Management performance, um, and talking with folks within the company. Are there any, um, new, uh, initiatives, you may have, uh, in the hopper here at this point, or do you still plan to go with kind of what's was presented? Just over in May, uh, in your first couple of uh, Quarters here

Yeah, I know, it's a great question. Uh, I think what we outlined in May at yesterday was spot on. Quality is our primary focus. It needs to be, um, we're well on our way towards improving that. You can see that in our numbers here today: lower quality expenses that will continue for the full year, and I think in the years beyond. So that is a tailwind going forward. Um, and has not kind of affected, as you can imagine, not just the immediate price, uh, immediate, um, cost impacts, but resale values, uh, net transaction pricing.

Julie Ann: Also, the focus on precision technology, our tech stack is dramatically making quick rebounds, and it's going to be, we'll be rewarded for those changes in the form of higher pricing over time. As we create more value for our farmers, they're going to pay more for the product, and we'll see the payback right away with the new technology stack that we're rolling out. I think what we laid out in May is spot on from a quality perspective, technology perspective. Then, of course, the strategic sourcing was underway prior to Investor Day. It's the flywheel that's up and spinning that is delivering benefits this year, and the benefits from that will grow in year two, and year three, and year four, all the way through 2030. Those are all the right things. I have nothing to add.

Proceed performance, etc. All that, um, bleeds into improved, um, P&L functions. So, uh, quality is job one; that's going to happen. Uh, that's the right spot to do it. Also, the focus on precision technology. Our tech stack is dramatically making quick rebounds and, uh, it's going to be.

uh,

We will be rewarded for those changes in the form of higher pricing over time. As we create more value for our farmers, they're going to pay more for the product. Um, and we'll see the payback.

Right away. With, with that new, the technology sector we're rolling out. So I think what we laid out in

May is spot on from a quality perspective, technology perspective. And then, of course, the...

Julie Ann: I think the diagnosis was correct, and I think the recovery course that we're on is tracking.

Strategic sourcing was underway prior to investor day. It's the flywheel is up and spinning, that is delivering benefits this year. And the benefits from that will grow in year 2 and year 3 and year 4 all the way through 2030. So those are all all the right things so I have nothing to add. I think I think the diagnosis was correct and I think the um,

The recovery course that we're on is, is is tracking.

Speaker 2: Our next question comes from Ted Jackson from Northland Securities. Please go ahead. Your line is open.

Our next question comes from Ted Jackson from Northland Securities, please go ahead, your line is open.

Gerrit Marx: Thank you. Good morning. I wanted to circle in on just the North American market. It seems like, you know, there's pockets here and there, but you've troughed out in the other regions, and North America is the thing that needs to write itself. My understanding from the sources I talked to is that there's a pretty wide spread right now between the pricing of new and used equipment. If that's the case, how much of an issue is that for you to be able to bring North American inventory into alignment to demand? Does it mean that you're going to have to be more aggressive with regards to incentives to make that happen?

Out in the other regions in North America is, you know, the the thing that needs to write itself, um, my understanding from, you know, the sources I talked to is that, you know, there's a pretty widespread right now between the pricing of new and used equipment. Um, and if that's the case, um how much of an issue is that for you to be able to bring

North American inventory.

Into alignment to demand.

Does it mean that you're going to have to be more?

Gerrit Marx: Would that be the kind of situation that would have more play in the second half of this year as you're clearing out things that are on the yard today and would have more importance as you think about the new model year for 2026 and next year? That's my question. Thanks.

Aggressive with regards to its assistance to make that happen. And would that be the kind of situation that would have more play in the second half of this year? As you're.

Clearing out things that are on the yarn today or what it had more important as you think about the new model year for 2026 in next year.

That's my question.

Julie Ann: Thanks, Ted. I can answer. Yes, yes, yes. So, yeah, look, the efforts, there is a price differential between used and new, and obviously with new having returned and the yards having seen quite some used machines now sitting there, there is an increased level of efforts and support to get those used machines into its next hands at a decent price with good support from our side. So that is in the numbers. We have programmed our retail plans with financial services in partnership with the dealers in a way that will navigate the next six months, or let's say until year end, our paths in a way that we have good projected retail inventory levels for new and used machines. Because only if both will both come down, the channel is open for new machines to be sold in.

Thanks. Um, I can't answer. Yes, yes, yes, yes. So yeah. Look, the um...

the efforts to there is a there is a price uh differentiate between used and new and obviously with new having returned,

Um, and The Yards having seen quite some use machines. Now sitting there

Um, there is an increased level of efforts and support to get those used machines, um, into their next hands.

Um, at a decent price with good support from our side. Yeah. So that is, that is in the numbers. We have programmed, our retail plans, with, with financial services. Um, in partnership with the dealers in a way that, um, will, uh, navigate the next 6 months or let's say, until year, end our paths in a way that we have good. Um, the projected retail inventory levels for new and used machines.

Julie Ann: You're right, and that's of utmost importance and focus in our dialogues that we have with our dealers. The machines that we are launching now with model year 26 have quite some updates across the board, not only on the iron side, but also on the technology side. So there is incremental and additional value on those newly made model year 26 machines to set them apart from both prior model year new and as well as three, four, one, two, three, four-year-old used machines. And that is a point of attention for us to carefully navigate that. We're tracking that dealer by dealer, and we are having these dialogues through our North American team led by Scott Harris on a, yeah, almost daily basis. We are reviewing this regularly. So this is a point of attention.

Because only if both both come down the channel is open for new machines to be sold in your your right. And that's of utmost, importance and focus in our dialogues that we have with our with our dealers. The machines that we are launching now with model year, 26 have quite some updates across the board, not only on on the iron side but also on the on the technology side. So there is incremental and additional value. Um on those newly made model year 26 machines to set them apart from uh both um prior model year new and as well as uh, you know.

341234 year old used machines.

Julie Ann: Yes, we have to deploy additional financial efforts, and it is in our projections that we have here included in the overall guidance.

And that is a point of attention for us to carefully navigate that and we we're tracking that dealer by dealer and we are having these dialogues through our North American. Uh team led by Scott Harris um on a on a yeah almost daily basis and we are reviewing this regularly so this is a point of attention yes we have deploy additional Financial efforts and it is in our projections um that we have here included in the in the overall guidance.

Speaker 2: Our next question comes from Avi Jaroslawicz from UBS. Please go ahead. Your line is open.

Our next question comes.

Jason Omerza: Hi, good morning. Thank you. Just in terms of the timing of the tariff impacts, and I know a lot of things remain in flux around them, but just in terms of when you expect those costs to flow through, do you think most of them should be felt in Q4, or do you think there could still be a considerable incremental impact in the beginning of 2026? I know I think you said there are tier-two suppliers that may have more of a lag on their pricing to cover their tariff exposures. So really just, what's your sense of the timing for when these impacts should be flowing through at a full run rate?

Hi, good morning, thank you. Um, so just in terms of the timing of the Tariff impacts and I know a lot of things remain in flux around them, but uh, just in terms of, when you expect those costs to flow through, um, do you think most of them should be felt in Q4 or, uh, do you think there could still be a, uh, considerable incremental impact in, in the beginning of 2026? Um, and I know I think you said there are tier 2 suppliers that uh, may have more of a lag on on their pricing, to cover their tariff exposures. So really just you know, what's your sense of the timing for when these impacts should be flowing through at a full run rate?

Julie Ann: I think I would expect them to grow through the second half of this year. Virtually very little affected in Q2. Almost all of it, close to $120 million, is our negative effect on EBIT in the second half of this year. We'll see what happens in 2026 because we don't know where things shake out at. We didn't have tariffs affecting us in Q1 at all this year, and very little in this past quarter, Q2. On a year-over-year basis, that'll be a headwind in Q1 and Q2 of next year because they didn't exist really in this year for Q1 and Q2. It's something we're working on, looking at ways to offset it. As Gerrit Marx mentioned, sharing with suppliers, taking costs out on our end, trying to mitigate efforts there or price increases. A combination of those things will be in play.

Yeah, I think I would expect them to grow through this second half of this year. Um virtually virtually, um very little infected in Q2 almost all of it close to 120 million is uh, our negative effect on ebit in second half of this year. And I think, um, I mean, we'll see what happens in in 2026 because we don't know where things shake out at, um, but we didn't have tariffs affecting us in q1 at all this year and very little in this past quarter Q2. So on a year-over-year basis, it will be, will that be a headwind in q1 and Q2 of next year because they didn't exist really in in this year for q1 and Q2? So um it's something we're working on uh looking at ways for to offset. It is Garrett. Mentioned sharing with suppliers um taking costs out on our end, trying to mitigation efforts there or price increases, a combination of those things will be in play.

Speaker 2: Our next question comes from Daniela Costa from Goldman Sachs. Please go ahead. Your line is open.

Our next question, comes from Danielle aosta. From Goldman Sachs, please go ahead. Your line is open.

Jim Nicholas: Hi, good morning. I wonder if you could quickly sort of touch on two topics. First, delinquencies, if there was any particular one-off on the trend, given there was quite an increase. Then the second, you had paused the project on construction equipment to find a partner, having originally announced it in the back end of last year. What could get you back on track for that project?

Julie Ann: Thank you. Great. Thank you. Thank you, Daniela. It's Jim. I'll answer the first part. The uptick in delinquencies was almost exclusively attributable to activity in Brazil. Commodity prices are depressed there. They've had some weather issues with floods or droughts. It's just a cyclically tough time for farmers in Brazil. We think the issue is largely isolated to Brazil. We think it's peaked. We think it gets better after this quarter. We've reserved appropriately for that, but that's a uniquely Brazilian phenomenon. It's not a global issue. It's just going on in Brazil. We think we've put up adequate reserves to address that.

On on, on 2 topics, first delinquencies, if there was any particular 1 off, um, on the trend given there was, um, quite an increase. And then the second you had paused the project on construction equipment to find a partner. Um, having originally announced it in the back end of last year. What could get you back on? On track for that project?

Thank you, great. Thank you. Thank you, Danielle. It's Jim. I'll answer the first part. Uh, the

The uptick in delinquencies was almost exclusively attributable to activity in Brazil. Um,

Commodity prices are depressed there. That had some weather issues with floods or droughts um and it's just a cyclical cyclically tough time for farmers in Brazil. Um so we think the issue is largely isolated to Brazil. We think it's peaked. We don't we think it gets better after this quarter um and so we we've reserved appropriately for that but that's a uniquely Brazilian phenomenon. It's not a global issue. It's just it's just going out of Brazil. And we think we've put a adequate reserves uh to the address that

Angel Castillo: Hi, Daniela Costa. I will take the construction question. We have not really paused it. We have said that we basically have put certain discussions on hold simply because of the uncertainties of the tariff impacts on the P&L and the outlook of the construction business. We have kept going with several other discussions, particularly around strategic partnering when it comes, for example, to the larger and large excavator business and how we can further enhance our competitiveness through deeper localization in some key markets. That is progressing. It was also a conscious decision because the construction team has been doing an outstanding job, not only navigating these markets, but leading the business, launching new products, new compact machines, developing new lines, new attachments to our construction lineup. Such a process can be quite a distraction at this very moment.

Hi Daniel and I take the the construction question. Um we haven't really paused it. Uh we have said that we are basically have, you know, um, you know, put certain discussions on hold simply because of the uncertainties of the Tariff impacts on the p&l and the the Outlook of the construction business. Uh we have kept going with several other discussions, particularly around strategic partnering when it comes to

Angel Castillo: Our decision was we focus on a few discussions to continue that are definitely accretive. We have the team concentrate to navigate this current tariff and cycle moment to be on top of things when some momentum returns to the construction market as well. I think by the time we have gone through this phase of uncertainty and we can run numbers and our setup globally in a more reliable fashion, discussions will certainly continue as we have them. This is not a race. We are super happy about the machines and the compact machines that come from construction that flow through our agriculture equipment network. There is no need to rush in any way to do something. There is always the time for everything, and this is not the time for construction equipment.

For example, to the to the larger and large excavator business. Um and how we can further enhance our let's say competitiveness to deeper localization and some uh some key markets. Yeah, so that that is progressing. So and um, it was also conscious decision because the construction team has done has been doing an outstanding job. Um, you know, not only navigating these markets but leading the business launching new products, new compact machines developing, uh, new lines. Uh, new attachments to our construction lineup and uh, such a process can be quite a distraction at this very moment. And so our decision was we focus on a few discussions to continue. That are, let's say, definitely a creative and um, you know, we have the team concentrate to navigate this current tariff and cycle moment, uh, to be on top of things, when, you know, some no momentum returns to to the construction Market as well.

Angel Castillo: We will stay tuned till the days become more clear for us and the boundary conditions more certain. That will certainly then also inform a good decision on how we take construction equipment forward in its next chapter.

I think by the time, uh, we have gone through, uh, now this this FAA face of uncertainty and we can run numbers and our setup globally with a more reliable in a more reliable fashion. I mean, discussions will certainly continue as we as we had them, but this is not a race and look, we are, we are super happy about the machines and the compact machines that come from construction, that flow through our egg Network and there's no need to rush in any way to do something. There's always the time for everything, and this is not the time for CE and we'll, we'll stay tuned, um, till the till

The dates become more clear for us, and the boundary conditions more certain. And that will certainly then also inform a good decision on how we take CE forward in its next chapter.

Speaker 2: Our next question comes from David Raso from Evercore ISI. Please go ahead. Your line is open.

Gerrit Marx: Oh, thank you for the follow-up. I know you are more geographically diversified, but seeing Agco first half of the year, two-thirds of revenues in AMEA, 100% of profits, segment profits from AMEA. Would you indulge us at all and give us some sense of the relative margins by your geographies?

Our next question comes from David Razo from evercore isi. Please go ahead. Your line is open.

Oh, thank you for the follow-up. Um, I know you're more geographically Diversified, but you know seeing Aiko first half of the Year 2/3 of revenues and may 100% of profits, you know, segment profits from AA. Would you indulge us at all? And give us some sense of the relative margins by your geographies?

Julie Ann: Generally speaking, North America is our highest margin region. EMEA comes in second, I'd say closer to second this quarter. Maybe last year, the differential would have been larger, but still number two. LATAM would be coming in third. Then close to fourth would be Asia Pacific.

Yep. Um, generally speaking, North America is our highest margin region.

Angel Castillo: Right. If I may build on that, we have now significantly changed governance and leadership on our European operations. The targets that we have discussed and committed with the team are going to narrow, not close, but narrow the margin differentials that Jim just outlined between North America and Europe. There is a big opportunity for us in Europe doing our homework and getting ourselves back on the track where basically we should not see such large differences in marginality between the two regions, as there is no reason for that. Everything is done in the proper fashion, and we execute well on quality and innovation and technology. As we said before, we are on a pretty good path to get there.

The am is a uh comes in second. I'd say closer. Second this this quarter maybe yet last year the the differential would have been larger. Uh but still number 2 and 3 would be um latam coming in coming in third, uh and then close forth would be aged Pacific.

Right. And if I may build on that, um, we have now significantly changed governance and leadership on our European operations.

Angel Castillo: Europe is a special focus here, and we are going to be pretty bold in our moves that we are venturing in Europe over the next years to come. There will be some things we will be discussing in the next few years, how we are going to get our European operation closer to where the North American operation is. As I mentioned, also India, although now from a P&L point of view, maybe rather small, but in the mid to long term, this is going to be a strategically very relevant region to remain cost and price competitive in compact and utility machines around the world. These are truly two regions that will be a point, are a point of attention on our side.

Before we end a pretty good path to get there. So Europe is a special Focus here and we going to be pretty bold in our moves that we are, um, you know, venturing in in, in Europe, over the next years to come. So there will be some, some things um, will be discussing in in the next. Let's say few years, how we are going to get our European operation closer to where the North American operation is. And, as I mentioned, also India, um, although now from a p&l point of view, maybe rather small. Uh, but in the mid to long term, this is going to be a strategically very relevant region to remain cost and price competitive in Compact and utility machines around the world. So these are truly 2 regions. That will be a point our point of attention on our side

Speaker 2: We have no further questions. That concludes today's conference call. You may now disconnect.

We have no further questions.

Conference call. You may now disconnect.