Q3 2025 AGCO Corp Earnings Call

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I would now like to turn the conference over to Greg Peterson Agco head of Investor Relations. Please go ahead.

Thanks, Gary and good morning, welcome to those of you joining us right because third quarter 2025 earnings call.

We will refer to a slide presentation. This morning, that's posted on our website.

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Speaker #1: Good day and welcome to the AGCO Q3 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

non-GAAP measures used in the slide presentation are reconciled to GAAP metrics in the appendix of the presentation.

We will make forward looking statements this morning, including statements about our strategic clients and initiatives as well as our financial impacts demand product development and capital expenditure plans and timing of those plans and our expectations concerning the costs and benefits of those plans and timing of those benefits.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. In consideration of time, please limit yourself to one question and one follow-up. To ask a question, you may press star, then one on your telephone keypad.

We'll also cover future revenue crop production farm income production levels price levels margins earnings operating income cash flow and.

Speaker #1: To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations.

Engineering expense tax rates and other financial metrics. All of these forward looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the safe Harbor included on slide two and the income accompanying presentation.

Speaker #1: Please go ahead.

Speaker #2: Thanks, Gary, and good morning. Welcome to those of you joining us for AGCO's Q3 2025 earnings call. We will refer to a slide presentation this morning that's posted on our website at www.agcocorp.com.

Actual results could differ materially from those suggested in these statements further information concerning these and other risks is included in AG because filings with the SEC, including its Form 10-K for the year ended December 31, 2024, and subsequent Form 10-Q filings Echo disk.

Speaker #2: The non-GAAP measures used in the slide presentation are reconciled to GAAP metrics in the appendix of the presentation. We will make forward-looking statements this morning, including statements about our strategic plans and initiatives, as well as our financial impacts, demand, product development, and capital expenditure plans and timing of those plans and our expectations concerning the costs and benefits of those plans and timing of those benefits.

Any obligation to update any forward looking statements, except as required by law will make a replay of this call available on our corporate website later today.

On the call with me. This morning is Eric Ken Soda, our chairman, President and Chief Executive Officer, and Damon Audia Senior Vice President and Chief Financial Officer with that Eric. Please go ahead.

Speaker #2: We'll also cover future revenue, crop production, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics.

Thanks, Craig and good morning to everyone joining the call today.

Speaker #2: All of these forward-looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the Safe Harbor included on slide two in the accompanying presentation.

We delivered a strong third quarter performance underscoring the effectiveness of our strategic execution and the resilience of our global team.

While macro conditions continue to be volatile we benefited from a more favorable regional mix and stayed laser focused on what we can control.

Speaker #2: Actual results could differ materially from those suggested in these statements. Further information concerning these and other risks is included in AGCO's filings with the SEC, including its Form 10-K for the year ended December 31st 2024 and subsequent Form 10-Q filings.

Our disciplined approach to production and cost management continues to position us well in this environment.

Thank you to the entire agco team for their continued focus in these two areas, where we remained agile in the face of a complex and evolving landscape and our people have been instrumental in helping us navigate this uncertainty maintaining our momentum and continuing to put farmers first.

Speaker #2: AGCO disclaims any obligation to update any forward-looking statements except as required by law. We'll make a replay of this call available on our corporate website later today.

Net sales were $2 $5 billion down approximately 5% year over year were up nearly 6% when excluding grain and protein business divested last year.

Speaker #2: On the call with me this morning is Eric Hansotia, our Chairman, President, and Chief Executive Officer; and Damon Audia, our Senior Vice President and Chief Financial Officer.

Strong growth in <unk> led the quarter, which continues to be our largest most stable and most profitable region.

Speaker #2: With that, Eric, please go ahead.

Speaker #3: Thanks, Greg, and good morning to everyone joining the call today. We delivered a strong Q3 performance, underscoring the effectiveness of our strategic execution and the resilience of our global team.

Near record global crop production in 2025 is leading to an elevated green inventories and putting pressure on commodity prices.

Speaker #3: While macro conditions continue to be volatile, we benefited from a more favorable regional mix and stayed laser-focused on what we can control. Our disciplined approach to production and cost management continues to position us well in this environment.

While farm income is being supported by increased government systems in the U S.

Margins are still tight and farmers around the globe remain cautious on capital spend.

During this industry downturn, we are staying focused on executing our strategy supporting our dealers and customers and investing in technologies that will drive long term growth.

Speaker #3: Thank you to the entire AGCO team for their continued focus in these two areas. We remained agile in the face of a complex and evolving landscape, and our people have been instrumental in helping us navigate this uncertainty.

We also continue to look for every opportunity to limit the impact of tariffs on our farmers.

We are closely monitoring the evolving tariff policies on government support programs around the world, while continuing to engage with suppliers and adjust our supply chain.

Speaker #3: Maintaining our momentum and continuing to put farmers first. Net sales were $2.5 billion, down approximately 5% year over year, or up nearly 6% when excluding grain and protein business divested last year.

We continue to assess and implement price increases where appropriate and feasible.

Speaker #3: Strong growth in EAM led to Q4, which continues to be our largest most stable and most profitable region. Near-record global crop production in 2025 is leading to an elevated grain inventories and putting pressure on commodity prices.

For the quarter consolidated operating margins were six 1% on a reported basis and seven 5% on an adjusted basis.

Our results reflect strong execution by our teams we maintained solid margins through disciplined operational performance.

Speaker #3: While farm income is being supported by increased government assistance in the US, crop margins are still tight, and farmers around the globe remain cautious on capital spend.

Favorable regional mix and continued progress on our restructuring initiatives.

This consistency underscores the effectiveness of our strategy and our commitment to delivering long term value.

Speaker #3: During this industry downturn, we are staying focused on executing our strategy, supporting our dealers and customers, and investing in technologies that will drive long-term growth.

Notably we achieved these margins despite another quarter of significant production cuts in North America as part of our ongoing efforts to destock the dealer channel.

Speaker #3: We also continue to look for every opportunity to limit the impact of tariffs on our farmers. We are closely monitoring evolving tariff policies and government support programs around the world while continuing to engage with suppliers, adjust our supply chain.

When comparing third quarter of 2025 to the same period last year production was down nearly 50% in North America <unk>.

Production levels are actually down nearly 70% from 2023.

In addition to making further progress in reducing dealer inventories. We've also decreased company inventories.

Speaker #3: We continue to assess and implement price increases where appropriate and feasible. For the quarter, consolidated operating margins were 6.1% on a reported basis and 7.5% on an adjusted basis.

This continued discipline is reflected in our working capital improvements and free cash flow generation during the nine months of the year.

Speaker #3: Our results reflect strong execution by our teams. We maintain solid margins through disciplined, operational performance. Favorable regional mix and continued progress on our restructuring initiatives.

Which was approximately 40.

$453 million up compared to the same period in 2024.

Slide four provides an overview of industry unit retail sales by region for the first nine months of 2025 the.

Speaker #3: This consistency underscores the effectiveness of our strategy, and our commitment to delivering long-term value. Notably, we achieved these margins despite another Quarter of significant production cuts in North America as part of our ongoing efforts to destock the dealer channel.

The global farm equipment market continues to face significant headwinds, Brazil remains slightly up compared to the third quarter of 2024, driven primarily by demand for smaller and mid sized tractors, coupled with favorable trade dynamics.

Speaker #3: When comparing Q3 of 2025 to the same period last year, production was down nearly 50% in North America. Production levels are actually down nearly 70% from 2023.

Despite record soybean harvests and potential trade benefits demand for larger equipment has yet to show meaningful improvement.

Hi financing costs and political uncertainty are expected to continue constraining demand in 2025, but the early signs of recovery point to a modest increase in 2026.

Speaker #3: In addition to making further progress on reducing dealer inventories, we've also decreased company inventories. This continued discipline is reflected in our working capital improvements and free cash flow generation during the nine months of the year.

In North America tractor sales declined 10% in the first nine months of 2025 compared to the same period in 2024 with the steepest drops occurring in the high horsepower categories draw.

Speaker #3: Which was approximately 453 million dollars up compared to the same period in 2024. Slide four provides an overview of industry unit retail sales by region for the first nine months of 2025.

Driving this behavior is a significantly lower grain export demand.

Global trade uncertainty and continued high input costs.

We expect these pressures to persist, particularly with the demand for larger equipment.

Speaker #3: The global farm equipment market continues to face significant headwinds. Brazil remains slightly up compared to the Q3 of 2024, driven primarily by demand for smaller, mid-sized tractors coupled with favorable trade dynamics.

Recent announcements of government support are expected to support net farm income, which may help unlock future equipment investments.

There are also potential upsides, if further progress can be made.

On top of the trade agreement that was announced earlier this week between the U S and China.

Speaker #3: Despite record soybean harvests and potential trade benefits, demand for larger equipment has yet to show meaningful improvement. High financing costs and political uncertainty are expected to continue constraining demand in 2025, but the early signs of recovery point to a modest increase in 2026.

For Western Europe tractor sales were down 8% during the first nine months of 2025 compared to the same period one year ago.

The industry experienced double digit percentage decreases across most markets.

Demand and mix are expected to remain soft through the remainder of the year as lower income levels way on arable farmers and correspondingly large tractors.

Speaker #3: In North America, tractor sales declined 10% in the first nine months of 2025 compared to the same period in 2024. With the steepest drops occurring in the high-horsepower categories.

As <unk> largest and most strategically important region.

Europe continues to deliver stable demand that is less cyclical than other markets with strong and consistent operating margins.

Speaker #3: Driving this behavior is the significantly lower grain export demand, global trade uncertainty, and continued high input costs. We expect these pressures to persist, particularly with the demand for larger equipment.

This performance provides valuable balance to our global portfolio.

Helping us to offset fluctuations in other markets, including those influenced by evolving U S trade dynamics.

Speaker #3: Recent announcements of government support are expected to support net farm income, which may help unlock future equipment investments. There are also potential upsides if further progress can be made on top of the trade agreement that was announced earlier this week between the US and China.

We remain confident in the region's ability to support our long term growth, especially as precision AG grows there.

Timeline sales continue to decline across all three regions with North America experiencing the largest year over year drop at 29%.

Mid industry wide pressures agco's performing more resilient than in previous downturns and remains well positioned for the long term growth.

Looking ahead to 2026 current commodity prices and fundamental uncertainties continue to impact the global AG industry outlook.

Positive market factors, including our livestock and dairy prices to replacement cycle and government payments are being offset by geopolitical tension tariff impacts and difficult farm economics, which include elevated borrowing costs and rising input costs.

Given the combination of all of these factors, there's increasing likelihood of markets being relatively flat in 2026 with North American large AG down in Europe, and South America modestly up.

This view confirms our assessment that the global industry is at the trough.

Slide five outlines Agco's factory production hours to ensure year over year comparability, we have excluded green and protein production hours from the 2024 baseline.

Third quarter production hours were up approximately 6% year over year, driven by a favorable comparison in Europe.

We're a quarter three 2024 was impacted by the prolonged factory shutdowns as well as increased output in South America.

In contrast, North America production was down over 50% again this quarter, reflecting our continued focus on reducing dealer inventories in response to soft market demand and as I mentioned production levels are actually down nearly 70% from 2023.

Looking ahead, we now expect full year 2025 production to be down approximately 15% versus 2024.

Revision from our prior estimate of down 15% to 20%, primarily due to stronger quarter three output and EEP.

Right sizing inventory in North America remains a top priority, while Europe and South America, we will continue to see production effectively aligned with retail demand.

Looking at regional inventory breakdown in Europe dealer inventory is now just over three months slightly below our target fences.

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Europe's near target inventory levels are encouraging, particularly given our strong exposure to the region.

In South America dealer inventory ticked up to around four months slightly above our three month target and quarter two levels given the decline in demand for low and medium horsepower tractors. The increase in inventory reflects mainly our more cautious industry outlook given the demand changes in quarter, three which led us to adjust our forward.

Sales expectations.

In North America, we continue to make meaningful progress reducing dealer inventory from 9% to eight months, we're still above our target. The reduction reflects the success of our disciplined production cuts with units being reduced almost 13% in the quarter.

A slight revision from our prior estimate of down. 15 to 20% primarily due to Stronger. Quarter 3 output in e,

Our three high margin growth drivers globalizing and expanding our fendt product line growing precision AG and.

Right-sizing inventory in North America remains a top priority, while Europe and South America will continue to see production effectively aligned with retail demand.

And increasing our parts business remains central to our strategy.

Looking at Regional inventory breakdown in Europe. Dealer inventory is now just over 3 months slightly below our Target.

To unlock the full potential of these growth levers and transform <unk> into a higher performing company throughout the cycles. There are five major strategic shifts. We've just made in the past two years that position us for significant earnings growth.

Kent is below this average, well, Massie Ferguson and valter are just above

Europe's near Target. Inventory levels are encouraging, particularly given our strong exposure, to the region,

Let's start with a significant update regarding a resolution with coffey.

We recently announced the sale of our ownership interest in taffy generating approximately $230 million in after tax proceeds.

In South America, dealer inventory picked up to around four months, slightly above our three-month target and quarter-to-levels, given the decline in demand for low and medium horsepower tractors.

For the first time under my leadership, we now plan to move forward with a $1 billion share repurchase program, reflecting our confidence in the business and our commitment to shareholder returns.

The increase in inventory, reflects mainly a more cautious industry, Outlook given the demand changes in quarter 3, which led us to adjust our forward, sales expectations.

We plan to begin purchasing $300 million of shares in the fourth quarter.

Turning to other key elements that are meaningfully reshaping our company the accretion of our Pts business is the most critical to helping us achieve our vision to be the trusted partner for industry, leading smart farming solutions.

In North America, we continue to make meaningful progress, reducing dealer inventory from 9 to 8 months. While still above our target, the reduction reflects the success of our disciplined production cuts, with units being reduced almost 13% in the quarter.

By combining precision planting the AG assets of Trimble and six additional tech acquisitions over the last five years, plus doubling our engineering budget, we've built a $900 million platform with a path to $2 billion in precision AG revenues as synergies and scale take hold.

Our 3 high margin growth, drivers, globalizing and expanding our fendt product line, growing Precision egg.

And increasing our parts, business remains Central to our strategy.

To unlock the full potential of these growth levers and transform Adco into a higher performing company throughout the Cycles. There are 5 major strategic shifts. You've just made in the past 2 years. That position us for significant earnings growth

As we strengthened our high margin high growth portfolio, we exited the lower growth lower margin business of grain and protein, which lack of alignment with our core machine and technology products as well as our distribution strategy.

Let's start with a significant update regarding our resolution with Toffee.

We recently announced the sale of our ownership interest in Tafe generating approximately 230 million in after tax proceeds.

Project re imagined as a companywide restructuring effort focused on automating and standardizing simplifying centralizing and in some cases outsourcing work.

For the first time under my leadership, we now plan to move forward with a 1 billion dollar. Share repurchase program reflecting our confidence in the business and our commitment to shareholder returns.

With over 700 active projects, we are driving efficiency lower cost.

We plan to begin purchasing dollars of shares in the fourth quarter.

And most importantly, improving the outcomes for our dealers farmers and employees.

Enabled by AI.

This initiative is expected to reduce our cost base by 175 million to $200 million.

Turning to other key elements that are meaningfully reshaping. Our company the creation of our PTX business is the most critical to helping us achieve our vision to be the trusted partner for industry-leading smart farming Solutions.

By combining Precision planting.

Finally farmer core is unique in our industry is transforming our go to market strategy.

We're taking service and support right to the farmers online and on the farm by investing in digital tools, and enabling dealers to shift from brick and mortar.

The mobile service models.

The a assets of Trimble and 6 additional Tech Acquisitions over the last 5 years plus doubling our engineering budget. We've built a 900 million dollar platform with a path to 2 billion dollars in Precision. A revenues as synergies and scale. Take hold.

This is about servicing the farmer not just the product, we're making meaningful progress in north and South America with expansion to other markets planned in the future.

Together these five strategic shifts are shaping the agco, we've envisioned more focused more agile and better positioned to deliver sustainable high margin growth.

As we strengthened our high margin high growth portfolio, we exited the lower growth, lower margin business of green and protein which lacked alignment with our core machine and Technology products as well as our distribution strategy.

The results include margins at this trough that are comparable to the companys margins at the previous Cycle's Peak AG.

Project Reimagine is a companywide restructuring effort focused on automating, standardizing, simplifying, centralizing, and, in some cases, outsourcing work.

<unk> is delivering higher margins through the business cycle driven by these structural changes to the company's portfolio.

With over 700 active projects, we are driving efficiency and lowering costs.

And most importantly, improving the outcomes for our dealers, farmers, and employees.

And so your proposition.

Enabled by AI.

Going deeper into precision AG slide seven showcases two major innovation milestones that reflect agco as a leader in smart farming solutions.

This initiative is expected to reduce our cost base by 175 million, to 200 million.

We've launched phase one of farm engage our new mixed fleet digital platform designed to deploy work plans track field work and collect test data from all machines on the farm regardless of brand.

Finally farmer core is unique in our industry and has Transforming Our go to market strategy.

we're taking service and support right to the farmers online and on the farm, by investing in digital tools and enabling dealers to shift from brick and mortar,

To mobile service models.

This retrofit first solution enables agco equipment to seamlessly integrate with existing Trimble technology, while also supporting interoperability with non agco fleets.

This is about servicing the farmer, not just the product.

We're making meaningful progress in North and South America with expansion to other markets planned in the future.

Looking ahead phase II will consolidate features into a unified platform experience in phase III, we will complete the full farm operation cycle.

We've envisioned.

More focused, more agile, and better, positioned to deliver sustainable high margin growth.

Bring an end to end solution for planning execution and optimization.

Together these phases positioned farm engaged is an absolute cornerstone of our smart farming strategy.

The results include margins at this trough that are comparable to the company's margins at the previous cycle's peak.

As you know our goal is to be <unk>.

Echo is delivering higher margins through the business cycle, driven by these structural changes to the company's portfolio.

And value proposition.

<unk> across the crop cycle by 2030, we're accelerating this journey.

And that our recent tech day in Germany, we unveiled the latest outrun autonomous solution for tillage and fertilization.

Going deeper into precision ads. Slide 7 showcases two major innovations, milestones that reflect our role as a leader in smart farming solutions.

<unk> is now in beta testing and fertilization is an alpha.

These build on the success of our outrun autonomous Green card solution, which is already in production.

These innovations offer autonomous capabilities for fendt and competitive machines in three of the five major stages of the crop cycle, making us one of the industry leaders in this transformational technology.

We've launched Phase 1 of Farm Engage, our new mixed-fleet digital platform designed to deploy work plans, track field work, and collect task data from all machines on the farm, regardless of brand.

This retrofit, first solution, enables Ado, equipment to seamlessly integrate with existing criminal technology while also supporting interoperability with non-ag fleets.

This progress reflects our commitment to delivering practical scalable technologies for the mixed fleet that reduced labor dependency improve efficiency and help farmers operate more profitably.

That exciting note I'll hand, it over to Damon for a deeper dive into the financials.

Looking ahead Phase 2 will consolidate features into a unified platform experience and phase. 3 will complete the full Farm operation cycle, delivering an end-to-end solution for planning, execution, and optimization.

Thank you Eric and good morning.

Slide eight summarizes our regional net sales performance for the third quarter and year to date.

Together, these phases positioned Farm engaged as an absolute cornerstone of our smart farming strategy.

Net sales for the quarter increased approximately 1% year over year, excluding the positive impact of currency translation.

As you know, our goal is to be autonomous across the crop cycle by 2030. We are accelerating this journey.

For comparability, we have also excluded the $251 million of sales associated with the divested grain and protein business in Q3 of 2024.

and at a recent Tech Day in Germany, we unveiled the latest outrun autonomous solution for tillage and fertilization

tillage is now in beta testing and fertilization is in Alpha.

Breaking net sales down by region Europe Middle East posted a 20% increase compared to the same period in 2024, excluding the impact of favorable currency effects. This reflects a recovery in their production levels and corresponding sales following extended plant downtime last year growth was strongest in the.

These build on the success of our outrun autonomous green card solution which is already in production.

These Innovations offer autonomous capabilities for fendt.

And competitive machines, in 3 of the 5, major stages of the crop cycle making us 1 of the industry leaders in this transformational technology.

High horsepower in mid range tractors.

South America declined close to 10%, excluding favorable currency impact weaker industry demand drove most of the decrease with lower sales across most product categories.

Progress reflects our commitment to delivering practical, scalable technologies for the mixed fleet that reduce labor dependency, improve efficiency, and help farmers operate more profitably.

North America was down 32%, excluding unfavorable currency effects. The decline was driven by continued market softness in our focused underproduction to reduce dealer inventories.

On that exciting note, I'll hand it over to Damon for a deeper dive into the financials.

Thank you, Eric, and good morning.

Slide 8 summarizes our regional net sales performance for the third quarter and year to date.

The largest decreases occurred in high horsepower tractors sprayers and combines.

Net sales for the quarter increased approximately, 1% year-over-year excluding the positive impact of currency translation.

Asia Pacific Africa declined 5%, excluding unfavorable currency translation impacts lower demand across the Asian markets were partially offset by stronger performance in Australia and Africa.

For comparability we've also excluded the 251 million of sales associated with the divested grain and protein business in Q3 of 2024.

Finally, consolidated replacement parts were $498 million in the third quarter up 2% year over year on a reported basis and down approximately 2% when excluding the favorable currency translation.

Turning to slide nine.

Third quarter adjusted operating margin was seven 5% 200 basis points higher than the prior year. The industry backdrop remains challenging with continued pressure from factory under absorption and elevated discounting.

Breaking net sales down by region Europe, Middle East, posted a 20% increase, compared to the same period in 2024. Excluding the impact of favorable currency effects, this reflects a recovery in the production levels and corresponding sales following extended plant, downtime last year growth was strongest in the high horsepower and mid-range tractors.

South America, declined, close to 10% excluding favorable currency impact.

Weaker industry, demand, drove. Most of the decrease with lower sales across most product categories.

The margin improvement was primarily driven by strong performance in our Europe Middle East segment were higher sales and production volume supported improved operating leverage.

North America was down. 32% excluding unfavorable currency effects.

The decline was driven by continued market softness and our focused underproduction to reduce dealer inventories.

By region Europe Middle East income from operations increased around $163 million with operating margins approaching 16%.

The largest decreases occurred in high horsepower. Tractors sprayers and combines.

<unk> reflects the significantly higher volumes in sales compared to Q3 of 2024, which was impacted by the extended plant shutdowns.

Asia-Pacific and Africa declined by 5%, excluding unfavorable currency translation impacts.

Lower demand across the Asian markets was partially offset by stronger performance in Australia and Africa.

North American operating income declined approximately $56 million year over year with margins remaining negative again this quarter lower sales and significantly reduced production hours were the key drivers coupled with a significantly weaker industry.

South America operating income declined $23 million with margins down to around 6%, primarily due to lower volumes.

Finally Consolidated replacement parts were 498 million in the third quarter up to percent year-over-year on a reported basis and down approximately 2% when excluding the favorable currency translation.

Turning the slide 9.

Asia Pacific Africa posted a slight increase in operating income of $1 million driven by lower manufacturing costs, partially offset by lower sales volume.

Third quarter adjusted operating margin was 7.5%, 200 basis points higher than the prior year. The industry backdrop remains challenging, with continued pressure from factory under-absorption and elevated discounting.

Slide 10 shows our year to date free cash flow performance as a reminder, free cash flow is defined as cash provided by or used in operating activities less capital expenditures free cash flow conversion is calculated as free cash flow divided by adjusted net income.

the margin Improvement was primarily driven by strong performance in our Europe, Middle East segment, where higher sales and production volume supported improved operating Leverage

Through September we generated $65 million of free cash flow an improvement of around $450 million versus last year's net outflow of $387 million for the same period. This was driven by stronger working capital performance and roughly $120 million and lower capital expenditures year over year.

Compared to Q3 of 2024, which was impacted by the extended plant shutdowns.

North American operating income declined approximately $56 million year-over-year, with margins remaining negative again this quarter.

We continue to expect full year free cash flow to be within our targeted range of $75 to 100% of adjusted net income.

Lower sales and significantly reduced production hours were the key drivers coupled with the significantly weaker industry.

Our capital allocation priorities remain unchanged reinvest in the business potential bolt on acquisitions maintain investment grade credit ratings and return capital to shareholders as.

South America, operating income declined by $23 million, with margins down to around 6%. This decline is primarily due to lower volumes.

As Eric mentioned following the Taffy resolution and the board approval of our new $1 billion share repurchase program, we expect to begin repurchasing $300 million of shares in the fourth quarter.

Asia Pacific Africa. Posted a slight increase in operating income of 1, million driven by lower manufacturing costs, partially offset by lower sales volume.

We also recently declared a regular quarterly dividend of <unk> 29 per share.

Like 10 shows our year-to-date free cash flow performance. As a reminder, free cash flow is defined as cash provided by or used in operating activities less capital expenditures.

We remain focused on deploying capital effectively to drive long term shareholder value and we are encouraged by the increased flexibility to return capital through the preferred industrial method of share repurchases.

Free cash flow conversion is calculated as free cash flow divided by adjusted net income.

Slide 11 highlights our current 2025 market outlook across our three major regions. Our outlooks remained relatively unchanged since the second quarter call call other than a modest adjustment to our north American large AG forecast.

Through September, we generated $65 million of free cash flow, an improvement of around $450 million compared to last year. We experienced a net outflow of $387 million for the same period. This was driven by stronger working capital performance and roughly $120 million in lower capital expenditures year-over-year.

In North America, we continue to expect significantly lower industry demand in 2025, while net farm income has improved supported by government programs and record high cattle prices sentiment remains challenged by wheat, corn and soybean prices investment confidence as declining interest rate cuts haven't yet provided meaningful.

We continue to expect full year. Free cash flow to be within our targeted range of 75 to 100% of adjusted net income.

Our Capital allocation priorities remain unchanged.

Reinvest in the business potential, pursue bolt-on acquisitions, maintain investment-grade credit ratings, and return capital to shareholders.

Release, where.

We're maintaining our outlook for the small tractor segment to be down approximately 5% and now expect large AG to be down around 30% versus our prior range of down 25% to 30%.

As Eric mentioned, following the tappy resolution and the board approval of our new 1 billion dollar share repurchase program, we expect to begin repurchasing, 300 million of shares in the fourth quarter.

We also recently declared our regular quarterly dividend of $0.29 per share.

In Western Europe, we continue to expect the industry demand to decline, 5% to 10% the market remains soft relatively stable. We prices are below historical averages and geopolitical uncertainty continues to weigh on sentiment.

We remain focused on deploying Capital effectively to drive long-term shareholder value and we're encouraged by the increase. Flexibility to return Capital through the preferred investor method of share repurchases.

In South America record soybean exports, partly driven by U S. Tariff barriers have supported trade flows. However margins are under pressure from higher input costs and elevated interest rates in Brazil are dampening demand, especially for large AG under these conditions, we still expect Brazil to be flat to up 5%.

Slide 11 highlights our current 2025 Market Outlook across our 3, major regions, our outlooks remain relatively unchanged since the second quarter call. Call other than a modest adjustment to our North American large, a forecast.

In North America, we continue to expect significantly lower industry demand in 2025.

For the year.

Slide 12 outlines the key assumptions supporting our full year 2025 outlook.

We continue to expect global industry demand to be around 85% of mid cycle levels. Our sales outlook remains unchanged. Despite a slightly softer pricing outlook now in the zero to 1% range, which is down from approximately 1% in Q2, given the increase in competitive pricing in certain regions.

On that firm income has improved supported by government programs and record high cattle. Prices sentiment remains challenged by weak corn and soybean prices investment competences, declining and interest rate, Cuts, haven't yet provided meaningful relief.

We're maintaining our outlook for the small tractor segment to be down approximately 5%. And now, expect large eggs to be down around 30% versus our prior range of down 25 to 30%.

We continue to anticipate a favorable currency impact of roughly 2%.

Our guidance reflects current tariffs across our global footprint, along with mitigation efforts through cost actions and pricing.

That said the potential for additional U S. Tariffs are retaliatory measures fosters continued uncertainty we are monitoring developments closely and will adjust our outlook if needed.

In Western Europe, we can continue to expect the industry demand to decline 5% to 10%. The market remains soft, but relatively stable. Weak prices are below historical averages, and geopolitical uncertainty continues to weigh on sentiment.

Engineering expense is expected to remain effectively flat year over year.

We still expect our adjusted operating margin to be approximately seven 5%, reflecting structural improvements and cost initiatives positioning us roughly 350 basis points above our last trough in 2016.

In South America, record soybean exports partly driven by us. Tariff barriers, have supported trade flows. However, margins are under pressure from higher input, costs and elevated. Interest rates in Brazil are dampening demand, especially for large egg. Under these conditions, we still expect Brazil to be flat to up 5% for the year.

Slide 12 outlines the key assumptions supporting our full year 2025 Outlook.

Lastly, we revised our effective tax rate to 33% to 35% modestly better than our prior estimate of approximately 35%.

We continue to expect Global industry demand to be around 85% of mid-cycle levels.

Turning to slide 13 for our current 2025 outlook.

We continue to expect full year net sales of approximately $9 8 billion consistent with our prior outlook. This reflects the modest changes in demand trends across key markets. We refined our earnings per share forecast to approximately $5, reflecting strong execution across our global operations. This assumes no material.

Our sales all remain unchanged. Despite a slightly softer pricing outlook now in the 0% to 1% range, which is down from approximately 1% in Q2, given the increase in competitive pricing in certain regions.

We continue to anticipate a favorable currency impact of roughly 2%.

<unk> to existing trade measures.

Capital expenditures are now expected to be around $300 million. While this represents a decrease from the prior estimate of $350 million, we remain focused on supporting strategic initiatives and maintaining flexibility in response to shifting demand trends.

Our guidance reflects current terrorists across our Global footprint along with mitigation efforts through cost actions and pricing that said the potential for additional us tariffs or retaliatory measures Fosters. Continued uncertainty. We're monitoring developments closely and will adjust our Outlook if needed.

Engineering expense is expected to remain, effectively flat year-over-year.

We continue to target free cash flow conversion of 75% to 100% of adjusted net income supported by disciplined working capital management and improved inventory efficiencies.

We still expect our adjusted operating margin to be approximately 7.5%. Reflecting structural improvements in cost initiatives. Positioning us, roughly 350 basis points above our last, drop in 2016,

As Eric noted, we're pleased with our performance through the third quarter in what remains a challenging and evolving year. Our teams have executed well grown share and continued to reduce dealer inventories while supporting farmers' needs.

3 to 35% modestly better than our prior estimate of approximately 35%.

Turning to slide 13 for our current 2025 Outlook.

With this updated outlook, we believe our results further demonstrate the structural improvements in agco's profitability, even in a down cycle, we're delivering stronger margins and more consistent earnings are a reflection of our transformed business model with that I'll turn the call over to the operator to begin the Q&A.

We will now begin the question and answer session.

We continue to expect full year. Net sales of approximately 9.8 billion consistent with our prior Outlook. This reflects the modest changes in demand Trends across key markets. We refined our earnings per share forecast to approximately 5 dollars reflecting strong execution across our Global operations. This is no material changes to existing trade measures.

To ask a question you May Press Star then one on your Touchtone phone.

Capital expenditures are now expected to be around 300 million.

If you are using a speakerphone please pick up your handset before pressing the keys to.

To withdraw your question. Please press Star then two please.

Please limit yourself to one question and one follow up.

While this represents a decrease from the prior estimate of 350 million, we remain focused on supporting strategic initiatives and maintaining flexibility in response to shifting demand trends.

Our first question today is from Kristen <unk> with Oppenheimer <unk> Company. Please go ahead.

We continue to Target, free cash flow conversion of 75 to 100% of adjusted net income supported by disciplined working Capital Management, and improved inventory, efficiency.

Hi, good morning. Thank you so much for the question.

I'm wondering if we can start here with the strong Europe results and.

Just ask the simple question is how.

Europe.

Yes.

Performed relative to your expectations I'm, just trying to parse through some of the onetime items versus the underlying trends there and what's supporting the outlook for a little bit more constructive growth in 2026 and I'll start there.

as Eric noted, we're pleased with our performance, through the third quarter and what remains a challenging and evolving year, our teams have executed well grown share and continue to reduce dealer inventories while supporting Farmers needs

With this updated Outlook. We believe our results further demonstrate the structural improvements in. Add code profitability, even in a down cycle, we're delivering stronger, margins and more consistent earnings. A reflection of our transformed business model.

Yes, sure Kristen So I think Europe, I would say performed modestly better than what we had expected more on the top line. So volumes were a little bit stronger than what we had originally anticipated. The production. What you saw with the margins are heavily influenced by the production.

With that, I'll turn the call over to the operator to begin the Q&A.

We will now begin the question-and-answer session.

to ask a question, you may press star then 1 on your touchtone phone,

If you are using a speakerphone, please pick up your handset before pressing the keys.

Schedule I would say was relatively in line with what we had expected.

To withdraw your question. Please. Press star. Then 2

So overall, we feel good I think the key point for us as we look at Europe right now the dealer inventory levels are sitting below the optimal level for us. So we feel very good as we go into the fourth quarter and into 'twenty six.

Please limit yourself to 1 question and 1 follow-up.

Our first question today is from Kristen Owen with Oppenheimer & Company. Please go ahead.

Here that we're sitting in a relatively strong position from producing in line with retail or hopefully if the markets were to pick up and again, we haven't given a full outlook for 2006, yet, but the dealer inventory levels are positioned well therefore for 2006.

And then my follow up understanding it's very early days to digest, but any initial thoughts on the China trade agreement that was announced yesterday and how that might complement some of the government support that's been floated out there just early thoughts on what that could do for your North American outlook.

Hi, good morning. Thank you so much for the question. Um, wondering if we can start here with, with the strong Europe results, and maybe just ask a simple question if you know how Europe, um, performed relative to your expectations. I'm just trying to parse through some of the 1-time items versus the underlying Trends there. And and what's supporting the outlook for a little bit more constructive growth in 2026 and I'll start there.

Thank you.

Yes, we see this is clearly a net positive there is a combination of the soybean purchases that are more clear now for this year and the next few years. So farmers can that's really the core of what farmers look to as markets stability and predictability, but then there's also the government support that.

Been strength and so it's a.

<unk>.

Dual positive outlook, having said that we think this is going to be a little bit of a show me situation, where the farmers are going to need to have this have the trades actually happened the deal actually finalized.

Beans, actually being purchased which will then drive real pricing in the market. So.

Yeah, sure Kristen. Um, so I think Europe, I would say performed modestly better than what we had expected more on the top line. Um, so volumes were a little bit stronger than what we had originally anticipated. Uh, the production what you saw with the margins heavily influenced by the, by, with the production schedule, I was say was, you know, relatively in line with what we had expected. Um, so overall we feel good. I think the, the key point for us as we look at Europe right now, you know, the dealer inventory levels are, are sitting below the, uh, the optimal level for us. So, you know, we feel very good as we go into the fourth quarter and into 26, um, here that we're sitting in a, in a relatively strong position from producing in line with retail, or hopefully, if the markets were to pick up. And again, we haven't given an a full outlook for 26 yet. But, uh, you know, the dealer inventory levels are positioned, well, there for for 26.

Yes.

Our phones are ringing off the hook yesterday with all kinds of purchasing orders coming in.

Um, and then my follow-up, um, understanding. It's it's

Digested. But

But it's net positive that will just take some time to play out in the market is probably more of a 2026 effect.

The next question comes from Jamie Cook with <unk> Securities. Please go ahead.

Thoughts on, uh, the China trade agreement that was announced yesterday and how that might complement some of the government support that's been, um, floated out there? Just early thoughts on what that could do for your North American outlook next year. Thank you.

Hi, Good morning, I guess, just my first question just on the North America dealer inventory and I said it came down to eight months, I guess versus 89% or nine months last quarter.

I mean, it sounds like this is obviously going to go into the <unk> inventory is going to go into 2026.

Just any color there I know at what point in 2026 do you think we can get right sized and if we continue this way.

Given what you are saying that North America is there greater risk in 2026.

In North America.

It would be at a loss again for 2020 I guess, that's my first question.

And then I'll ask the next one after you answer this.

Yeah, we see this as, you know, clearly net positive. There's the combination of the soybean purchases that are more clear now for this year and the next few years so farmers can that that's really the core of what Farmers look to is, is Market stability and predictability. But then there's also the government support that's been strengthened. And so it's a, you know, it's a, a dual positive outlook. Having said that we we think this is going to be a little bit of a show me situation where the farmers are going to need to have this have the trades actually happen. The deal. Actually finalized the beans actually being purchased, which will then drive, real pricing in the market. So you know, I

Yes, Jamie So I think overall North America. The team did a really good job in reducing the units on hand. It is I think Eric said around 13%.

<unk> sequentially given the change in our industry outlook for this year with large AG being down now around 30 and as Eric alluded in his opening comments here.

Our phones weren't ringing off the hook yesterday with all kinds of purchase orders coming in, um, but it's net positive. That will just take some time to play out in the market. It's probably more of a 2026 effect.

The next question comes from Jamie Cook with Truist Securities. Please go ahead.

Do see North America down.

Large egg down in north them next year as well that is putting pressure on us to get to that six month target I don't we probably won't get there by the end of the year I think we'll make improvement from the eight months down, but we won't get to the to the six months now again, that's based on our current outlook I think as Eric just the prior question.

<unk> here a lot of new information has come out over the last couple of days with the China trade agreement with more conversations about subsidies for the farmers and just to put it in perspective again our industry.

Inventory levels are based on the 12 month forward look so again.

Hi, good morning. Um, I guess just my first question just on the North America dealer inventory. It's nice that it came down to 8 months, I guess. Versus 8 to 9, or 9 months, last quarter. Um I I mean this sounds like this is obviously going to go into the excess inventory is going to go into 2026 so um, just any color there on at what point in 2026, do you think we could get right size? And if if we continue this way, is it in given? What you're saying about North America is there greater risk in 2026 you know North America, you know would would would be at a loss. Uh, again for 2026. I guess that's my first question. Um, and then I'll ask the next 1 after you answer this.

Hypothetically if large AG in North America was flat next year instead of what we're assuming is down that would've changed my current eight months, we've reduced it by around half a month and so it's thoroughly.

Sensitive so what looks what 26 will look like so again, if we see that market turn here based on farmer sentiment based on increased purchasing in 26, we're going to be in line with our target fairly quickly so a little bit hard to answer right now because I think theres a little bit of flux in the system based on some of the most recent news.

Okay. Thank you and then I guess, just my second question tariffs in that lower price.

Yeah, Jamie um, so I think overall North America. The team did a really good job in reducing the, the units on hand. As I think Eric said around 13%, uh, down sequentially, you know, given the the change in our industry outlook, for this year, with large, egg being down now around 30, and as Eric alluded, his opening comments here. We, we do see North America down, um, large egg down in North, the next year, as well, you know, that is putting pressure on us to get to that 6-month Target. I, I don't, we, we won't get there by the end of the year. I think we'll make improvement from the 8 months down, but we won't get to the, to the 6 months. Now, again, that's based on our current Outlook, I think.

I think last clarity guidance assumed 45, and net tariff impact to EPS any update sort of with section 232, how that impacts you and just curious how we're managing that.

A higher cost, but then obviously you lowered your pricing assumption, so where are you seeing the discounting and how do you think about pricing into 2026, given with some of your peers have communicated.

Yes, no we're definitely I think the incremental section 232 items.

A relatively modest impact to our overall tariff costs again as we sort of quoted are net tariff number for 2025 I would say we are marginally worse relative to the 45.

More due to the incremental loss volume that we're estimating here versus the industry.

So I think thats sort of a little bit of the challenge for US here as we think about the pricing comment for this year, we have seen some increased competitive pricing tension more in South America and Europe.

Is Eric just sit on the prior question here. A lot of new information has come out over the last couple days with the China trade agreement, with more conversations about uh subsidies for the farmers in, you know, just to put it in perspective. Again, our our industry, our in inventory levels are based on the 12-month forward. Look, so you know, again, if hypothetically if large egg in North America was flat next year. Instead of what we're assuming is down that would have changed my current 8 months with reduced it by around a half a month and so it's fairly um, sensitive to what looks what 26 will look like. So again, if we see that market turn here based on Farmer sentiment, based on increased purchasing in 26, we're going to be in line with our Target fairly quickly. So a little bit hard to answer right now because I think there's a little bit of flux in the system based on some of the most recent news.

And Thats whats <unk>.

Asked us to change our outlook from what was up around one to somewhere in the range of zero to 1%, we will still be net neutral to positive on price.

Versus material costs and that does include tariffs on a global basis. So that we're still going to be able to cover it but maybe not as much as we had hoped given the current environment as we look into 2026.

Okay, thank you. And then I guess just my second question tariffs in the in the lower price. Um, I think last quarter. You see the guidance assumed 45 cents in in net. Tariff impact, to EPS, any update, sort of, with Section 232, have that impacts you and just curious how we're managing the, you know, incorp, you know, higher cost. But then obviously you lowered your your pricing assumptions. So where are you seeing the discounting and how do you think about pricing into 2026 given what some of your peers have communicated?

We're going to see how the industry dynamics play out as we've said from the beginning our our goal is to limit the cost.

The tariffs to us into the farmers, where we can't do that we know that those costs will be centralized likely here in North America, and we're going to look to try to spread pricing as broadly as possible and as I again early look into 2006 again I think it was a total company, we should be able to cover the material costs and the pricing, but yes.

We want to get through the year end before we give more official outlooks for for 2006.

Thank you Dan and very helpful.

The next question is from Kyle <unk> with Citigroup. Please go ahead.

Thanks for taking my question guys, maybe just jumping off from the last question. It would be helpful. Just to hear you guys elaborate a bit more on the pricing competition youre seeing particularly it sounds like in Brazil and in Europe, just maybe what's going on there. Thanks.

Yes, no, we're definitely. Uh, you know, I think the incremental section, 232 items, um, you know, had a, a relatively modest impact to our overall tariff cost again, as we've sort of quoted a net tariff number for 2025. I would say, we are marginally worse. Um, relative to the 45 cents, more due to the incremental loss volume that we're estimating here, um, versus the industry. Um, and so, I think that's sort of a little bit of the, the challenge for us here. As we think about the pricing comment for this year. You know, we have seen some increase competitive pricing, uh, tension more in South America and Europe. Um, you know, and that's what's forced us to change our Outlook from what was up around 1 to somewhere in the range of 0 to 1%. Uh, we will still be net neutral deposited on price include versus material costs, and that does include tariffs on a global basis.

Yes, I think Kyle.

What we've seen is the south American markets, especially Brazil, as we said the last quarter has started to recover it was the first one of our three major markets into the downturn.

The recover mainly in the medium and low horsepower segments of the market again influenced a lot by the specialty crop farmers coffee citrus.

So, we were still going to be able to cover it, um, but maybe not as much as we had hoped given the current environment. You know, as we look into 2026, um, you know, we're going to see how the industry dynamics play out. As we've said from the beginning, our goal is to limit the cost, um, of the tariffs to us and to the farmers. Where we can't do that, we know that those costs will be centralized, likely here in North America, and we're going to look to try to spread pricing as broadly as possible.

And what we've seen is a little bit of a slowdown in those markets here.

And so the market is still growing I would say we were zero to five last quarter, we were probably closer to the high end of that and as we look at some of the competitive nature down there with some discounting, especially in that segment and that segment, it's reduced our outlook now closer to the lower end of that segment.

1 is like again, early. Look into 2026. Again, I think we'll, you know, it's a total company. We should be able to cover the material costs and the pricing, but, you know, we want to get through the year-end before we give more official outlooks for 2026.

Thank you, Damon very helpful.

The next question is from Kyle minguez with croup please. Go ahead.

Again, I think the markets are still doing well, but just given the push to try to drive volume. There. We're seeing that that segment of the market would be a little bit more competitive in nature.

Got it and then.

Question, guys. Um, yeah, maybe just jumping off from the last question. It'd be helpful to just hear you guys elaborate a bit more on the pricing competition you're seeing, particularly, it sounds like in Brazil and in Europe. Just maybe what's going on there? Thanks.

Just on your earlier comments on global retail sales looking like they could be flattish year over year next year, assuming that is more so just talking about unit sales I'm curious if that includes precision at all and would be helpful. Just to hear you discuss a little bit the trends youre seeing in demand for your precision.

Solutions into 2026.

And how you feel like you're positioned in that retrofit market going into next year.

Yes, so maybe able to I'll touch on the industry and then I'll, let Eric elaborate on the on the Pts business. So.

Our outlook for next year is really based on retail unit sales, it's not really including parts or our Pts business think of that more as holding sales.

Yeah, and then Pts we're hitting all our forecast this year, it's going as we would plan it to be at this stage of the cycle. We're at the trough. So that provides a lower than where we ultimately want them to be but we're signing up dealers. We've got 90 over 90% of our AG machines now going out of the factories with Trimble technology.

Yeah, you know I think Kyle um you know what we've seen is the South American Market specially Brazil. As we said, the last quarter has started to recover. It was the first 1 of our 3 major markets into the downturn. Um, it started to recover mainly in the medium and low horsepower, segments of the market and influence a lot by the specialty, crop Farmers, coffee Citrus. Um, you know, and what we've seen is a little bit of a Slowdown in those markets here. Um you know and so the market is still growing. I would say we were 0 to 5 last quarter. We were probably closer to the high end of that. And as we look at some of the competitive nature down there, with some discounting specially in that seg in that segment, um, it's reduced our Outlook now closer to the lower end of that segment. Um, again, I think the markets are still doing well, but just given the push to try to drive volume there. We're seeing that, uh, that segment of the market be a little bit more, um, competitive in nature.

Essentially if you look at the two channels that we inherited that precision planting in the PT X Trimble channels.

We've got over 90% of the market covered in everywhere, except for Brazil, and Thats in the low eighties.

With that dealer network and we are working on melting those together.

Got it and then um just on your earlier comments on global retail sales looking like they they could be flattish year-over-year next year. Assuming that's more. So just talking about unit sales I mean I'm curious if that includes um Precision at all and would be helpful just to to hear you discuss a little bit. The trends you're seeing in demand for your Precision Solutions into 2026.

The the.

Effort to end up with combined dealers that have the full portfolio is well underway. We've got 50 of those done target is to have 78 of them by the end of the year that will cover about 70% of the U S market, which is the fastest growing precision AG business. So just trying to give you a few data points on both channel as well as technology in our product and then.

Um, how do you feel about your position in the retrofit market going into next year?

New technology, we had our field Tech days and PT X launched 11, new innovations. This year well ahead of what we had anticipated when we were putting the business together. So the innovation engine is probably running ahead of schedule.

Yeah, so maybe I'll I'll touch on the the industry. How it's going to let Eric elaborate on the on the PTX business. So um you know our outlook for next year is really based on retail unit sales. Um it's not really uh including parts or our PTX business, think of that more as whole good sales.

Financials are on track channel development is on track.

We've got a new leader in charge of <unk>, hitting the ground running really well.

Yeah, and then PTX, you know, we're hitting all our forecasts this year. It's going as we would plan it to be at this stage of the cycle. We're at the trough, so that barns are lower than where we ultimately want them to be. But we're signing up dealers. We've got over 90% of our AGCO machines now going out of the factories with Trimble technology.

Visit many of our global operations in terms of sites and dealers and so I'm very pleased with how that's going.

As a reminder.

Retrofit doesn't go down as much as the rest of the business. It only declines about a third as much as the overall.

The decline of the whole goods and so we're seeing although it's down it's not down nearly as much as it recovers, we expect that that will recover as well.

Well color thanks, guys.

The next question is from Tami Zakaria with Jpmorgan. Please go ahead.

Hi, good morning, Thank you so much.

Wanted to get.

A little more clarification on the pricing outlook being changed.

Can you help us with which regions.

Our region is driving that reduction in outlook and I just wanted to make sure. His fourth quarter pricing is still positive or are we talking about negative pricing.

Essentially, if you look at the 2 channels that we inherited the Precision planting and the PTX Trimble channels, um, we've got over 90% of the market covered in everywhere, except for Brazil, and that's in the low 80s with that dealer Network. And we're working on melting those together. Uh, the the effort to end up with combined dealers that have the full portfolio as well underway. We've got 50 of those done targets. Have 78 of them by the end of the year, that'll cover about 70% of the US market, which is the fastest growing Precision egg business. So, just trying to give you a few data points on both Channel as well as technology on our product and then new new technology. We had our field tech days and uh PTX launched 11, new Innovations this year. Well ahead of what we had anticipated when we were putting the business together. So the Innovation engine is probably running ahead of schedule.

So Tammy fourth quarter it will still be positive if you look at our year to date I think were.

We're up around.

50 basis points give or take.

So pricing will be up around 1% in the fourth quarter total company wise again, if I think about the change in the pricing again based on the prior one of the prior questions. The change really was driven more in South America, and Europe is sort of where we saw the reduction relative to our.

Uh financials are on track Channel development is, is on track. Um, it's got a new leader in charge of PTX. He's hitting the ground running really well. Um, has visited many of our our, our Global operations in terms of sites and dealers. And so I'm I'm very pleased with how that's going just as a reminder, you know, retrofit doesn't go down as much as the rest of the business. It only declines about a third as much as the overall, um, decline of the whole goods. And so we're seeing, although, it's down, it's not down nearly as much and as it recovers, we expect that, that will recover as well.

I'll call her. Thanks guys.

Our Q2 outlook for you guys.

Understood. Thank you and.

The next question is from Tammy Zakari with JP Morgan. Please go ahead.

My next question is.

I think I heard you say in North America large AG and now expect to be down next year can you help us frame what that down means as of right. Now are we talking about flat to down are down to some degree but less than this year's third is any way to frame that.

Hi, good morning. Thank you so much. I wanted to get a little more clarification on the pricing outlook being changed.

Yes prior to the news of the last two days, we would've said down like say single digits nowhere near as much as this year, but then.

Uh can you help us with which regions um or region is driving that reduction in Outlook? And I just wanted to make sure is fourth quarter, pricing, still positive, or are we talking about negative pricing?

Then we've had a couple of pretty significant positive indicators in terms of farm support for farmers from the government and pricing.

Stability of China buying soybeans, so where that will actually end up is unknown, but it won't be anywhere near.

What we saw this year.

We believe we're at the bottom.

Global industry, we believe pricing is probably at about its worst we think pricing power will be stronger next year.

The the change in the pricing again, based on the prior 1 of the prior questions, you know, the the change really was driven more in South America. And Europe is sort of where we saw the the reductions relative to our Q2 outlook for you guys.

And so I think that 25 is probably.

In many cases are the worst of the cycle.

Understood. Thank you.

The next question is from Stephen Volkmann with Jefferies. Please go ahead.

Great. Good morning, Thank you.

Damien can you just give us a little bit of a walk into the fourth quarter and there is a pretty big margin expansion kind of implied in your guidance and I'm just curious what what are the buckets that kind of deliver that.

Understood, thank you. And um, my next question is I think I heard you say North America, large egg. You know, expect to be down next year. Can you help us frame? What that down means as of right now? Are we talking about flat to down, or down to some degree? But less than this year's 30s, any way to frame that.

Yeah, prior to the news of the last two days, we would have said down, like, say, single digits. Now, nowhere near as much as this year.

Yes, I think Steve for us.

Margins in the fourth quarter should finish up at around 9% or a little bit over 9% to deliver at the 7%.

Full year end.

As we look at some of the improvements I think Europe again fourth quarter is generally a fairly strong quarter for Europe, and so with up from a volume standpoint, So we should see the margins ticked up there.

Asia Pacific is one of the early within the Downmarket early and we see that improving so I think we see a little bit of the margin coming out of there and then.

But then I'm since then we've had a couple, pretty significant positive indicators in terms of farm support for Farmers from the government and pricing um stability of China, buying soybeans so where that'll actually end up is, is unknown but it won't be anywhere near, uh, what we saw this year, you know, we we believe we're at the bottom. Um, as of a global industry, We Believe pricing is probably at about its worst. Um, we think pricing power will be stronger next year, um, and and so, you know, I think that 25 is, is probably, uh, in in many cases the worst of

Of the cycle.

South America would be the other one North America continues to be the challenge.

Understood, thank you.

And if I think about the margins in North America relative to the third quarter given the increased level of under production again, we said on the on the scripted remarks that we were down around 50 in Q4 will be down will be cutting production over 50% as we continue to try to focus on that dealer inventory. So I think sequentially those margins.

The next question is from Stephen Volkman with Jeffries. Please go ahead.

Hey, uh, good morning, thank you. Um, Damon. Can can you just give us a little bit of a walk uh, into the fourth quarter? There's a a pretty big margin uh, expansion kind of implied in your guidance. And I'm just curious. What? What are the buckets that kind of deliver that

We will be even lower here in the North America in the fourth quarter for North America.

Okay. Thanks helpful and then.

Maybe just to focus on the restructuring programs. So the $175 million to $200 million is there a benefit of that in the fourth quarter and then what would the benefit of that be in 'twenty six.

Yeah, you know, I think Steve for for us the uh, margins in the fourth quarter should finish up at around 9% or a little bit over 9% to deliver the, the 7 and a half percent. Uh,

Yes.

Again year over year, we're picking up steam as we move through the restructuring actions. So there will be some benefit in the fourth quarter relative to last year, that's embedded in the outlook already.

As I look at next year Youre going to get the carryover from the original $100 million to $125 million and Youll get some of the early parts of the incremental 75. So next year as we look at the restructuring benefits today I'd say its probably in the range of 40% to $60 million of inquiry.

Mental improvement relative to 2025.

Full year and um, you know, as we look at some of the improvements, I think Europe again, 4 quarters, generally, a fairly strong quarter for for Europe and so with up from a volume standpoint, so we should see the margins ticked up there. Um, asia-pacific is, uh, you know, 1 of the early was in the down Market early and we see that improving. So I think we see a little bit of the margin coming out of there and then, um, you know, South America would be the other 1 North America continues to be the challenge. Um, you know, if I think about the margins in North America relative to the third quarter, given the increased level of underproduction. Again, we set on the, on the scripted remarks that we were down around 50, in Q4 will be down, we'll be cutting Productions over 50% as we continue to try to focus on that dealer inventory. So, you know, I think sequent.

Perfect. Thank you.

Yeah.

The next question is from Mig <unk> with R. W. Baird. Please go ahead.

Usually, those margins will be even lower here in the North in the fourth quarter for North America.

Hey, good morning, everyone.

Go back to the tariff discussion that we can.

What I'm confused about frankly as this interplay.

Interplay between section 232.

Just a normal cyclical tariffs and I guess the way I would ask the question when we're sort of thinking about your guidance for 2025.

Okay, thanks. That's helpful. And then, um, maybe just to focus on the restructuring program. So the $175 million to $200 million, is there a benefit of that in the fourth quarter? And then what would the benefit of that be in 2026?

Sort of the cadence and the way these tariffs kind of.

Came into play not much impact in the first half may be more impact in the second he also had FIFO accounting.

So I'm wondering.

Is it fair to think that the impact from these tariffs is actually greater in 2020.

And what's embedded in 2025 guidance and if so.

Maybe quantify for us.

Yes, sure Mig so yes in answer to your question. If we look at the there is a couple of variables to your point, we still have some costs that we have costs that are flowing through our P&L related to the tariff payments, we're making some of it is still tied up in inventory.

Yeah, there we are again year over year. You know, we're picking up steam as we move through the restructuring actions. So, there will be some benefit in Q4 relative to last year; that's embedded in the outlook already. As I look at next year, you're going to get the carryover from the original $100 million to $125 million, and you'll get some of the early parts of the incremental $75 million. So, next year, as we look at the restructuring benefits, you know, today I'd say it's probably in the range of $40 million to $60 million of incremental improvement, relative to 2025.

Super, thank you.

The next question is from Mick. Dobra, was RW beard. Please, go ahead.

And then we will have the full year run rate of those tariffs assuming there are no changes. So again, when we think about that we've also announced that we've put price actions.

Effect in many of our businesses PT X parts whole goods for model year 2006, and so we have only seen a portion of that and Thats why were sort of giving you that net effect. This year, but if I just try to quantify in absolute terms, what the tariff costs are again, not mitigating with price.

Hey, good morning, everyone. Um, I want to go back to, uh, this tariff discussion if we can. And you know what I'm confused about, frankly, is this interplay between, uh, Section 232 and just normal reciprocal tariffs.

And I guess the way I would ask the question when we're sort of thinking about your guidance for 2025.

Or other actions for next year again, assuming no changes to what's in effect today.

There was a sort of cadence in the way these tariffs kind of came into play; not much impact in the first half, maybe more impact in the second. You also have 50 accounting. Um, so I'm wondering.

I would tell you that the.

Total tariff costs are less than 1% of my total company sales. So this year, we're guiding to $9 8 billion I would tell you. The total tariff costs on an annualized basis would be less than 1% of that now that would be concentrated here in north America. So the percent would be more but as we've talked about in the past our.

26, then what's embedded in the 2025 guidance? And if so, is there a way to maybe quantify for us?

So for us to try to price in the region, where we can but to the extent, we're not able to pass all of that given competitive dynamics in that region, we look for opportunities to be strategic and increase prices in other parts of the world So to offset that total costs here for the total company.

Okay.

That's really helpful. Thank you for that.

And then maybe a quick follow up on South America and.

I don't know if thats the.

The right way to think about it but what I'm sort of looking at margin here.

Our revenue has gradually recovered sequentially through the year.

We've seen a sequential step down in margin from the second to the third quarter.

Revenue being higher and Im kind of wondering if this is a function of pricing as you talked about earlier.

Yeah, sure Mig. So um yes in answer to your question if we look at the, there's a couple variables to your point, you know, we still have some costs that we have cost that have flown through our p&l related to the, the Tariff payments. We're making some of it is still tied up in inventory, um, and then we will have the full year run rate of those tariffs. Assuming there are no changes. So again, when we think about that, we've also announced that we put price actions, um, in effect in many of our businesses PTX, Parts, Whole Goods for model year, 26. And so we have only seen a portion of that and that's why we're sort of giving you that net effect this year. But if I just try to quantify, you know, in absolute terms, what the Tariff costs are again, not mitigating with price or other actions for next year. Again, assuming no changes to what's in effect today. Um, you know, I would tell you that the, the total tariff costs are less.

If there is something else going on that we need to be aware of as we think about the fourth quarter.

Thanks.

Yeah. So I think there has been.

A couple of things the mix, if you think about year over year and Youre thinking more the mixes as we talked about the high horsepower segment. Despite all of the geopolitical stuff that we're hearing about Brazil being a beneficiary, we're not seeing the large AG part of that market picked up yet and so what we.

Than 1% of my total company sales. So this year we're guiding to $9.8 billion. You know, I'd tell you the total tariff costs on an annualized basis would be less than 1% of that. Now that would be concentrated here in North America. So the percent would be more, but as we talked about in the past, you know, our philosophy is to try to price in the region where we can.

Have been seeing is that again.

To the extent we're not able to pass all of that, given competitive dynamics in that region, we look for opportunities to be strategic and increase prices in other parts of the world to offset that total cost here for the total company.

Medium low horsepower specialty crops, so what youre seeing year over year. There is really more of a mix challenge in the quarter, we had a little bit of a warranty spike year over year, nothing significant but just on a quarter year over year basis warranty was a little bit higher when.

When I think about the fourth quarter again, youre going to see that mix headwind come in in South America is again, we're not seeing the large horsepower pick up and if you look at the fourth quarter for South America, specifically last year, we called out a special tax benefit for R&D was about one to one 5% of our <unk>.

Okay, that that's, that's really helpful. Thank you for that. Um, and then maybe a quick follow-up on South America. And, and you know, I don't know if if this the right way to think about it. But when, when I'm sort of looking at margins here, uh your your Revenue has gradually recovered financially through through the year. Um, we've seen a sequential step down in margin from from the second to the third quarter, despite Revenue being higher and I'm kind of wondering if this is a function of pricing is you talked about earlier or if there's something else going on that we need to be aware of as we think about the fourth floor. Thanks.

<unk> lift that's not repeating this year and so those are the two drivers as I think about the fourth quarter is really the continued mixed decline year over year, and then that one tax benefits that I had in the fourth quarter of 2024.

Alright appreciate it.

The next question is from Chad Dillard with Bernstein. Please go ahead.

Hey, Good morning, guys. A question for you guys on North America.

So can you walk through the path to margin recovery.

Is there further restructuring that you can do.

Then also I guess like how much of that headwind is coming from from tariffs.

Yeah, so I, you know, I think maybe there's been, um, you know, a couple things, you know, the mix, if you think about year-over-year and you're think and more the, the mix is, as we talked about the high horsepower segment, despite all of the geopolitical stuff that we're hearing about Brazil being a beneficiary. We're not seeing the large egg part of that market pick up yet. And so what we have been seeing is that again that Medium low horsepower specialty crops. So what you're seeing year-over-year there is is really more of a mixed challenge. You know, in the quarter we had a little bit of a warranty Spike year-over-year. Nothing

Yes, so Chad the part of the overall restructuring programs that we're talking about some portion of that is in North America. So we will see some marginal benefits of that.

As we move into next year when I look at the margins right now are the negative margins.

Is heavily influenced by the level of under production again, I think as Eric mentioned when you look at where we were producing in 2023, the number of hours versus what we're producing right now in the back half of 'twenty five we're down around 70 plus percent in ours.

Significant, but just on a quarter year-over-year, basis. Warranty was a little bit higher. Um, when I think about the fourth quarter again, you're going to see that mix headwind come in in South America. As again, we're not seeing the large horsepower pickup. And if you look at the fourth quarter for South America specifically, you know, last year we called out a special tax benefit for R&D. You know it was about 1 to 1 and a half percent of a margin lift, you know, that's not repeating this year and so those are the the 2 drivers. As I think about the fourth quarter is really the continued mixed Decline year-over-year and then that 1 tax benefits uh that I had in the fourth quarter of 2024.

All right, much appreciated.

In North America. So when you just think about the cost of those factories running at that lower level of utilization that is a significant drag on the margins.

The next question is from Chad Dillard with Bernstein. Please go ahead.

On top of that as I said, the tariff costs are centralized here.

Team is doing a nice job in trying to offset that I would say on a dollar basis, we're not offsetting it on a margin basis. So obviously, that's going to be margin dilutive.

Hey, good morning guys. Uh a question for you guys on North America. Uh so can you walk through the path to margin recovery? Um is there further restructuring uh that you can do? Uh and then also I guess like how much of that headwind is just coming from from tariffs.

So the key for US is to get the volume right. We looked at this industry and I think last year. When you exclude grain and protein we were two 3 billion or so give or take.

We need to get that volume back up and whether thats the industry recovering whether that's the continued focus on gaining share all of those things are going to be critical I'd say parts is doing quite well, but in North America parts, a little bit weaker.

Yeah. So, you know, Chad the part of the overall restructuring programs that we're talking about, you know, some of, you know, a portion of that is in North America. So we will see some marginal benefits of that. Um, as we move into next year, you know, when I look at the, the margins right now, where the negative margins, it's heavily influenced by the

The year over year. So again, that's a high margin part of the business. So we need the.

The volume has to start flowing back in North America, and it's not necessarily a reflection of what we're doing it's more a reflection of the industry because when we look at fendt, we're actually gaining share here in North America. You are just gaining share on a much smaller pie and you're not seeing that drop to the bottom line given the just given the overall industry decline.

Got it that's super helpful.

And then just secondly, you were talking about your pricing strategy to mitigate tariffs and talking about spreading it I guess more globally.

I'd love to get a little more color on that I guess, what I'm trying to understand is how.

How successful are you seeing pricing stick, if youre looking to expand more globally than narrowly focusing on pricing in North America.

That is a a significant drag on the margins. Um on top of that. As I said, the, you know, the Tariff costs are centralized here. Um, the team's doing a nice job in trying to offset that I'd say on a dollar basis, we're not offsetting it on a margin basis, you know? So obviously that's going to be margin dilutive. Um, so that, you know, the key for us is to get the volume, right? We look at this industry and you know, I think last year when you exclude grain and protein we were 2.3 billion or so give or take. Um,

Maybe I'll take that one of our strongest our biggest market is Europe and we continue to grow share there, even though we put pricing into that market.

South America is probably opposite it's like Damon said, it's the most price competitive right now.

And so it's been the one that's the most difficult for us to have pricing power at the moment, but.

Big Picture South America is going to come back as the industry comes back, but we've had the most success in Europe.

But the pricing and gained share at the same time so.

Our disconnect between where we incur the tariffs and where are we where we offset it has been working.

You know, we need to get that volume back up and, you know, whether that's the industry recovering, whether that's the continued focus on gaining share. Um, all of those things are going to be critical. I'd say, you know, Parts is doing quite well, but in North America Parts is a little bit weaker, um, year-over-year. So, again, that's a high margin part of the business. So we need the, you know, the volume has to start flowing back in North America and it's not necessarily a reflection of of what we're doing. It's more reflection of the industry because when we look at fence, we're actually gaining share here in North America. You're just gaining share on a much smaller pie and you're not seeing that drop to the bottom line. Giving the, uh, you're just giving the overall industry decline.

Remember theres a three pronged strategy there number one is work with our supply chain to minimize the cost impact.

Moving products around from within our supply base or within our manufacturing operations is item number one item number two is product re imagined when they take about $200 million out of our cost structure on a little over $1 billion base. So that's a self help area and then <unk>.

That's that's super helpful. Um and then just secondly you were talking about your your pricing strategy to to mitigate tariffs and and talking about spreading it, I guess more more globally. I I'd love to get a little bit more color on that. I guess what I'm trying to understand is how successful are you, you know, seeing pricing stick. If you're looking to expand more globally, then narrowly focusing on on pricing in North America.

Third is the pricing action and we've been really clear all the way along is we're going to put price around the globe wherever we can where the market will bear and that focuses on North America.

Maybe I’ll take that one. You know, our strongest, our biggest market is Europe, and we continue to grow share there, even though we put pricing in that market.

Okay. Thank you.

The next question is from Joel Jackson with BMO capital markets. Please go ahead.

Good morning.

Your outlook.

Next year in our global sales flat Europe up the rest of the market is down a bit can you speak to knowing what your inventory levels will be at the end of this year, what that means what that might mean for underproduction in the various regions, we might expect next year.

Yes, Joe.

Hello.

I think if we look around the world Europe, we continue to be in a really good position you didn't see much under production in Europe. This year and again given the dealer inventories right now are sitting below our optimal level I would say sort of consider that relatively flat year over year again, producing closer to retail.

South America is probably the opposite. It's like Damon said. It's the most price competitive right now. Um, and so it's been the 1 that's the most difficult for us to to have pricing power at the moment. But uh, big picture, you know, South America is going to come back, um, as the industry comes back, but we've had the most success in in Europe, um, but the price in and gain share at the same time. So our our disconnect between where we incur the tariffs and where we where we offset it has been working, you know, remember there's a 3-prong strategy there. Number 1 is work with our supply chain to minimize the cost impact.

We're in line with retail excuse me South America other than the industry is picking up year over year. If you remember we had a lot of under production here in the first half of 2025, and so as I think about South America, you, probably see some incremental positive from absorption on the full year it'll be first half weighted and then we'll start the <unk>.

And moving products around from within our supply base or within our manufacturing operations is item number 1. The item number 2 is Project reimagine. We're going to take about a hundred million dollars out of our cost structure on a little over a billion dollar base. So that's a a self-help area and then only third is the pricing action and we've we've been really clear all the way along as we're going to put price around the globe wherever we can where the market will bear and and that focuses on North America.

Thank you.

The next question is from Joel Jackson with BMO Capital Markets. Please go ahead.

<unk> the comps that we're seeing here in the third and fourth quarter, where were producing closer to retail.

North America has been a little bit of a wildcard again, if you look at what we've said with North America large AG potentially being down our dealer inventories at eight months right now hoping to get that closer to our targets that would likely result in some under production here in the in the early part of 2026, but as Eric said.

Good morning. Um, what's your outlook that you expect next year in your global sales? Flats in Europe up, the rest of the markets down a bit. Um, can you speak to, you know, knowing what your inventory levels will be at the end of this year? What that means, what that might mean for underproduction in the various regions we might expect next year?

Given the recent news with the trade deal with potential incremental subsidies and my comment that if that changes the industry outlook.

For large AG that may help us.

Accelerate or not have to under produce but again North America is still a little bit of a TBD next year.

And then finally can you maybe talk about what sort of subsidy packaging packaging. This data a magnitude might move the needle for your end customers $5 billion $10 billion $15 billion program, where that $50 an acre hydrology in acre have you thought about sort of what's needed to move the needle to get farmers to look at capital purchase.

Yeah, Joel. Um, you know, obviously, I think if we look around the world Europe, we can we continue to be in a really good position. You didn't see much under production in Europe this year. Um, and again, given the dealer inventories right now are sitting below, our, our optimal level. I would say, you know, sort of con consider that relatively flat year-over-year. Again producing closer to to retail. Um we're in line with retail, excuse me, South America. Again the industry is picking up year-over-year. If you remember we had a lot of under production

And not just deleveraging of working capital.

I think it needs to be over $10 billion.

Sure.

10% to 20 anything in there we will you will get farmers attention.

<unk> that money is not seen as the same as market driven profitability. They are more likely with subsidy money to pay down debt and other things because they're not sure if it's going to be sustainable into next year and year after.

If the trade deal really sticks and Theres, a three year commitment to purchase 25.

Dollars metric tons type purchasing or more.

It's going to drive confidence way more than farmers, then will the subsidy.

The next question is from Angel Castillo with Morgan Stanley. Please go ahead.

Thanks. Good morning, everyone. Just wanted to go back to maybe one of the earlier discussions on North America margins in tariff.

Just wanted to check I guess am I doing the math right based on what you talked about with the one percentage of sales impact next year that that kind of implies something approaching roughly a dollar.

And then finally, can you maybe talk about, you know, what sort of subsidy package and stakes would be able to package in the states of magnitude? Might move the needle, you know, for your end customers? You know, $5 billion, $10 billion, $15 billion programs, where that $50 an acre, $100,000 acre. Have you thought about sort of what's needed to move the needle to get farmers to look at capital purchases and not just do leveraging or working capital?

Tariff headwind if you could just comment on that and then just related to that I guess based on what you are estimating today for kind of in North America.

Outlook fully accepting that theres a lot of moving pieces.

Which quarter would you kind of expect to see the kind of peak pressuring.

So angel.

<unk> pressure in what regard.

In terms of how you kind of spread that.

<unk> of headwind, which im assuming theres quite a bit of a ramp up is can you as you kind of work through inventories and.

Yeah, I think it needs to be over 10 billion, you know, 10 to 20, anything in there, will will get Farmers attention. Granted, that money is not seen as the same. As as Market driven profitability, they're more likely with subsidy money to pay down debt and other things because they're not sure if it's going to be sustainable in the next year near after. So the if the trade deal really sticks and there's a 3 year commitment to purchase 25 million metric, tons of type purchasing or more

The flow through of that tariff impact on your kind of P&L, So just curious which quarter would kind of yes.

That's going to drive confidence, way more in Farmers than will uh, the subsidy.

Before it starts to them.

Comp numbers.

Numbers.

Yeah, well I think first question I again, if our sales right now were $9 8 billion I said less than 1%. So youre, probably looking at sort of less than one dollar call. It closer to 80 give or take it.

The next question is from Angel Castillo with Morgan Stanley. Please go ahead.

Depending on how things finalized against some of these tariffs as you know are are still changing.

Will influence some of the small horsepower tractors that we buy from other that are imported from other countries. So I don't want to be too precise but directionally AUM.

Thanks, good morning everyone. And um, just wanted to go back to maybe 1 of the earlier discussions on North America margins and tariffs. Uh, I just wanted to check, I guess, am I doing the math, right? Based on what you talked about with the 1%, or just sales impact next year? That that kind of implies something approaching or, or kind of some roughly, a dollar, uh, of tariff, headwinds. If you could just comment on that, and then just relate it to that. I guess, based on what you're estimating today, for kind of the North America, um,

Less than that and again that doesn't take into consideration the pricing actions that I mentioned as well. So again when I gave make that number that was the absolute tariff cost that's not my net effect to P&L next year, because I already have pricing actions in effect in parts in Pts for model year <unk>.

Outlook fully accepting that there's a lot of moving pieces still, which quarter would you kind of expect to see the the kind of peak pressure in

So, Angel, can you explain peak pressure in what regard?

Six equipment and so that net number will be less than that again, we haven't given a specific outlook, we want to see how the fourth quarter unfolds, but it will be a lot less than that absolute number.

The number that I'm quoting you for the tariff costs themselves.

In terms of how you kind of spread that, um, tariff headwind, which I'm assuming there's a little bit of a ramp up as can you as you kind of work through inventories and um you know, the flow throughout that tariff impact on your kind of pnl. So just curious which quarter would kind of see the the before it starts to kind of comp easier numbers.

Think about the cadence.

<unk> you already see that flowed through our P&L in North America, depending on the product again as you know we buy a lot of these medium and low horsepower tractors from other companies depending on the level of inventory that we had in stock and that our dealers have the stock that's flowing through over a period of time, coupled with the cost that we're incurring for <unk>.

Some of the raw materials that we're purchasing for our assembly operations here in the U S. So again I think it's going to face itself in as we get into the second quarter I would think we'd worked through most of the inventory that we've had and we've started to see more of the full effect I would say directionally around Q2.

Yeah, well, I think the first question again is if our sales right now are $9.8 billion. I said less than 1%, so you know, you're probably looking at sort of, you know, less than a dollar, you know, call it closer to 80 cents, give or take. Um, you know, depending on how things finalize against some of these tariffs, as you know, are still changing. Um, you know, and those will influence some of the small horsepower tractors that we buy from others that are imported from other countries. So I don't want to be too precise, but you know, directionally, you know,

That's very helpful. Thank you and then maybe.

I think you had indicated that flat volumes next year would actually reduce your inventory levels by about half a month.

And I think your current assumptions I was down in single digits. I guess first can you put a finer point on kind of what that assumption was for North America is that closer to mid single digit to high single digits type of decline and then if for some reason I guess volumes in North America large AG wind up being closer to down kind of mid teens, which I think some investors just kind of talent checks suggest that might.

They are realistic.

The risk I guess, what's the sensitivity of math.

And back on your inventory levels, if it were to be closer to the mid teens and how much what does that mean for your production next year.

Yes, so I mean, we haven't given a specific number related to what we were thinking for 2006 again as more as.

You know, less than that—and again, that doesn't take into consideration the pricing actions that I mentioned as well. So again, when I gave Mig that number, that was the absolute tariff cost. That's not my net effect to P&L next year because I already have pricing actions in effect in Parts and PTX for model year 2026 equipment, and so that net number will be less than that. Again, we haven't given a specific outlook; we want to see how the fourth quarter unfolds, but it will be a lot less than that absolute number that I'm quoting you for the tariff costs themselves. You know, as I think about the cadence, you know, we're starting to already see that flow through our P&L in North America depending on the product. Again, as you know, we buy a lot of these medium and low-hulks power tractors from other companies. You know, depending on the level of inventory that we had in stock and that our dealers had in stock, that's flowing through over a period of time, coupled with the costs that we're incurring for some of the raw material.

As we look at the data as we look at the analytical models running we're starting to see it down I think as Eric said sort of in that mid.

Mid single digit range as what we were Directionally looking at.

I'd, rather not speculate right now with all of the recent news that's come out. This week again, I think as Eric said those were both net positive.

Materials that were purchasing for our assembly operations here in the US. So again, I think it's going to phase itself in. You know, as we get into the second quarter, I would think we'd work through most of the inventory that we've had. Um, and we start to see more of the full effect. Um, I'd say directionally around Q2.

Data points for farmers in North America, and we're hopeful that that has more of a positive catalyst as we go into 'twenty six, but obviously to the extent it was down.

Using your mid teens numbers, we'd be forced to keep the underproduction.

Longer to continue to reduce the dealer inventories, we want to make sure of that.

We're not that we're getting that down to that six months as quickly as possible and again given the numbers through heroes quoting with production down over 50% again in the fourth quarter were being as aggressive as we can.

And trying to minimize the putting incremental inventory into the dealer channel here.

That's very helpful. Thank you. And then maybe, um, earlier, I think you had indicated that flat volumes next year would actually, uh, reduce your inventory Levels by about half a month. Um, and I think your current assumptions was down, single digits, I guess first, can you put a finer point on kind of what that assumption was for North America is that go through the mid single digits or high single digits uh type of Decline and then if for some reason, I guess volumes in North America, large egg, wind up being closer to down kind of mid teens, which I think some investors kind of challenge checks suggest that might be a realistic um risk. I guess what's the sensitivity of math you know or impact on your inventory levels? Uh if if it were to be closer to the mid teens and how much, you know, what does that mean for under production next year?

Very helpful. Thank you.

Uh huh.

This concludes our question and answer session I would like to turn the conference back over to Eric <unk> for any closing remarks.

Yes. Thank you for joining us today and all of these thoughtful questions AGL continues to make meaningful progress on our transformation journey, we delivered a strong third quarter performance with strong margins and disciplined inventory management accelerated cost reduction and healthy free cash flow generation year to date I'm really proud of the team for achieving this macro.

Volatility by focusing on what we can control in a dynamic environment that always and always keeping our eyes on putting the farmer at the center.

In fact, the feedback we're getting from our farmers is real strong our net promoter scores that are all time highest level in the company's history. They like the net impact of our products and what we're doing with our dealers to serve them better.

In the quarter Europe is our biggest market continued to provide stability.

We know farmers around the world are under pressure, our priorities supporting them with efficient machines in technology that keep them productive and profitable.

I think is Eric said, sort of in that, you know, mid single digit range is what we were directionally looking at. Um, I'd rather not speculate right now with all of the recent news that's come out this week. Again, I think as Eric said those are both net positive, um, data points for farmers in North America. And, you know, we're hopeful that that has more of a positive Catalyst as we go into 26. Um, but obviously, to the extent it was down with your, you know, using your mid teens numbers, you know, we would be forced to keep the underproduction, um, probably longer, um, to continue to reduce the dealer inventories. We want to make sure that, uh, you know, we're not that, we're getting that down to that 6 months as quickly as possible. And again, given the numbers you hear us quoting with production down over 50% again in the fourth quarter, we're being as aggressive as we can. Um, in in trying to, you know, minimize the putting incremental inventory into the dealer channel here.

We continue to execute our strategic shifts that sharpen our focus and unlock long term potential including the cafe exit.

Very helpful. Thank you.

The PT X creation and product re imagine.

This concludes our question and answer session. I would like to turn the conference back over to Eric hodaya, for any closing remarks,

Our innovation flywheel spinning faster than ever with new autonomous solutions and the launch of farm engage be.

Reinforcing us as one of the most progressive leaders in smart farming and I think youll see that on display big time at agro Technica the world's largest AG.

AG show coming up here.

School generation year to date.

A week or so.

That will be a great way to engage with all the exciting things that <unk> got going on.

2025 financial outlook reflects our confidence in the strategy and the strength of our global team.

I'm really proud of the team for achieving this a missed mackerel volatility, by focusing on what we can control in a dynamic environment that always and always keeping our eyes on putting the farmer at the center.

Even in this challenging environment, we are investing in the future gaining share executing with agility and.

He's putting the farmer first.

Thank you for your participation today, and we really appreciate it.

You know, in fact, the feedback we're getting from our Farmers is real strong. Our net promoter score is that are all-time highest level in the company's history. They like the net impact of our products and what we're doing with our dealers to serve them better.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

In the quarter, Europe is our biggest market and continued to provide stability.

We know farmers around the world are under pressure. Our priority is supporting them with efficient machines and technology that keep them productive and profitable.

We continue to execute our strategic shifts. That sharpen our focus and unlock long-term potential including the Tafe exit, the PTX creation and project reimagine.

Our Innovation flywheel is spinning faster than ever with new autonomous Solutions in the launch of farm. Engage reinforcing us is 1 of the most Progressive leaders in smart farming. And I think you'll see that on display big time at Agra Technica. The world's largest um egg show coming up here in a in a week or so, um that that will be a great way to engage with all the exciting things that aico's got going on.

Our 2025 Financial Outlook reflects our confidence, in the strategy and the strength of our Global team.

Even in this challenging environment, we are investing in the future, gaining share executing with agility and always putting the farmer first.

Thank you for your participation today. We really appreciate it.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect