Q3 2025 CNH Industrial NV Earnings Call

And the answer session.

Ask a question at this time, you will need to press star followed by the number one on your telephone keypad.

Speaker #3: Good morning and welcome to the CNH Industrial N.V. Q3 2025 results conference call. All participants are in a listen-only mode. After the speakers' remarks, we will have a question and answer session.

As a reminder, this conference call is being recorded.

I will now turn the call over to Jason <unk>, Vice President of Investor Relations.

Speaker #3: To ask a question at this time, you will need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.

Thank you Julian and Hello, everyone. We would like to welcome you to <unk> third quarter earnings presentation for the period ending September 32025. This live webcast is copyrighted by <unk> and any recording transmission or other use of any portion of it without the written consent of <unk> is strictly prohibited.

Jason Omerza: Many of the improvements discussed at our investor day, such as improving dealer network presence and improving operating performance, along with the product launches mentioned by Gerrit earlier, are designed to improve the fortunes of the EMEA region, with our focus on this critical area that will yield benefits for the entire agricultural segment. Construction third quarter net sales were $739 million, up 8% year over year, driven by higher sales in North America and EMEA. The increase is mainly due to the low sales level last year, as we had cut production aggressively in 2024. Gross margin for the quarter was 14.5%, down from 16.6% in Q3 2024, mainly as a result of the tariffs. Purchasing and manufacturing efficiencies of $12 million favorable were more than offset by $26 million of tariff costs.

Speaker #3: I will now turn the call over to Jason Omerza, Vice President of Investor Relations.

Speaker #4: Thank you , Julianne , and hello everyone . We would like to welcome you to CN's third quarter earnings presentation for the period ending September 30th , 2025 .

Hosting today's call are <unk>, CEO, Gerrit Marx and CFO, Jim Nicholas They will referenced the material available for download from our website.

Speaker #4: This live webcast is copyrighted by CNH Industrial N.V. Any recording, transmission, or other use of any portion of this webcast without the written consent of CNH Industrial is strictly prohibited.

Please note that any forward looking statements that we make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material.

Speaker #4: Hosting today's call are CEO Gerrit Marx and CFO Jim Nicholas. They will reference the material available for download from our website.

Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U S Securities and Exchange Commission.

Speaker #4: Please note that any forward-looking statements that we make during today's call are subject to risks and uncertainties mentioned in the Safe Harbor Statement included in the presentation material.

Speaker #4: Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent Annual Report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission.

Our presentation includes certain non-GAAP financial measures additional information, including reconciliations to the most directly comparable U S. GAAP financial measures is included in the presentation material I will now turn the call over to Gary.

Jason Omerza: It's important to point out that we seem to have been a bit more aggressive on price increases as a result of the tariffs than we have seen from our competitors. Like in agriculture, construction SG&A was unfavorable due to variable compensation accruals, and labor inflation. We closed the third quarter with an adjusted EBIT margin of 1.9%. I would also like to note that earlier this week, we finalized our previously announced plan to stop production at our construction plant in Burlington, Iowa, by the second quarter of 2026 due to declining demand and underutilization. Production will be moved to other existing CNH facilities, including our plant in Wichita, Kansas. This is part of construction's manufacturing optimization effort that was discussed at the investor day. Moving to financial services, third quarter net income was $47 million.

Speaker #4: Our presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures, is included in the presentation material.

Thank you, Jason and welcome to everyone joining the call.

Our third quarter ended in an evolving world of global trades, but with progress along all articulated priorities, who licensed channel inventory reduce our quality and product costs break new ground across our lineup of buyer and in technology and build a solid foundation for our recently announced two.

Speaker #4: I will now turn the call over to Garrett . Thank you . Jason , and welcome to everyone joining the call . Our third quarter ended in an evolving world of global trade .

Speaker #4: But with progress .

Speaker #5: Along with our articulated priorities to lighten channel, inventory, reduce our quality and product costs, break new grounds across our lineup of iron and technology, and build a solid foundation for our recently announced 2030 mid-cycle margin commitment.

<unk> mid cycle margin commitment.

Since the very early days of our industry farmers have seen many cycles and shifts in global trade, some even larger and more disruptive than this one as we look forward beyond the current cycle. It is certain that most arable land around the world will be used for technology led crop production in our lives.

Speaker #5: Since the very early days of our industry, farmers have seen many cycles and shifts in global trade, some even larger and more disruptive than this one.

Jason Omerza: The $31 million year-over-year decrease was driven by higher risk costs in Brazil, partially offset by better margins in all regions. Retail originations in the third quarter were $2.7 billion, down 6% year over year, reflecting the lower equipment sales environment. The managed portfolio ended the quarter at $28.5 billion. The wholesale portfolio is down nearly $1.5 billion since 12 months ago on a constant currency basis, mainly driven by the lower dealer inventory levels. While credit collection rates have been relatively steady in most regions, despite the market downturn, we, along with others in the industry, are experiencing persistent delinquencies in Brazil. Accordingly, we increased our credit reserves again in the quarter. We believe that our reserves are adequate, and we're working with farmers in the region so they can continue to operate their farms and pay for their equipment.

Still farming to feed the growing population, even if it requires growing different crops.

Speaker #5: As we look forward beyond the current cycle, it is certain that most arable land around the world will be used for technology-led crop production and livestock farming to feed the growing population, even if it requires growing different crops.

As the only other truly global full on agriculture machinery provider <unk> is going to play an even larger role in helping feed the world as we will showcase next week during our tech data at the <unk> Technical fair in Hanover, Germany.

Speaker #5: As the only other truly global full-line agriculture machinery provider is going to play an even larger role in helping feed the world, as we will showcase next week during our Tech Day at the Agritechnica Fair in Hannover, Germany.

We are thoughtfully transforming our global supply chain footprint and dealer network to mitigate the risks of further volatility that may emerge in the in our industry.

With this clear direction in mind, we have maintained the overall low levels of production that we initiated in the third quarter of 2024 to help reduce <unk> dealer inventories and clear aged products, while still defending and in some cases growing market shares.

Speaker #5: We are thoughtfully transforming our global supply chain footprint and dealer network to mitigate the risks of further volatility that may emerge in our industry.

Speaker #5: With this clear direction in mind, we have maintained the overall low levels of production that we initiated in the third quarter of 2024.

Jason Omerza: Our experience from past cycles is that most farmers in delinquent status will eventually catch up on their commitments, but this increase in risk reserves is a needed measure while observing how the market environment unfolds. Our capital allocation priorities remain unchanged. We will continue to reinvest in our business while maintaining a healthy balance sheet. During the third quarter, we repurchased $50 million worth of CNH stock at an average price of $11.25 per share. Before I turn the call back to Gerrit, I want to give you an update on our net tariff assumptions for this year, as well as a view of the gross run rate impact of the tariffs. The numbers on this page reflect the expanded Section 232 steel and aluminum tariffs, which were not factored into our previous guidance, and reflect that China tariffs will be lowered by 10 percentage points on Monday.

Both AG and construction production was flattish year over year, but large AG production was down 10%, while small AG was mostly up.

Speaker #5: To help reduce HDL inventories and clear aged products , while still defending and in some cases , growing market shares . Both AG and construction production was flattish year over year , but large egg production was down 10% , while small egg was mostly up .

AG dealers, new inventory levels saw another sequential decline of over $200 million.

Putting them on track to achieve our targeted levels over the next three to four months.

Speaker #5: Our ag dealers' new inventory levels saw another sequential decline of over $200 million, putting them on track to achieve our targeted levels over the next 3 to 4 months.

Our North American dealers used inventory also saw another sequential decline in the quarter.

Well, it's all good news for <unk> market fundamentals remain uncertain and challenging for our farmers and it is difficult to say, if we enter 2026 with more visibility or even more momentum conditions in South America, and Brazil in particular continue to be a headwind.

Speaker #5: Our North American dealers' used inventory also saw another sequential decline in the quarter. Well, that's all good news for market fundamentals, which remain uncertain and challenging for our farmers.

Jason Omerza: For 2025, we estimate the net impact to agriculture at around $100 million at the midpoint, and construction at $40 million at the midpoint. In the fourth quarter, that will be around $60 million for ag and $20 million for construction. In the short term, we are working diligently to offset as much of the tariff impact as we can. This includes collaborating with our suppliers to identify alternative sourcing options, and consuming pre-tariff inventories. The price adjustments implemented to date do not fully offset the gross tariff impact, as we have chosen to share the burden alongside our suppliers, network partners, farmers, and builders while the trade environment is in flux. The 2025 impact is only a partial year impact, as the ramp-up in tariff levels and our FIFO accounting pushed most of the impact into the second half.

For our farmers, while we had expected to see this region as the first to emerge from the downturn difficult geopolitical and market circumstances have persistence.

Speaker #5: And it is difficult to say if we will enter 2026 with more visibility or even more momentum. Conditions in South America, and Brazil in particular, continue to be a headwind for our farmers.

Similarly conditions in North America have been difficult for farmers as they see the global trade shifts impact their very own operating bottom line.

Speaker #5: While we had expected to see this region as the first to emerge from the downturn, difficult geopolitical and market circumstances have persisted.

Even with the recent announcements around the trade deal with China materials subsidies for farmers in that different forms are needed while the leveling of the global trade Plainfield as promising.

Speaker #5: Similarly, conditions in North America have been difficult for farmers as they see the global trade shifts impact their very own operating bottom line.

So in the meantime, we use all of these shifts changes and drags on global framework condition as an opportunity to invest our resources in building, a better and higher performing <unk> during these slow quarters.

Speaker #5: Even with the recent announcements around the trade deal with China, material subsidies for farmers in their different forms are needed. While the leveling of the global trade playing field is progressing.

Jason Omerza: If we annualize the gross impacts, still at 2025 volumes, we estimate approximately $250 million of impact in agriculture and $125 million impact in construction. That is approximately 200 basis points of agriculture margin headwind and 425 basis points of construction margin headwind. I'm only showing the gross cost run rate impact here because, as Gerrit said, we do intend to be able to fully offset the tariff impact over the long run. We will take advantage of our ongoing strategic sourcing program to identify the right suppliers with a global footprint to help us identify the most favorable countries of origin. Likewise, we will leverage our global manufacturing footprint to identify the ideal production locations. Ultimately, we will pass through the remaining incremental costs through our pricing, as has been done across the industry in the past. Our 2030 margin targets will not be jeopardized by the tariffs.

Speaker #5: So in the meantime, we use all these shifts, changes, and drags on global framework conditions as an opportunity to invest our resources in building a better and higher-performing organization. During these slow quarters, we can prepare for upcoming product launches and define new ways of working more efficiently.

We can prepare for upcoming product launches and define new ways of working more efficiently. This.

This business has always been very cyclical and maintaining a through cycle perspective on what matters, accompanied with consistently delivering profits and cash flows to make all the difference.

We are advancing our investments in iron and technology, all the way to adjourn take AI applications for our digital farm management system <unk> we.

Speaker #5: This business has always been very cyclical, and maintaining a full-cycle perspective on what matters, accompanied by consistently delivering profits and cash flows, makes all the difference.

We continue to take obsolete cost out of the operations to improve our underlying margin profile outside of the near term tariff impacts.

Speaker #5: We are advancing our investments in iron and technology all the way to agentic AI applications for our digital farm management system, Field Ops.

And we continue to make progress on our new go to market network development strategy with regionally important steps to emerge over the next year.

Speaker #5: We continue to take obsolete costs out of the operations to improve our underlying margin profile . Outside of the near term tariff impacts , and we continue to make progress on our new go to market network development strategy with regionally important steps to emerge over the next year .

So why are we thoughtfully navigate near term challenges our focus remains on investing in the business to secure leading positions across all our major markets.

Jason Omerza: With that update, I will turn it back to Gerrit. Thank you, Jim. Now, let's review our latest outlook for agriculture in 2025. Global industry retail demand is expected to be down around 10% from 2024. We have narrowed our net sales guidance as we approach the end of the year. Full-year pricing will be positive about 1%, and there is no expected currency translation impact. We have also updated our margin guidance. As you recall, last quarter, we said that margins would likely fall somewhere below the midpoint in the guidance. However, since our last call, additional Section 232 tariffs on steel and aluminum were introduced. As such, our revised guidance now reflects both tariffs, as well as the geographic mix shift between North America and EMEA, and product mix between large ag and small ag.

In full alignment with our board of directors, we are pursuing the path. We laid out on may eight with determination and a healthy dose of flexibility as we navigate near term challenges, we are <unk> and we will deliver.

Speaker #5: So, while we thoughtfully navigate near-term challenges, our focus remains on investing in the business to secure leading positions across all our major markets, in full alignment with our Board of Directors.

With that let's turn to the results.

Speaker #5: We are pursuing the path we laid out on May 8th with determination and a healthy dose of flexibility as we navigate near-term challenges.

As expected and projected our Q3 results now reflect the delayed impact of tariffs on our costs.

Speaker #5: We are , and we will deliver . With that , let's turn to the results . As expected and projected , our Q3 results .

Which did not yet have a material impact in Q2.

As a reminder, we introduced additional pricing adjustments effective with new orders received after May one and we also started to see some of that benefit in Q3.

Speaker #5: Now reflect the delayed impact of tariffs on our costs , which did not yet have a material impact in Q2 . As a reminder , we introduced additional pricing adjustments effective with new orders received after May 1st , and we also started to see some of that benefit in Q3 .

It is our intention that we will eventually offset all the tariff cost impact through cost mitigation structure realignment and pricing actions.

Jason Omerza: The Section 232 tariffs will impact all players in the industry, whether their components are imported or locally sourced, as domestic steel and aluminum prices will rise as well. We expect to recover those impacts through pricing of our products. In construction, overall industry retail volumes are expected to be down about 5% from 2024. As with ag, we have also narrowed our net sales outlook for the year and lowered our margin expectations. We are still working on our 2026 industry estimates, and we will need to see how some of the larger market players react on pricing before we are able to finalize an opinion here. With the narrowed sales estimates in ag and construction, we are guiding total industry net sales to down 10% to 12% year over year, with margins reflective of the net tariff exposure between 3.4% to 3.9%.

In 2025, however, we are absorbing some of the impact alongside our Suppliers' network partners farmers and builders as we navigate these new trade realities.

Speaker #5: It is our intention that we will eventually offset all the tariff cost impacts through cost mitigation structure realignments and pricing actions in 2025.

The changed conditions for purchase components and ship machines impact the entire industry and relative differences in exposure and footprint will impact near term results differently.

Speaker #5: However, we are absorbing some of the impact alongside our suppliers, network partners, farmers, and builders as we navigate these new trade realities.

2026 will be a year of alignments and adjustments for our industry and we expect those to play out fully for the 2027th season.

Speaker #5: The changed conditions for purchase components and shipped machines impact the entire industry, and relative differences in exposure and footprint will impact near-term results differently.

Consolidated revenues for the quarter were down 5% at $4 4 billion, our global AG segment sales were down 11% with North America down, 29%, but EMEA up 16%, while the geographic mix shift has a negative effect on our margins.

Speaker #5: 2026 will be a year of alignments and adjustments for our industry, and we expect those to play out fully for the 2027 season.

Speaker #5: Consolidated revenues for the quarter were down 5% at $4.4 billion. Our global ag segment sales were down 11%, with North America down 29%.

It is encouraging to see some bright spots in EMEA sales, particularly tractors, especially in eastern Europe and in the middle East and to some extent also in Germany.

Jason Omerza: Free cash flow is now expected in the $200 to $500 million range. EPS is now forecasted to be between $0.44 and $0.50, again reflecting the latest net tariff impacts. I will end our prepared remarks by looking at our priorities for the remainder of the year as we close out 2025 and position ourselves for success in a likely transition year in 2026. We are carefully observing the different leading demand indicators. At the same time, while we are dealing with a rapidly changing trade environment, we are working very closely with our network partners and suppliers to ensure that we are responsive to ongoing shifts in the market. We are taking orders for model year 2026 products now at new prices, reflecting another round of cost recovery. Each region has their own cadence for order collection, typically North America ahead of the other regions.

Speaker #5: But EMEA up 16% , while the geographic mix shift has a negative . Effect on our margins , it is encouraging to see some bright spots in EMEA sales , particularly tractors , especially in Eastern Europe and in the Middle East , and to some extent also in Germany .

Some of our product launches to be revealed next week in Hanover a.

Precisely targeted to fill gaps and gain more ground in those markets for CNA itch, we will explain these step changes in greater detail next week.

Speaker #5: Some of our product launches to be revealed next week in Hanover are precisely targeted to fill gaps and gain more ground in those markets.

Industrial EBIT was adjusted industrial adjusted EBIT was $104 million down 69% compared to last year, mainly reflecting the impact of lower industry demand tariffs and geographic mix.

Speaker #5: For we will explain these step changes in greater detail next week . Industrial Ebit was a industrial adjusted Ebit was $104 million , down 69% compared to last year , mainly reflecting the impacts of lower industry demand , tariffs and geographic mix .

Adjusted net income was 109 million with adjusted EPS for the quarter at eight cents.

While the markets are not helpful to our farmers growers and builders. These days, we remain more committed than ever to strengthening the company and prioritizing long term value creation.

Speaker #5: Adjusted net income was $109 million , with adjusted EPs for the quarter at $0.08 . While the markets are not helpful to our farmers , growers and builders these days , we remain more committed than ever to strengthening the company and prioritizing long term value creation .

Jason Omerza: Production order slots are full for the remainder of 2025, and we are about half full for the first quarter of 2026. Some products in some regions are a bit further out than that. North America's Q1 slots are already full. For example, we are monitoring order collection closely to understand overall industry retail demand in 2026, and to make the appropriate shift in our production cadence when needed. Besides our order collection, other factors that we are evaluating include commodity prices, stocks-to-use ratios, progress on trade deals, especially a finalization of the recently announced agreement between the United States and China, clarity on renewable fuel standards in the US, used inventory levels and their values, and competitive pricing dynamics. As of right now, we would expect global industry retail demand to be flat to possibly slightly down in 2026 when compared to 2025.

Our company strategy is centered around five key strategic pillars.

Expanding product leadership, advancing our iron and tech integration driving commercial excellence operational excellence and quality as a mindset.

Speaker #5: Our company strategy is centered around five key strategic pillars: expanding product leadership, advancing our innovation and technology integration, driving commercial excellence, achieving operational excellence, and ensuring quality.

These pillars remains front and center to ensure we stay aligned with our long term strategic objectives.

Our team remains focused and United in our ship purpose to feed and build the world. We all live in.

Speaker #5: As a mindset, these pillars remain front and center to ensure we stay aligned with our long-term strategic objectives and our team remains focused and united in our shared purpose to feed and build the world we all live in.

Today, I would like to focus on a few of these items that demonstrate our commitment to the future.

While we turned the challenges of the presence into opportunities for the future.

First in the area of expanding product leadership I'm Revisiting a chart that we showed at our Investor day in May it shows a sample of our extensive product offering across many different farming applications.

Speaker #5: Today, I would like to focus on a few of these items that demonstrate our commitment to the future. While we turn the challenges of the present into opportunities for the future.

Speaker #5: First, in the area of expanding product leadership, I am revisiting a chart that we showed at our Investor Day in May.

The 2000 2500 technical show next week, we will be unveiling several new product highlights this year with key launches across our tractor and hay and forage lineup.

Jason Omerza: That likely includes EMEA being slightly up, North America slightly down in large ag, and South America and Asia Pacific somewhere in between. As year-end approaches, we'll assess market developments to refine our industry forecasts with greater precision. As I discussed earlier, we will continue to produce at our current low levels through the end of 2025 and likely into the beginning of 2026, given continued soft demand. Our North American dealers are on pace to achieve our inventory targets for new equipment within the next few months, whereas improving sentiment in Europe will allow dealers to increase their stocks somewhat. Like our continued dedication to investing in the future through iron and tech R&D, we are not taking our eyes off our margin improvement initiatives, regardless of the market environment.

Speaker #5: It shows a sample of our extensive product offering across many different farming applications. At the 2025 Agritechnica show next week, we will be unveiling several new products highlighted here, with key launches across our tractor and hay and forage lineup.

The more we will be launching significant upgrades across our full product portfolio in terms of both iron and technology.

Stay tuned as more news will be revealed about these products next week, but we are very excited about the advancements that we're making here.

Speaker #5: Furthermore, we will be launching significant upgrades across our full product portfolio in terms of both iron and technology. Stay tuned as more news will be revealed about these products next week.

Speaking of our technical and advance of the show.

We received two innovation award silver medals for our corn head on automation and forage Cam.

Speaker #5: But we are very excited about the advancements that we are making here. Speaking of Agritechnica, in advance of the show, we received two Innovation Awards Silver medals for our Corn Header Automation and Forage Cam.

The court heard automation system uses advanced AI and automation to enhance corn harvesting, which ultimately result in more high quality grain in the tank.

<unk> uses the camera to instantly annualized crop flow and credible fragments delivering real time kernel processing scores and helping to boost livestock nutrition.

Speaker #5: The Corn Header Automation System uses advanced AI and automation to enhance corn harvesting, which ultimately results in more high-quality grain in the tank.

Jason Omerza: We are maintaining our relentless focus on our homework and executing the cost management strategy that we presented to you in May. We are pursuing productivity improvements and the strategic sourcing program to drive further cost reductions, with a particular focus on delivering the highest quality products to our customers. I want to reiterate what Jim said. Our 2030 targets are not jeopardized by the current trade environment or status of the ag cycle. Things are very positive for CNH, and during times like these, continuity, true dedication, and consistent execution are more than ever important. At our tech days next week, we will exhibit our latest products, technology applications, and solutions. We are excited to show you how our technology evolves to serve farmers on their fields, and to preserve their soil health. Our solutions help them rise to everyday challenges, particularly the unexpected ones.

These technologies, which delivers significant agronomic advantages demonstrates how <unk> continues to deliver the tools and innovations that create the most value and the greatest impact for farmers.

Speaker #5: Forage Cam uses a camera to instantly analyze crop flow and kernel fragments, delivering real-time kernel processing scores and helping to boost livestock nutrition.

Speaker #5: These technologies, which deliver significant agronomic advantages, demonstrate how CNH Industrial continues to deliver the tools and innovations that create the most value and the greatest impact for farmers.

We have transformed how we think about quality within <unk>. We are taking a 360 degree view of quality spending product development supply chain manufacturing and our dealer network.

We gave you a few examples we have embedded quality into everything we do and our suppliers are a big part of that through our strategic sourcing program. We are selecting suppliers, who meet our stringent quality standards. These collaborative partnerships more reliable durable parts that directly enhance our machines.

Speaker #5: We have transformed how we think about quality within CNH Industrial, and we are taking a 360-degree view of quality spanning product development, supply chain manufacturing, and our dealer network.

Speaker #5: Let me give you a few examples . We have embedded quality into everything we do and our suppliers are a big part of that .

Performance in an industry downturn, it's tempting to focus only on the purchase price of our components, but we are maintaining a holistic view of quality throughout the sourcing process why we still take cost out from all purchase goods.

Speaker #5: Through our strategic sourcing program, we are selecting suppliers who meet our stringent quality standards. These collaborative partnerships yield more reliable, durable parts that directly enhance our machines' performance in an industry downturn.

Jason Omerza: We hope to see you in person, Hanover, or connected to the webcast. That concludes our prepared remarks, and we are ready for the Q&A. Thank you. We will now begin the question-and-answer session of the call. To ask a question at this time, you'll need to press star, followed by the number one on your telephone keypad. To allow time for as many participants as possible, please limit yourself to one question, and then return to the queue for any follow-ups. We'll take our first question from Kristen Owen from Oppenheimer. Please go ahead. Your line is open. Hi. Good morning. Thank you so much for the question. Or I suppose good afternoon now. A lot of discussion this morning on the ag margin bridge. You hit on some of the points, but I'll ask you to articulate on three particular items that stood out to us.

Speaker #5: It's tempting to focus only on the purchase price of our components, but we are maintaining a holistic view of quality throughout the sourcing process.

The programs that we piloted at our Racine planned such as no fault Ford and dynamic vehicle validation testing and now being deployed at other facilities I'm happy to report that as measured by our dealers. We are now achieving the highest deliberate quality scores for our large tractors that we have seen in over a deck.

Speaker #5: While we still take cost out from our purchase goods programs that we piloted at our plant, such as No Fault Forward and Dynamic Vehicle Validation testing, these are now being deployed at other facilities.

Kate our dealers recognize the difference in our customers are seeing it too.

Speaker #5: I'm happy to report that, as measured by our dealers, we are now achieving the highest delivered quality scores for our large tractors that we have seen in over a decade.

We never want to have machine downtime downtime, but when problems do occur. Our motto is fix right first time diagnostic AI Tech assistant tool is providing dealer technician through the real time insights at their fingertips. It has significantly reduced the time it.

Speaker #5: Our dealers recognize the difference in our customers are seeing it too . We never want to have machine downtime , downtime , but when problems do occur , our motto is fix right ?

Jason Omerza: First, can I ask you on the decremental margin on the volume mix? How much of that was the decline in North America as a total percent? How should we think about that decremental going forward? The second item here is on the SG&A and the $37 million drag. Finally, I'll just ask you to unpack some of the product cost puts and takes, tariffs versus some of that underlying quality work that you addressed. I realize there's a lot there, but I appreciate you addressing that bridge. Thank you. Yes. Okay. Hey, Kristen. Happy to answer those questions. The decremental in ag was really driven by the declining sales in North America, 29% decline in North America. EMEA up 16%. You've got a fairly sizable geographic mix element in there. SG&A did grow. That's what both parts of your questions were here.

<unk> to identify solutions and we see that in our dealer helped that efficiency.

Speaker #5: First time , then diagnostic AI tech assistant tool is providing dealer technicians with real time insights at their fingertips . It has significantly reduced the time it takes to identify solutions , and we see that in our dealer help desk efficiency .

We already see the benefits in our bottom line year to date, we have reduced our quality costs by over $60 million and there's a lot more to go as we discussed during the Investor day, but perhaps more importantly, this commitment to a quality mindset reinforces the trust our customers have in our brands and lays the foundation.

Speaker #5: We already see the benefits in our bottom line. Year to date, we have reduced our quality costs by over $60 million.

Speaker #5: And there's a lot more to go . As we discussed during the Investor Day . But perhaps more importantly , this commitment to a quality mindset reinforces the trust our customers have in our brands and lays the foundation for achieving a higher net price realization for new and used machines over time .

For achieving a higher net price realization for new and used machines over time.

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

Thank you Garrett.

Third quarter industrial net sales were $3 7 billion.

<unk>, 7% year over year.

Speaker #5: With that, I will now turn the call over to Jim to take us through the details of our financial results.

Mainly driven by decreased agricultural shipment volumes and lower industry demand.

Speaker #4: Thank you . Garrett . Third quarter industrial net sales were $3.7 billion , down 7% year over year , mainly driven by decreased agriculture shipment volumes on Lower industry demand , compounded by reduced ag dealer inventory requirements , adjusted net income decreased by nearly two thirds , with adjusted diluted earnings per share down from 24 to $0.08 .

Compounded by reduced AG dealer inventory requirements.

Jason Omerza: The ag EBIT margin declined, 12% of that decline was from higher SG&A due to the variable compensation. Last year, very low bonus accruals. This year, normalized rate of bonus accruals is being accrued. You've got the SG&A growth. Tariffs were a meaningful portion of that as well. Geographic mix I mentioned. To a lesser extent, our ag JVs are delivering lower profits this quarter than they did a year ago. Those are the four primary buckets. If you take those out, you're back to the normalized 25% to 30% decremental. That answers the ag question. Gerrit? Yeah. I just would like to, on the first point, on the mix point, Kristen, I would like to add that in EMEA, particularly the tractor segment was up, while the harvesting segment was still behind in the overall mix.

Adjusted net income decreased by nearly two thirds with adjusted diluted earnings per share down from 24 to <unk>.

The decrease was mainly due to lower sales levels tariff impacts unfavorable geographic mix and increased risk costs and financial services.

Q3 free cash flow from industrial activities was outflow of $188 million roughly in line with Q3 last year as the lower year over year, EBIT was offset by better net working capital and cash taxes.

Speaker #4: The decrease was mainly due to lower sales levels . Tariff impacts . Unfavorable geographic mix and increased risk costs in financial services . Q3 free cash flow from industrial activities was an outflow of $188 million , roughly in line with Q3 last year .

Agriculture Q3, net sales were just under $3 billion.

Down 10% year over year, driven by the 29% decrease in our higher margin North American market, where we are experiencing both a weak retail demand coupled with dealer inventory destocking.

Speaker #4: As the lower year over year Ebit was offset by better net working capital and cash taxes . Agriculture Q3 net sales were just under $3 billion , down 10% year over year , driven by the 29% decrease in our higher margin .

The year over year net sales increase in the EMEA region was mostly driven by higher demand in eastern Europe, and Middle East Africa.

Jason Omerza: I think, as you might recall, we are quite strong on tractors. We are particularly pronounced on harvesting equipment, and I mean large combines. That was in another, it's not a regional mix, it's like an in-region product mix to some extent. As Jim and I alluded to, Europe or EMEA is, for us, from a marginality, a trailing region. It's actually at the bottom. We have launched quite some substantial turnaround and restructuring actions across the region, starting as well from the product side that you will see next week in order to regain momentum and share in a region that shall be no weaker than any of our margins in North and South America.

Speaker #4: In the North American market, we are experiencing both weak retail demand coupled with dealer inventory destocking. The year-over-year net sales increase in the region was mostly driven by higher demand in Eastern Europe and the Middle East and Africa.

Pricing was favorable overall with North America, a positive, 3% and which starts to include compare related price adjustments.

This was partially offset by some negative pricing in South America, where we had seen aggressive competitive incentives.

Speaker #4: Pricing was favorable overall , with North America up positive 3% and which starts to include some tariff related price adjustments . This was partially offset by some negative pricing in South America , where we have seen aggressive competitive incentives .

Third quarter adjusted gross margin was 26% down from 22, 7% in Q3 2024 affected.

Affected by the lower volumes tariff costs and unfavorable geographic mix.

We offset by purchasing efficiencies and lower warranty expenses.

Speaker #4: Third quarter adjusted gross margin was 20.6% , down from 22.7% in Q3 2020 . For affected by lower volumes , tariff costs and unfavorable geographic mix , partially offset by purchasing efficiencies and lower warranty expenses , product costs were favorable $33 million year over year , despite including $45 million of unfavorable tariff costs after Fifo inventory offsets , manufacturing and warranty quality costs were lower by 44 million in the quarter , with supply chain efficiencies making up the remainder of the favorable year over year results .

Product costs were favorable $33 million year over year, despite including $45 million of unfavorable tariff costs after FIFO inventory offsets.

Jason Omerza: This is very much in focus, and we are going to talk you through those things next week when we stand in front of our lovely new product lineup with tractors that serve segments that we never had. Okay? High-horsepower, mid-range tractors we never had, and now we have. We'll show that next week as another measure to turn around Europe. To answer your question, the product cost unpacking really is $33 million of federal product costs, including $44 million of tariff costs. Without the tariffs, that number would have been $77 million favorability. That breaks down as $44 million in quality improvements, $17 million in purchasing and manufacturing improvements, and $16 million of other improvements. I think that shows the good work we've been doing on our path to 2030 from an operational perspective.

Manufacturing and warranty quality costs were lower by $44 million in the quarter.

The supply chain efficiencies, making up the remainder of the favorable year over year result.

So despite the tariff headwind, we're making good progress on our underlying margin improvement initiatives and this remains central to our path to 2030 strategy.

We will provide a more thorough progress report on our long term goals during our Q4 call.

Speaker #4: So, despite the tariff headwind, we are making good progress on our underlying margin improvement initiatives, and this remains central to our path to 2030 strategy.

Okay.

SG&A expenses were $36 million higher than in the third quarter last year, mainly due to higher variable compensation accruals in 2025 and labor inflation.

Speaker #4: We'll provide a more thorough progress report on our long-term goals during our Q4 call. S G&A expenses were $36 million higher than in the third quarter last year, mainly due to higher variable compensation accruals.

As a reminder, we took out over 10% of our white collar head count in late 2023 in early 2024.

And since then the levels have been essentially flat, while we work on improving our organizational effectiveness.

Jason Omerza: The tariffs, of course, are a headwind that were not there previously. Tariffs are growing a bit in Q4. Q4, we expect tariff costs to be $60 million in ag and $20 million in CE. We will give you a more detailed breakdown of the full-year cost improvements toward our investor-day targets when we report out in Q4. I think that addressed all three of your questions. Our next question comes from Angel Castillo from Morgan Stanley. Please go ahead. Your line is open. Hi. Good afternoon, and thanks for taking my question. Just two factors impacting fiscal year 2026 that I was hoping to get a little bit more color on. First, in terms of the annualized tariff growth headwind that you laid out, I just want to triple-check.

Speaker #4: In 2025, there is labor inflation. As a reminder, we took out over 10% of our white-collar headcount in late 2023 and early 2024.

Adjusted EBIT margin for Agriculture was four 6% a sequential decline from Q2 2020.

Speaker #4: And since then , the levels have been essentially flat . While we work on improving our organizational effectiveness , adjusted Ebit margin for agriculture was 4.6% , a sequential decline from Q2 2025 levels .

Five levels.

As a result of the increase in tariffs and our normal quarterly business seasonality.

<unk> enjoys the distinction of being the most geographically balanced of all the AG Oems in terms of our sales mix.

Speaker #4: As a result of the increase in tariffs and our normal quarterly business seasonality, CMH enjoys the distinction of being the most geographically balanced of all the OEMs in terms of our sales mix. We have been profitable in every region of the world so far this year.

And we've been profitable in every region of the world. So far this year, despite the consistently depressed markets.

We expect that trend to continue in the fourth quarter.

The EMEA region is weaker north and South America in terms of margins, but we know what needs to be done right its profitability profile.

Jason Omerza: I guess it seems to me, rough math, that that implies maybe a 2% to 3% kind of incremental headwind in terms of your North America sales next year. Just one, is that correct? Kind of second, based on pricing you're putting out through your orders right now for next year and the preliminary kind of cost inflation you see, I guess, how much of that 2% to 3% do you think you can offset with your pricing versus other kind of cost initiatives that you laid out? How much do you basically already have covered versus you still need to go out and get and kind of enact initiatives? The second piece of fiscal year 2026, just the underproduction, what gives you confidence in being able to achieve desired dealer levels in three to four months?

Speaker #4: Despite the consistently depressed markets , we expect that trend to continue in the fourth quarter . The EMEA region is weaker than the North and South America in terms of margins , but we know what needs to be done to raise its profitability profile .

Many of the improvements discussed at our Investor day, such as improving dealer network presence and improving operating performance along with the product launches mentioned by Gary earlier are designed to improve the fortunes of the EMEA region.

Speaker #4: Many of the improvements discussed at our Investor Day , such as improving dealer network presence and improving operating performance , along with the product launches mentioned by Garrett earlier , are designed to improve the fortunes of the EMEA region , with our focus on this critical area that will yield benefits for the entire agricultural segment .

With our focus on this critical area that will yield benefits for the entire agricultural segment.

Construction third quarter net sales were $739 million up 8% year over year, driven by higher sales in North America and EMEA.

The increase is mainly due to low sales level last year as we had cut production aggressively in 2024.

Speaker #4: Construction: Third quarter net sales were $739 million, up 8% year over year, driven by higher sales in North America and EMEA.

Jason Omerza: Basically, how much more inventory do you need to kind of work down, and how much would that be next year? That'd be helpful. Yeah. Let me tackle the first one, Angel. I think you're about right on the headwind effect of the tariffs, the basis point headwind. The pricing that we put out, if you couple the tariff costs with normal inflation costs, the list price growth that we put out is not adequate to cover 100% of the tariff costs. However, we're working to, over the course of 2026, we'll be working to cover that through various means, further cost cutting. There's also, we can adjust our discounting to some degree as well to maybe help offset. From a list price perspective, not there, but through other actions, we'll be endeavoring to get through throughout the course of 2026.

Gross margin for the quarter was 14, 5% down from 16, 6% in Q3 2024, mainly as a result of the tariffs.

Speaker #4: The increase is mainly due to the low sales level last year , as we had cut production aggressively in 2024 , gross margin for the quarter was 14.5% , down from 16.6% in Q3 2024 , mainly as a result of the tariffs , purchasing and manufacturing efficiencies of 12 million favorable were more than offset by 26 million of tariff costs .

Purchasing and manufacturing efficiencies of $12 million favorable were more than offset by $26 million of tariff costs.

It is important to point out that we seem to have been a bit more aggressive on price increases as a result of the tariffs than we have seen from our competitors.

Like in agriculture, construction, SG&A was unfavorable due to variable compensation accruals and labor inflation.

Speaker #4: It's important to point out that we seem to have been a bit more aggressive on price increases as a result of the tariffs than we have seen from our competitors, like in agriculture and construction.

We closed the third quarter with an adjusted EBIT margin of one 9%.

I would also like to note that earlier this week, we finalized our previously announced plan to stop production in our construction plant in Burlington, Iowa, and our second quarter of 2026 due.

Speaker #4: SG&A was unfavorable due to variable compensation accruals and labor inflation. We closed the third quarter with an adjusted EBIT margin of 1.9%.

Due to declining demand and underutilization.

Speaker #4: I would also like to note that earlier this week, we finalized our previously announced plan to stop production at our construction plant in Burlington, Iowa, by the second quarter of 2026.

Jason Omerza: As it relates to the production question, when we look at 2026, and it's consistent with what we, I think, said also during the last one or two calls, we expect that production pace equals retail pace. In next year, we expect in terms of production hours versus 2026, production hours over 2025 production hours to be up around mid-single-digit percentages, basically across all regions, across all products. We do see, as we mentioned, that we will achieve the target of about $1 billion inventory reduction in 2025. That gets us to a much better place by this year-end. We plan to increase production hours next year, and that might entail even a further inventory reduction at the same time if needed.

Production will be moved to other existing CH facilities, including our plant in Wichita, Kansas.

This is part of constructions manufacturing optimization effort that was discussed at the Investor day.

Speaker #4: Due to declining demand and underutilization, production will be moved to other existing facilities, including our plant in Wichita, Kansas. This is part of Construction's manufacturing optimization effort that was discussed at the Investor Day.

Moving to financial services third quarter net income was $47 million.

$31 million year over year decrease was driven by higher risk costs in Brazil, partially offset by better margins in all regions.

Speaker #4: Moving to financial services third quarter net income was $47 million . The $31 million year over year decrease was driven by higher risk costs in Brazil , partially offset by better margins in all regions .

Retail originations in the third quarter were $2 $7 billion down.

Down 6% year over year.

Reflecting the lower equipment sales environment.

The managed portfolio ended the quarter at $28 5 billion.

Speaker #4: Retail originations in the third quarter were $2.7 billion, down 6% year over year, reflecting the lower equipment sales environment. The managed portfolio ended the quarter at $28.5 billion.

Wholesale portfolio was down nearly $1 $5 billion since 12 months ago.

Constant currency basis, mainly driven by lower dealer inventory levels.

While credit collection rates have been relatively steady in most regions. Despite the market downturn, we along with others in the industry are experiencing persistent delinquencies in Brazil.

Speaker #4: The wholesale portfolio was down nearly $1.5 billion since 12 months ago on a constant currency basis, mainly driven by lower dealer inventory levels.

Jason Omerza: That is not a general statement across the world because, as I mentioned earlier, I mean, EMEA shows signs of momentum in some markets, which means, depending on where we are in the season, that we are going to stock up some machines in those markets. Again, depending on the season, while we have here and there still some pockets of machines where we might continue to see a further destocking next year. In large, we have achieved the target of $1 billion destocking this year over the next couple of months. With that, we see space now to restart production in the mid-single-digit up. Our next question comes from Tammy Zakaria from JPMorgan. Please go ahead. Your line is open. Hi. Good morning. Thank you so much. Wanted to touch on tariffs a little more.

Accordingly, we increased our credit reserves again in the quarter we.

Speaker #4: While credit collection rates have been relatively steady in most regions , despite the market downturn , we , along with others in the industry , are experiencing persistent delinquencies in Brazil .

We believe that our reserves are adequate and we work with farmers in the region. So they can continue to operate their farms and pay for their equipment.

Our experience from past cycles is that most partners in delinquent status will eventually catch up on our commitments, whether it's increase in risk reserves as needed measure while observing the market environment unfolds.

Speaker #4: Accordingly, we increased our credit reserves again in the quarter. We believe that our reserves are adequate, and we're working with farmers in the region so they can continue to operate their farms and pay for their equipment.

Okay.

Speaker #4: Our experience from past cycles is that most farmers in delinquent status will eventually catch up on their commitments. However, this increase in risk reserves is a needed measure.

Our capital allocation priorities remain unchanged.

We will continue to reinvest in our business, while maintaining a healthy balance sheet.

During the third quarter, we repurchased $50 million worth of <unk> stock at an average price of $11 25 per share.

Speaker #4: While observing how the market environment unfolds, our capital allocation priorities remain unchanged. We will continue to reinvest in our business while maintaining a healthy balance sheet.

Before I turn the call back to Gary I wanted to give you an update on our net tariff assumptions for this year as well as the view of the gross run rate impact of the tariffs.

Speaker #4: During the third quarter, we repurchased $50 million worth of stock at an average price of $11.25 per share. Before I turn the call back to Garrett, I want to give you an update on our net tariff assumptions for this year.

Jason Omerza: Is there a way to think about how much of the total tariff cost you quantified, I think, $205 to 225 million? How much of that is tied to IEPA versus Section 232 versus the baseline? Should the industry get some relief from any Supreme Court ruling in the coming weeks, months? Just wanted to get some sense what could be the opportunity there. Yeah. About 20% of the tariff costs are from Section 232. If any relief is granted, that'd be wonderful. We're not counting on that or baking that into our plans at this point, but we're waiting to see where that goes. Our next question comes from Kyle Menjez from CITI. Please go ahead. Your line is open. Thank you.

The numbers on this page reflects the expanded section 232 steel and aluminum tariffs, which were not factored into our previous guidance and reflected the China tariffs will be lowered by 10 percentage points on Monday.

Speaker #4: As well as a view of the gross run rate impact of the tariffs. The numbers on this page reflect the expanded Section 232 steel and aluminum tariffs, which were not factored into our previous guidance.

For 2025, we estimate the net impact of agriculture at around $100 million at.

At the midpoint and construction at $40 million at the midpoint.

Speaker #4: And reflect that China tariffs will be lowered by ten percentage points on Monday for 2025. We estimate the net impact to agriculture at around $100 million at the midpoint, and construction at $30 million at the midpoint.

In the fourth quarter that will be around $60 million for AG and $20 million for construction.

In the short term, we are working diligently to offset as much of the tariff impact as we can.

This includes collaborating with our suppliers to identify alternative sourcing options and considering pre care of inventories.

Speaker #4: In the fourth quarter, that will be around $60 million for AG and $20 million for construction. In the short term, we are working diligently to offset as much of the tariff impact as we can.

The price adjustments implemented to date do not fully offset the gross tariff impact as we've chosen to share the burden alongside our suppliers' network partners farmers and builders, while the trade environment is influx.

Speaker #4: This includes collaborating with our suppliers to identify alternative sourcing options and consuming pre tariff inventories . The price adjustments implemented to date do not fully offset the gross tariff impact , as we have chosen to share the burden alongside our suppliers , network partners , farmers and builders .

Jason Omerza: I wanted to follow up on some of the pricing comments, the comments that maybe you've been a little bit more aggressive on price increases versus competitors this year, and just how that's influencing how your pricing modeled year '26 machines as you're opening order books for next year. Curious what the customer feedback has been on pricing as you start to price model year '26 machines, and feedback on maybe where you're priced versus competitors in some of your different markets as you're opening order books for next year. Thank you. Yeah. Hey, just to clarify, Kyle, where we were more quick to raise prices was on the construction side, where we didn't see really much else happening with our competitors. We were probably out in front of that one.

The 2025 impact is only a partial year impact as the ramp up in tariff levels in our FIFO accounting pushed most of the impact into the second half.

If we annualize the gross impacts still at 2020 by volumes, we estimate approximately $250 million of impacting agriculture and $125 impacted in construction.

Speaker #4: While the trade environment is in flux, the 2025 impact is only a partial year impact, as the ramp-up in tariff levels enters FIFO accounting, pushing most of the impact into the second half.

That is approximately 200 basis points of agriculture margin headwind and 425 basis points of the construction margin headwind.

Speaker #4: If we analyze the gross impacts still, at 2025 volumes, we estimate approximately $250 million of impact in agriculture and $125 million of impact in construction.

I am always showing the gross cost run rate impact here, because as Gary said, we do intend to be able to fully offset the tariff impact over the long run.

Speaker #4: That is approximately 200 basis points . Agriculture margin headwind and 425 basis points of construction margin headwind . I'm only showing the gross cost , run rate impact here because , as Garrett said , we do intend to be able to fully offset the tariff impact over the long run .

We will take advantage of our ongoing strategic sourcing program to identify the right suppliers the global footprint to help us identify the most favorable countries of origin.

Jason Omerza: As it relates to ag, I would say we're 3% to 4% list price we put out there for the early order program. That's translating well. We think that's where the market is, and it seems to be working as planned. You can see it from our production slots being filled. That's encouraging. It's tracking as we would have expected. That's lined up, I'd say. Construction pricing, we're a little bit more aggressive on increases. Ag, I think we're in line with the market, and that seems to have been well received by the market. Our next question comes from Jamie Cook from Truist Securities. Please go ahead. Your line is open. Hi. Good morning. I mean, if you look at your guide, your fourth quarter sales implies we're finally up year over year versus decline.

Likewise, we will leverage our global manufacturing footprint to identify the ideal production locations.

Speaker #4: We will take advantage of our ongoing strategic sourcing program to identify the right suppliers with a global footprint to help us identify the most favorable countries of origin.

And ultimately we will pass through the remaining incremental costs.

Through our pricing and has been done across the industry in the past.

Speaker #4: Likewise, we will leverage our global manufacturing footprint to identify the ideal production locations, and ultimately, we will pass through the remaining incremental costs through our pricing, as has been done across the industry in the past.

Our 23 margin targets will not be jeopardized by the tariffs with.

With an update and will turn it back to Gary.

Thank you Jim.

And now let's review our latest outlook for agriculture in 2025.

Speaker #4: Our 2030 margin targets will not be jeopardized by the tariffs. With that update, I will turn it back to Garrett.

Global industry retail demand is expected to be down around 10% from 2024.

Speaker #5: Thank you, Jim. And now let's review our latest outlook for agriculture in 2025. Global industry retail demand is expected to be down around 10% from 2024.

We have narrowed our net sales guidance as we approach the end of the year full year pricing will be positive about 1% and there is no expected currency translation impact.

Jason Omerza: I'm just trying to think about that in the backdrop for 2026. It sounds like you broadly think industry demand is sort of flattish in ag, different pockets, obviously, and construction is probably up. Just trying to think of the company-specific items that you can control. To what degree do you think your earnings could grow next year in a flat market as next year you would produce in line with retail demand or potentially better? Quality should be an incremental savings, potentially supply chain. I guess tariffs are a headwind. Just the big puts and takes there of the things that you can control to hopefully get us comfortable or maybe not that 2025 would represent the trough of earnings. Thank you. Yeah. Great question, Jamie. The production increases that Gerrit outlined in 2026 are not because the industry is rebounding.

We've also updated our margin guidance as you recall last quarter, we said that margins would likely fall somewhere below the midpoint in the guidance. However, since our last call additional section 232 tariffs on steel and aluminum were introduced.

Speaker #5: We've narrowed our net sales guidance as we approach the end of the year . Full year pricing will be positive . About 1% , and there is no expected currency translation impact .

Speaker #5: We have also updated our margin guidance . As you recall , last quarter , we said that margins would likely fall somewhere below the midpoint , and the guidance .

As such our revised guidance now reflects both tariffs as well as the geographic mix shift between North America, and EMEA and product mix between large and small egg.

Speaker #5: However , since our last call , additional section 232 tariffs on steel and aluminum were introduced . As such , our revised guidance now reflects those tariffs as well as the geographic mix shift between North America and EMEA , and product mix between large egg and small egg .

Section 232 tariffs will impact all players in the industry, whether they are components of imported ore locally sourced as domestic steel and aluminum prices will rise as well.

We expect to recover those impacts through pricing of our products.

Speaker #5: The Section 232 tariffs will impact all players in the industry, whether their components are imported or locally sourced, as domestic steel and aluminum prices will rise as well.

In construction overall industry retail volumes are expected to be down about 5% from 2024 as with <unk>. We have also narrowed our net sales outlook for the year and lowered our margin expectations.

Jason Omerza: It's because we're producing closer to retail, so we're underproducing less than we did in 2025. We will get some absorption benefit from that, from the higher production rates. We will, of course, continue and amplify our ID 2025 targets that we put out around quality, around supply chain, efficiencies. Those areas are sort of working, we're seeing it. Strategic sourcing, these are all things that are coming through, as we talked about in Q3. We expect those to keep growing and building. Those are the sources of tailwinds that we've been looking towards. The headwind that you did point out is the one that we have less control over in the short term, and that's tariffs. As I mentioned on my question, when I answered Angel, we'll be looking for ways to help offset those tariff costs.

Speaker #5: We expect to recover those impacts through the pricing of our products in construction. Overall, retail volumes in the industry are expected to be down about 5% from 2024.

We're still working on our 2026 industry estimates and we'll need to see how some of the larger marketplace react on pricing before we are able to finalize an opinion here.

Speaker #5: As with OCC, we have also narrowed our net sales outlook for the year and lowered our margin expectations. We are still working on our 2026 industry estimates and will need to see how some of the larger market players react on pricing before we are able to finalize an opinion here.

With a narrowed sales estimates in AG and construction, we are guiding total industry net sales to down 10% to 12% year over year with margins reflective of the net tariff exposure between three four to three 9%.

Speaker #5: With a narrowed sales estimate for ENaC and construction, we are guiding total industry net sales to be down 10% to 12% year over year.

Free cash flow is now expected in the $200 million to $500 million range.

Speaker #5: With the margins reflective of the net tariff exposure between 3.4% to 3.9%, free cash flow is now expected in the $200 million to $500 million range.

<unk> is now forecasted to be between $44 50.

Jason Omerza: Those right now are probably the most significant headwind we've got to grapple with. Our next question comes from Steven Fisher from UBS. Please go ahead. Your line is open. Thanks. Good morning. Just maybe to follow up on that, I'm just curious what the drivers are of the smaller declines in revenue guidance for 2025 and maybe some of the regional color on what you have embedded for Q4. It seems like ag overall looks like it's implying around 4% growth, and construction, perhaps in the mid-teens. Just a little color on those changes and what's implied. Thank you. Yeah. In ag, EMEA will continue to be more strongly performing versus other regions. Construction equipment shall also be the one that's driving forward. The ag markets there have been improving.

Again, reflecting the latest net tariff impact.

I will end our prepared remarks by looking at our priorities for the remainder of the year as we close out 2025 and position ourselves for success in a likely transition year in 2026, we.

Speaker #5: EPS is now forecasted to be between $0.44 and $0.50, again reflecting the latest net tariff impacts. I will end our prepared remarks by looking at our priorities for the remainder of the year as we close out 2025 and position ourselves for success in a likely transition year in 2026. We are carefully observing the different leading demand indicators.

We are carefully observing the different leading demand indicators.

At the same time, while we are dealing with the rapidly changing trade environment. We are working very closely with our network partners and suppliers to ensure that we are responsive to ongoing shift in the market.

Speaker #5: At the same time, while we are dealing with a rapidly changing trade environment, we are working very closely with our network partners and suppliers to ensure that we are responsive to ongoing shifts in the market.

We are taking orders for model year 2026 products now at new prices, reflecting another round of cost recovery.

Each region has their own cadence for order collection typically North America ahead of the other regions.

Speaker #5: We are taking orders for model year 2026 products now at new prices , reflecting another round of cost recovery . Each region has their own cadence for order collection , typically , North America ahead of the other regions production order slots are full for the remainder of 2025 , and we are about half full for the first quarter of 2026 .

Jason Omerza: Those are the two areas where we see the sales growth coming from. Part of it also is we're underproducing retail less in Q4 on the ag side. That would also help above and beyond sort of the EMEA improvements. Hopefully that answers your question, Steven. Our next question comes from Tim Thane from Raymond James. Please go ahead. Your line is open. Great. Thank you. Maybe just coming back to the concept of production versus retail in 2026. We covered a lot of ground there earlier, but I just want to make sure I heard correctly with respect to large ag in North America. As I think back in recent months, the commentary for 2025 has suggested that in many cases where inventory was a bit heavier, it was more on the small ag side.

Production order slots are full for the remainder of 2025 and we are about half full for the first quarter of 2026 some products in some regions are a bit further out than that north.

North America's Q1 slots already flu for example, we are monitoring order kind of collection closely to understand overall industry retail demand in 2026 and to make the appropriate shifts in our production cadence when needed.

Speaker #5: Some products in some regions are a bit further out than that. North America's Q1 slots are already full. For example, we are monitoring order collection closely to understand overall industry retail demand.

Besides our order collection other affect us that we are evaluating include commodity prices.

<unk> to use ratios progress on trade deals, especially a finalization of the recently announced agreement between the United States and China clarity on renewable fuel standards in the U S used inventory levels and their values and competitive pricing dynamics.

Speaker #5: In 2026, we will make the appropriate shifts in our production cadence when needed. Besides our order collection, other factors that we are evaluating include commodity prices, stocks to use, ratios, and progress on trade deals, especially with regard to the realization of the recently announced agreement between the United States and China.

As of right now, we would expect global industry retail demand to be flat to possibly slightly down in 2026, when compared to 2025. They would likely include EMEA being slightly up North America slightly down in large AG, and South America, and Asia Pacific somewhere in between.

Jason Omerza: I would assume that gives you more of a production tailwind as we're thinking about into 2026, i.e., if there's more upside pressure to production, it would be on the large side versus small, just given the fact that more of the inventory issue has been on the small ag in North America. Again, kind of bouncing around ideas here, but is that a fair kind of characterization as we think about the potential outlook for production in North America split between large versus small? Yeah. I think you're directionally correct. We'll be a few percentage points in the current planning, we'll be a few percentage points higher in large ag than in small ag when we look at production hours 2026 over 2025. Our next question comes from Daniela Costa from, pardon me, Goldman Sachs. Please go ahead. Your line is open. Hi. Good afternoon.

Speaker #5: Clarity on renewable fuel standards in the U.S., used inventory levels and their values, and competitive pricing dynamics. As of right now, we would expect global industry retail demand to be flat to possibly slightly down in 2026 when compared to 2025.

As year end approaches, we'll assess market developments to refine our industry forecast with greater precision.

Speaker #5: That likely includes EMEA being slightly up, North America slightly down in large egg, and South America and Asia Pacific somewhere in between.

As I discussed earlier, we will continue to produce at our current low levels through the end of 2025 and likely into the beginning of 2026, given continued soft demand our north American dealers are on pace to achieve our inventory targets for new equipment within the <unk>.

Speaker #5: As year end approaches , we'll assess market developments to refine our industry forecast with greater precision . As I discussed earlier , we will continue to produce at our current low levels through the end of 2025 and likely into the beginning of 2026 .

Few months, whereas improving sentiment in Europe will allow dealers to increase their stock somewhat.

Speaker #5: Given continued soft demand, our North American dealers are on pace to achieve our inventory targets for new equipment within the next few months.

Like our continued dedication to investing in the future through iron and Tech R&D, we are not taking our eyes of our margin improvement initiatives, regardless of the market environment. We.

Speaker #5: Whereas improving sentiment in Europe will allow dealers to increase their stocks somewhat. Like our continued dedication to investing in the future through iron and tech R&D, we are not taking our eyes off our margin improvement initiatives, regardless of the market environment.

Jason Omerza: I have a follow-up on what's implied for Q4 in the guidance because most years we have a negative seasonality into Q4. I understand you have a little bit of delivery growth here, but even when we have delivery growth, we tend to have negative. You mentioned you don't offset the tariffs entirely. They're higher in Q4, and there's sort of all the other headwinds. Can you walk us a little bit through the tailwinds that drive you to a better-than-usual seasonality in Q4? Thank you. Yeah. Good question. From a market perspective, the improvement versus history is we've got, again, line of sight to improvement in quality costs and our manufacturing costs. We're looking for good product cost improvement in Q4. Of course, those are growing. That's something we're expecting when you compare it versus 2024 levels.

We are maintaining our relentless focus on our homework and executing the cost management strategy that we presented to you in may.

We are pursuing productivity improvements and strategic sourcing program to drive further cost reductions with a particular focus on delivering the highest quality products to our customers I want to reiterate what Jim said, our 2030 targets Im not jeopardized by the current trade environment or status of the <unk> cycle.

Speaker #5: We are maintaining our relentless focus on our homework and executing the cost management strategy that we presented to you in May. We are pursuing productivity improvements and the strategic sourcing program to drive further cost reductions, with a particular focus on delivering the highest quality products to our customers.

Things are very positive for <unk> and during times like these continuity true dedication and consistent execution more than ever important.

Speaker #5: I want to reiterate what Jim said. Our 2030 targets are not jeopardized by the current trade environment or the status of the egg cycle.

And our tech data next week, we will exhibit our latest product technology applications and solutions. We are excited to show you how technology evolves to serve farmers on their fields and to preserve the soil health.

Speaker #5: Things are very positive for CN, and during times like these, continuity through dedication and consistent execution are more important than ever. At our Tech Days next week, we will exhibit our latest products, technology applications, and solutions.

Jason Omerza: Everything we talked about before, the ID 2025 targets we put out, those initiatives are underway. They're delivering. We expect that to continue in Q4. Our next question comes from Meg Dobre from Baird. Please go ahead. Your line is open. Thanks. Just a clarification, if I may. I'm a little bit confused about the moving pieces to the guidance here. I'm looking at slide 17, right? If I look there, on an 11% revenue decline, you used to expect 6.5% margin. Now, on an 11% revenue decline, we're looking at something more like 3.7% margin. Just a rough math would be we're cutting EBIT here by $430 million, give or take. This is all second half of 2025. What are the moving pieces here? As I understand the tariff assumptions, that alone does not account for this move.

Our solutions help them rise to everyday challenges, particularly the unexpected one we.

Speaker #5: We are excited to show you how our technology evolves to serve farmers in their fields and to preserve their soil health. Our solutions help them rise to everyday challenges, particularly the unexpected ones. We hope to see you in person in Hanover or connected to the webcast.

We hope to see you in person handle or connected to the webcast that concludes our prepared remarks, and we're ready for the Q&A.

Thank you we will now begin the question and answer session of the call to ask a question. At this time you will need to press star followed by the number one on your telephone keypad.

Speaker #5: That concludes our prepared remarks, and we are ready for the Q&A.

So a lot of time for as many participants as possible. Please limit yourself to one question and then return to the queue for any follow ups.

Speaker #3: Thank you . We will now begin the question and answer session of the call to ask a question . At this time , you'll need to press star , followed by the number one on your telephone keypad to allow time for as many participants as possible .

Our first question from Christian <unk> from Oppenheimer. Please go ahead. Your line is open.

Hi, Good morning. Thank you can I ask a question.

Speaker #3: Please limit yourself to one question and then return to the queue for any follow-ups. We'll take our first question from Kristen Owen from Oppenheimer.

Afternoon now.

A lot of discussion this morning on the AG margin Bridge you hit on some of the points, but I'll ask you to articulate on three particular items that stood out to us.

Speaker #3: Please go ahead. Your line is open.

Speaker #6: Hi . Good morning . Thank you so much for the question . Or I suppose , good afternoon . Now , a lot of discussion this morning on the AG margin bridge .

First can I ask you on the decremental margin on the volume mix.

Jason Omerza: Maybe specifically within this, what dollar figure is associated with tariffs? What are some of the other elements here? Yeah, it's a good question. Page 17 is corporate, right? The entire enterprise. What's not broken out there is the mix effect. We've got construction, the CE business sales growing. Those are incredibly low margins. Not happy where those are at, but that's not delivering margin with those earnings or that revenue. The ag business is not growing at the same pace. You're seeing sort of within a segment, between segment mix happening there. That also explains why the industrial activities decrementals were so poor in this quarter. CE sales were up, ag sales were down, and that has that same dynamic. That's what you're seeing.

How much of that with the decline in North America as the total percent.

Speaker #6: You hit on some of the points, but I'll ask you to articulate on three particular items that stood out to us. First, can I ask you on.

And how should we think about that decremental going forward.

Second item here is on the SG&A.

Speaker #6: The decremental margin on the volume mix , how much of that was the decline in North America ? Is the total percent , and how should we think about that ?

The $37 million drag and then finally I'll just ask you to unpack some of the product cost.

Tariffs versus some of that underlying quality work that you addressed I realize there's a lot there, but I appreciate you addressing that range. Thank you, yes, Okay, Hey, Chris.

Speaker #6: Decremental going forward ? The second item here is on the SG&A and the $37 million drag . And then finally , I'll just ask you to unpack some of the product costs , puts and takes tariffs versus some of that underlying quality work that you addressed .

To answer those questions.

The decremental in AG was really driven by the declining.

Speaker #6: I realize there's a lot there, but I appreciate you addressing that bridge. Thank you.

Sales in North America, 29% decline in North America, EMEA up 16%.

Speaker #4: Yes. Okay. Hey, Kristen, I'm happy to answer those questions. The decrement in AG was really driven by the declining sales in North America, with a 29% decline in North America.

<unk> got a fairly sizable geographic mix element in there.

SG&A did grow.

Both parts of your question with the AG EBIT margin decline.

Jason Omerza: Part of what you're seeing on page 17 is what we experienced in Q3, and that will continue in Q4. Our next question comes from Mike Shlisky from D.A. Davidson. Please go ahead. Your line is open. Hello, and thank you. It sounds like, as you've been saying, you're a few months away from getting to the right level of new inventories in the channel. Are you also a few months away on the used inventory side? Just update us on what's happening there. Is that the point where both new and used are at decent levels, at optimal levels, where you'll start to see your wholesale sales be above your retail sales, and some kind of restocking again happening at the dealership level? Yeah. Great question, Mike. I think we've seen good success on the used inventory side.

Speaker #4: It may be up 16%. So you've got a fairly sizable geographic mix element in there. SG&A did grow for both parts of your question here.

12% of that decline was from.

Higher SG&A due to the variable compensation for last year.

Lower bonus accruals this year normalized rate of bonus accruals.

Speaker #4: The the the ag Ebit margin decline , 12% of that decline was from higher due to the variable compensation . So last year , very low bonus accruals this year , normalized rate of bonus accruals is being is being accrued .

Great.

So you've got the SG&A growth.

We're a meaningful portion of that as well then geographic mix I mentioned and then as they look to a lesser extent our AG jv's are delivering lower profits this quarter than it did a year ago. So those are the four primary buckets, if you take those out.

Speaker #4: So you've got the CA growth tariffs, which were a meaningful portion of that as well. Then, the geographic mix I mentioned. And then, to a lesser extent, our ag JVs are delivering lower profits this quarter than they did a year ago.

You are back to the normalized 25, 30% decremental.

So that's the answer to the AG question.

Speaker #4: So those are the four primary buckets. If you take those out, you are back to the normalized 2,530% decremental, so that answers the question.

Yes, I just I just would like to on the <unk>.

First one on the mix point Christian I would like to add that in EMEA, particularly the.

The tractor segment was up while the really harvesting segment was still.

Jason Omerza: I think there's been three quarters in a row for CNH ag dealers' declines in the used inventory. We're pleased with that trend. I wouldn't say it's done at the end of this year, though. It's still higher than historical norms would imply. I think there's more work to be done there. That's always been less of a concern for us, though. I think it's more of a, maybe a broader industry concern, not as big a concern for CNH and CNH dealers. It's higher than we'd like. We're making progress over the last three quarters. We think it'll continue, but we won't be done. That effort won't be done in Q4. Our next question comes from Joel Jackson from BMO Capital Markets. Please go ahead. Your line is open. Hi. Thanks for taking the question.

Speaker #4: Gary .

Speaker #5: Yeah , I just I just would like to on the on the first point , on the mix point , Christine , I would like to add that in EMEA , particularly the the tractor segment was up while the , harvesting segment was still behind in the overall , you know , mix .

Behind in the overall.

Mix and I think as you might recall.

<unk> strong on tractors were particularly pronounced on harvesting equipment and I mean large combined so that was another is not the regional mix of delicate in region product mix.

Speaker #5: And I think as you might recall , we are quite strong on tractors . We are particularly pronounced on on harvesting equipment . And I mean large combines so that was another it's not a regional mix .

To some extent and as Jim and I alluded to is Europe is EMEA.

For us from a marginality of trailing region, it's actually at the bottom and we are have launched quite some substantial.

Speaker #5: It's like a in region product mix to some extent . And as Jim and I , alluded to , is , Europe is or EMEA is a for us from a marginality , a trailing region .

Turnaround and restructuring actions across.

The region, starting as well from the product side that you would see next next week in order to regain momentum and share in a region that shall be no weaker than any of our margins in north and South America. So this is very much.

Speaker #5: It's actually at the bottom and we have launched quite some substantial turnaround and restructuring actions across the region , starting as well from , from the product side that you will see next , next week in order to regain momentum and share in a region that shall be no weaker than any of our margins in north of South America .

Jason Omerza: Definitely a couple of months ago, there was some optimism, I know, expressed by the management team around South America, maybe turning. Wasn't clear, but there was optimism a couple of months out. Later now, as you mentioned earlier, the optimism has sort of died down a bit. Can you talk about what you were thinking then and what you're thinking now, what you've seen the last couple of months? Thanks. Well, look, the South American market experienced the higher attention from China when it comes to not only soy but also alum and other commodities. We had the sentiment there that overall, when trade clarity comes up, this region would react first to this increased level of certainty when it comes to global trade.

And focus and we are going to talk you through those things next week when we stand in front of our locally new product lineup with tractors that we serve segments that we never had a case of high horsepower midrange tractors, we never had and now we have and we'll show that next next week.

Speaker #5: So this is very much in focus , and we are going to talk you through those things next week . When we stand in front of our lovely new product lineup with tractors that we and that serve segments that we never had .

As another measure tool turnaround Europe yeah.

And then and then continue to answer your question.

Speaker #5: Okay . So high horsepower , mid tractors , we never had and now we have . And we'll show that next next week as a as another measure to turn around Europe .

The product cost unpacking that really is $33 million favorable product costs, including $44 million of tariff costs. So so without the tariffs that number would have been 77 million favorability that breaks down as <unk> $44 million and quality improvements.

Speaker #4: Yeah . And then and then continuing to answer your question . So the product cost unpacking that really is 33 million of favorable product costs .

Jason Omerza: As we are still in a moment of uncertainty, I mean, there is a deal announced between the US and China about 25 million metric tons of soy over the next couple of years, three years. We still await the exact numbers, and we will still need to see, as an industry, not as only CNH, what are the actual purchase volumes of China when it comes to South American soybeans and other commodities. That will then refuel farmer sentiment in the region when it comes to the 2026 planting season and related equipment sale or purchase considerations. It is really around continued ambiguity of global trade and a still existing lack of certainty. Because, I mean, you have heard many trade deals being announced, but then the details are not yet disclosed and are not there yet. Our farmers are, and so are we.

$17 million in purchasing and manufacturing improvements.

Speaker #4: Excluding 44 million of tariff costs . So so without the tariffs that number would have been 77 million . Favorability . That breaks down as 44 million in quality improvements , 17 million in purchasing and manufacturing improvements .

And $60 million of other improvements.

So that's sort of.

I think it shows the good work we've been doing on our path to 2030 from an operational perspective.

<unk> supports our headwind that weren't there previously.

Speaker #4: And $16 million of other improvements. So that's sort of, I think, it shows the good work we've been doing on our path to 2030 from an operational perspective.

<unk> are growing a bit in Q4, Q4, we expect tariff cost to be $60 million in AG and $20 million in CE.

Speaker #4: The tariffs , of course , are headwind that weren't there previously . Tariffs are growing a bit in Q4 , Q4 , we expect tariff costs to be 60 million in AG and 20 million in CE .

But what gives you more detailed breakdown of our full year cost improvements towards.

Towards our Investor day targets when we report out in Q4, so I think that addressed all three of your questions.

Our next question comes from Angel Castillo from Morgan Stanley. Please go ahead. Your line is open.

Speaker #4: But we'll give you a more detailed breakdown of the full-year cost improvements toward our Investor Day targets when we report out in Q4.

Good afternoon, and thanks for taking my question just two factors impacting fiscal year 2006, I was hoping to get a little bit more color on <unk>.

Speaker #4: So, I think that addressed all three of your questions.

Speaker #3: Our next question comes from Angel Castillo from Morgan Stanley. Please go ahead. Your line is open.

<unk>.

In terms of the annualized tariff gross headwind that you've laid out.

Speaker #7: Hi. Good afternoon, and thanks for taking my question. Just two factors impacting fiscal year '26 that I was hoping to get a little bit more color on.

Just wanted to triple check I guess it seems to me any rough math, what that implies maybe a 2% to 3% kind of incremental headwind.

Jason Omerza: We are curious to see those details coming through, which will then lead to more certainty, and that will also then lead to a higher level of predictability when it comes to purchase equipment sales, I mean, or equipment purchases. That is the difference. We haven't really improved on certainty as it comes to global trade conditions. That's the main driver. Jim alluded also to an increase in Latin American increase in delinquencies. Our farmers were expecting a payout from the local Brazilian Farm Bill as it comes to purchase of seeds and fertilizer. That was delayed, and farmers preferred or particularly prioritized purchase of seeds, fertilizer, and inputs, that purchased rather those instead of, let's say, giving priority to our equipment or the industry's equipment rates.

Speaker #7: First , you know , in terms of the annualized tariff gross headwind that you laid out , it just want to triple check .

In terms of your North America sales next year so.

One is that correct and kind of second.

Based on pricing you are putting out.

Speaker #7: I guess it seems to me rough math that that implies maybe a 2% to 3% kind of incremental headwind in terms of your North America sales next year.

The orders right now for next year, and the preliminary kind of cost inflation you're seeing.

How much of that sort of 3% or do you think you can offset the pricing versus other kind of cost initiatives that you laid out.

Speaker #7: So just one , is that correct ? And kind of second , you know , based on on pricing , you're putting out through your orders right now for next year and the preliminary kind of cost inflation , you see , I guess how much of that 2 to 3% do you think you can offset via pricing versus other kind of cost initiatives that you laid out ?

And how much do you basically do you already have covered versus you still need to go out and get and.

Kind of in App initiatives, and then the second piece of fiscal year 'twenty six just the underproduction, what gives you confidence in being able to achieve that.

Speaker #7: And how much do you , you know , basically , do you already have covered versus you still need to go out and get and , you know , kind of an act initiatives .

They are doing a lot of of some three to four months.

Basically how much more inventory do you need to kind of work down and how much of a tailwind that would be next year that'd be helpful.

Speaker #7: And then the second piece of fiscal year 2026, just to underproduce, what gives you confidence in being able to achieve desired levels in 3 to 4 months?

Yeah, Let me, let me tackle the first one angel.

So.

I think you're about right on the on the headwind effect of tariffs.

Speaker #7: And you know, basically, how much more inventory do you need to kind of work down, and how much would that be next year? That would be helpful.

The basis point headwind.

And the pricing that we put out if you couple the tariff costs with normal inflation costs.

Speaker #4: Yeah . Let me let me tackle the first one . Angel . So the I think you're about right on the on the headwind effect of tariffs for the basis point .

Jason Omerza: That is another drag in the market, that is another indicator for uncertainty that has very much unfolded in the third quarter. We are taking a very cautious view here, and so do the farmers. More uncertainty and wait and see mentality in Brazil, that's really what has changed. We need to see what China really buys in the end. Yeah. One thing is a deal, the other thing is the actual purchase and the consistency of such purchases month after month. Our next question comes from Ted Jackson from Northland. Please go ahead. Your line is open. Thanks very much. Excuse me. Thanks very much. Good morning or afternoon, depending on where you're at. Two questions for you. One, with regards to the tariff guidance in the, what is it?

The list price growth that we put out is not adequate to cover 100% of the tariff costs. However, we're working to.

Speaker #4: Headwind and the pricing that we put out. If you couple the tariff costs with normal inflation costs, the list price growth that we put out is not adequate to cover 100% of tariff costs.

Over the course of 2006 will be working to cover that.

Through various means for the cost cutting and then also we can we can adjust our discounting to some degree as well to maybe help offset so from a list price perspective, not there but through other actions, we will be endeavoring to get there throughout the course of 2026 and as it relates to the production question, yes and related.

Speaker #4: However , we're working to , over the course of 2026 , we'll be working to cover that , you know , through various means .

Speaker #4: Further cost cutting and there's also we can we can adjust our discounting to some degree as well to maybe help offset . So from a list price perspective , not there , but through other actions .

Into the production question.

When we look at 2026, and it's consistent with what we said also during the last one or two calls as we expect.

Speaker #4: We'll be endeavoring to get through throughout the course of 2026. And as it relates to the production question, yeah.

That production pace equals retail pace.

Speaker #5: And relating to the production question, when we look at 2026, it is consistent with what I think we also said during the last one or two calls: we expect that the production pace equals the retail pace.

And in next year, we expected some of production hours versus a 2026, <unk> 25 per <unk> to be up around mid single digit percentages basically across all regions across all products.

Jason Omerza: Is it $80 million, I think you said you were going to have in the fourth quarter? When you look at the second quarter, what was the view for the tariff impact for the remainder of the year? Honestly, I don't recall what it was when I looked at the past presentation. You didn't see anything in there. I mean, are the costs that you're putting forth there, is that incremental relative to what your view was exiting the second quarter and going into third? Yeah. Again, good question. The Section 232 costs were not part of our guidance at Q2. I think we indicated $110 to 120 million of full-year net tariff costs, and then we bumped that up to the current view. The biggest reduction in guidance is not from tariffs. Tariffs were a smaller piece of that.

Speaker #5: And in next year we expect in terms of production hours versus a 2026 production hours over 25 production hours to be up around mid-single digit percentages .

Because we do see.

We mentioned that we will achieve the target of about $1 billion inventory reduction in 2025 that gets us to a much better place by this year end. So we plan to increase production next year and that might entail even a further inventory reduction at the same time if needed.

Speaker #5: Basically across all regions , across all products . Because we do see , as we mentioned , that we will achieve the target of of about 1 billion inventory reduction in 2025 .

Speaker #5: That gets us to a much better place by by this year end . So we plan to increase production hours next year . And that might entail even a further inventory reduction .

And that is not a general statement across the world because as I mentioned earlier.

In EMEA showed signs of momentum in some markets, which means depending on where we are in the season that we're going to stock up some machines.

Speaker #5: At the same time , if needed . And that is not a general statement across the world because as I mentioned earlier , I mean , it may show signs of momentum in some markets , which means depending on where we are in the season , that we are going to stock up some machines in those markets .

And those markets again, depending on the season, why we have here and Theres still some pockets of machines, we might continue to see a further destocking next year, but.

Jason Omerza: The bigger reduction was more of the items we've gone through, estimated increases, and the mixed effects. I understand. Geographic mix came in tougher than we thought. My next and last question, obviously, is even with all this stuff and you look at the change in guidance, you did take your sales number up. At the midpoint, it would be up $650 to 700 million. Your third quarter, at least relative to consensus, was a bit higher this year. Even if we just say, okay, well, third quarter was better, and just use consensus as a proxy and back that out, there's another $200 million of sales in fourth quarter relative to kind of what would have been expected if you're thinking like this with prior guidance. It sounds like it's construction in India that's driving that.

In large we have achieved the target of $1 billion Destocking.

Speaker #5: Again , depending on the season , why we have here and there still some pockets of machines where we might continue to see a further destocking next year , but in large we have achieved the target of 1 billion destocking this year .

This year over the next couple of months and with that we see space now to restart production in the mid single digit up.

Our next question comes from Tami Zakaria from Jpmorgan. Please go ahead. Your line is open.

Speaker #5: Over the next couple of months, and with that, we see space now to restart production in the mid-single digits upward.

Hi, good morning, Thank you so much.

Wanted to touch on <unk>, a little more is there a way to think about how much of the total tariff costs to quantify that I think 200 classes.

Speaker #3: Our next question comes from Tammy Zakaria from JP Morgan. Please go ahead. Your line is open.

Speaker #8: Hi. Good morning. Thank you so much. I wanted to touch on tariffs a little more. Is there a way to think about how much of the total tariff cost you quantified?

And how much of that is tied to IEP versus sections with only two vessels.

The baseline should they end is to get some really from any of the Supreme Court ruling in the coming weeks months.

Speaker #8: I think two hundred five to two hundred twenty-five million. How much of that is tied to IP versus Section Two? Thirty-two versus the baseline?

Jason Omerza: How much of that increase is, am I right with that? How much of that pickup in revenue is from you being able to push along pricing as you're compensating for things like tariffs and such? Yeah. Pricing remains a positive driver of revenue in Q4, so it's definitely a favorable item that we've got baked in. The second half change in the guidance that you're seeing, though, was again mostly driven by higher volume sales in sales areas with sort of lagging margins. The margin that you'd associate with any given dollar of sale just wasn't there given where the sales occurred. Higher sales without the margin delivery coming through it, that's what's really affecting what would appear to be a bad incremental or decremental. It's really just the sales mix.

So we'll get some sense.

What could be the opportunity though.

About about 20% of the tariff costs are from section 232. So any relief is granted that that would be wonderful we're not we're not counting on that or.

Speaker #8: Should the industry get some relief from any Supreme Court ruling in the coming weeks or months? Just wanted to get some sense of what could be the opportunity there.

Taking it into our plant at this point, but we'll wait and see where that goes.

Speaker #4: Yeah , about about 20% of tariff costs are from section 232 . So any relief is granted that be that'd be wonderful . We're not we're not counting on that or taking that into our our plans at this point .

Our next question comes from Ohio Mendes from Citi. Please go ahead. Your line is open.

Okay.

Thank you I wanted to follow up on some of the pricing comments on the comments that maybe you've been a little bit more aggressive on price increases versus competitors. This year.

Speaker #4: But we're waiting to see where that goes.

Speaker #3: Our next question comes from Kyle Menges from Citi. Please go ahead. Your line is open.

And just how that's influencing how you're pricing model year 'twenty six machines as your order opening order books for next year.

Speaker #9: Thank you. I wanted to follow up on some of the pricing comments. The comments that maybe you’ve been a little bit more aggressive on price increases versus competitors.

Curious what the customer feedback has been on pricing as you start to price model year, 'twenty, six machines, and and feedback on maybe where your price versus competitors in some of your different markets. As you are opening order books for next year. Thank you.

Speaker #9: This year, and just how that's influencing your pricing model year, 26 machines is your order opening order books for next year?

Jason Omerza: Our final question today will come from David Raso from Evercore ISI. Please go ahead. Your line is open. Hi. Thank you. When you speak to global industry retail next year being flat to slightly down, the order books as they sit today, where are the order books right now versus a year ago? Ideally, if you can help us between the North American large ag commentary for next year and EMEA, if you can give us some sense of the order patterns in those two regions, would be great. Yeah. I think the order coverage we see right now is basically, as I said, Q4 is basically covered everywhere. Q1, largely, let's say, very well on track. We have a bit more order coverage on the North American side than in other regions, but this is pretty comparable, I would say, to prior years.

Speaker #9: Curious what the customer feedback has been on pricing as you start to price model year 2026 machines, and feedback on maybe where your price versus competitors and some of your different markets is? Your opening order books for next year.

Yes, just to clarify kind of the where we are more quick to raise prices was on the on the construction site.

What we didn't see really much else happening with our competitors. So we.

Speaker #9: Thank you .

We're probably out in front of that one.

Speaker #4: Yeah . Hey , just just to clarify , Kyle , the where we were more more quick to raise prices was on the construction side where we didn't see really much else happening with our competitors .

As it relates to add I would say we're.

3% to 4% was price we put out there for the early order program. That's that's translating well, we think thats, where the market is.

Speaker #4: So we we were we were probably out in front on that one as , as it relates to AG , I would say we're 3 to 4% list price we put out there for the early order program .

It seems to be working as planned and we.

You can see it from our our production slots are being filled.

Speaker #4: That's that's translating well . We think that's where the market is and we're it seems to be working as planned . And you can see it from our , our production slots being filled .

That's encouraging track.

Tracking as we would have expected. So that's lined up I'd say, so construction pricing than we were a little bit more aggressive on increases add where I think we are in line with the market and thats usually have been well received by the market.

Speaker #4: You know , that's it's encouraging . It's tracking as we would have expected . So that's that's lined up I'd say so construction pricing .

Our next question comes from Jamie Cook from tourists Securities. Please go ahead. Your line is open.

Speaker #4: We're a little bit more aggressive on increases . And we're I think we're in line with the market . And that seems to be have been well received by the market .

Hi, good morning.

Just I mean, if you look at your guide your fourth quarter sales implies.

Jason Omerza: I think there's not a particular pattern here. We are working through, obviously, early order programs, and we're working through, which will be quite exciting for us to showcase the machines next week at Agritechnica. We have a full lineup of renewed tractors on offer, and similar upgrades also on the combine side. I think Agritechnica as well will be another stimulating moment when our farmers see what great machines we're putting out there. We're pretty excited to walk you around and show you what we have on offer, but the order books are very much aligned with expectation. Hey, David, one more data point that we're excited about, and it's very comforting and validating. Our flagship combines in North America, the production slots are sold out for the entire year.

Speaker #3: Our next question comes from Jamie Cook from Truist Securities. Please go ahead. Your line is open.

Finally up year over year versus decline. So I'm, just trying to think about that in the backdrop for 2026. It sounds like you broadly think.

Speaker #10: Hi . Good morning . Just I mean , if you look at your guide , your fourth quarter sales implies , you know , we're we're finally up year over year versus decline .

Industry demand is sort of flattish and acts different pockets, obviously and construction is probably up.

Speaker #10: So, I'm just trying to think about that in the backdrop for 2026. It sounds like you broadly think industry demand is sort of flattish.

So just trying to think of the Companys ossific items that you can.

Troll and.

To what degree do you think your earnings could grow next year in a flat market.

Next year, you would produce in line with retail demand or potentially better.

Hi, good morning. Um, just a, I mean, if you look at your guide, your fourth quarter sales implies, you know, we're finally up year-over-year versus decline. So I'm just trying to think about that in the backdrop for 2026. It sounds like you broadly think industry demand is sort of flattish and in different pockets. Obviously, in construction, it's probably up.

Quality should be an incremental savings potentially supply chain I guess tariffs a headwind, but just the big.

Puts and takes Arab with things that you can control to hopefully.

Get us comfortable or maybe not that that 2025 would represent the trough earnings. Thank you.

Jason Omerza: It's evidence of how well that machine's performing, how well it's been received, and the value proposition. That's another good sign about delivering the right products and markets receiving them quite well. That concludes today's conference call. You may now disconnect.

Yes, great question, Jamie so.

The production increases that Garrett outlined in 2026 are not because the industry is rebounding.

Because we are producing closer to the retail so.

Under producing less than than we do.

2025, so we will get some absorption benefit from that from the higher production rates, we will of course continue and amplify our I'd.

2025 targets that we put out around quality around supply chain efficiencies.

Those areas are sort of working were seeing it.

Strategic sourcing is youre all things are coming through as we talked about in Q3, we expect those to keep growing and building. So those are the sources of tailwind that we're looking towards and the headwind that you had pointed out is the one that we have less control over in the short term and that's tariffs. So as I mentioned on my question answered Angel will be looking for ways to help.

Just trying to think of the company specific items that you can um control and you know, to what degree do you think your earnings could grow next year in a flat Market as like, you know, next year you would produce in line with retail demand, or potentially better. Um you know, quality should be an incremental savings potentially supply chain. I guess, tariffs the headwind. But just the big uh, you know, puts and takes their of the things that you can control to hopefully, uh, get us comfortable or maybe not that, that 2025 would represent the trough of earnings, thank you. Yeah, yep, great question Jamie. So, uh, the production increases that Garrett outlined in 2026 are not because the the industry is rebounding. Uh, it's because we're producing closer to the retail so, uh, or under producing less than in than we did in 2025. So we will get some absorption benefit from that from the higher production rates. We

Our simple tariff costs, but those right now are probably the most significant headwind we've got to grapple with.

Our next question comes from Steven Fisher from UBS. Please go ahead. Your line is open.

Thanks, Good morning, just maybe to follow up on that I'm. Just curious so what the drivers are of the smaller declines in revenue guidance for the for.

Will of course, continue in amplify our ID, 2025 targets that we put out around quality around supply chain efficiencies. Um, the those areas are sort of working we're seeing it, uh, strategic sourcing. These are all things that are coming through as we talked about in Q3, we expect those to keep growing and building. So those are the sources of of Tailwinds that we're looking towards and the headwind that you did point out is the 1 that uh, we have less less control over in the short term and that's tariffs. So as I, as I mentioned, on my question, uh, when answered the angel we'll be looking for ways to help offset those tariff costs. Uh, but those right now are probably the most significant headwind. We've got to to Grapple with

For 2025, and maybe some of the regional color on what you have embedded for Q4. It seems like overall it looks like it's implying around 4% growth in construction in the perhaps in the mid teens. So just a little color on on those changes and whats implied thank you.

Our next question comes from Stephen Fischer from UBS. Please go ahead. Your line is open.

Yes, so in AG.

EMEA.

<unk> continues to be more suddenly performing versus other regions.

And construction industries also equipment starts to be the one that's driving towards that the end markets they have been improving.

Well thanks. Good morning. Just a to follow up on that. I'm just curious. Uh, what the drivers are of the, the smaller declines in in Revenue guidance for, uh, for 2025 and maybe some of the regional color on what you have embedded for Q4, because it seems like, uh, a overall looks like it's implying around 4% growth, and and Construction in the, uh, and perhaps in the in the mid teens. So, just a little color on on those changes and, and what's implied. Thank you.

And so those are the two areas, where we see the sales was coming from part of it also is we're producing.

Under producing retail less in Q4 on the AG side that would also help above and beyond sort of the EMEA improvement. So hopefully that answer your question Steven.

Our next question comes from Tim Steve.

And James. Please go ahead your line is open.

Great. Thank you, maybe just coming back to the concept of production.

Versus retail in 2006.

Yeah, so a uh it it Maya will continue to be a more strongly performing versus other regions um and Construction Industries also, equipment should also be the ones driving for that. The am markets there have been improving. Um, and so those are the 2 areas where we see the the sales growth coming from part of it. Also is the we're producing. Uh, we're under producing retail Less in, in Q4, on the aside, that would also help above and beyond sort of the Maya improvements. So hopefully that that answers your question. Stephen.

We covered a lot of ground there early but I just want to make sure.

Our next question comes from Tim Sean from Raymond James.

I heard correctly with respect to large AG in North America.

I think back in recent months.

The commentary for 'twenty.

<unk> five has suggested that in many cases, where inventory was it was a bit heavier it was more on the small AG side.

So I would I would assume that that gives you more of a.

Okay production tailwind as we're thinking about into 2006 I E.

Thank you, maybe just coming back to the, the concept of of production, uh, versus retail in in 26 and I we covered a lot of ground there early, but I just want to make sure. Um I Heard correctly with respect to large a in North America, as I think back in in recent months and you know, the, the commentary for

If there is theres more upside pressure to production it would be in the large si.

<unk> versus small just given the fact that more of the inventory issue has been on the small AG in North America. So again, it kind of bouncing around ideas here, but is that a fair.

Kind of characterization as we think about the outlook potential outlook for production in North America split between.

Large versus small.

Yeah, I think you're Directionally correct.

We'll be a few percentage points in the current planning will be a few percentage points higher in large AG than in small AG.

When we look at production hours 26 over 25.

25 is suggested that many cases where inventory was a was a bit heavier. It was more on the small, a side. Um, so I would I would assume that that gives you more of a of a a production Tailwind as we're thinking about into 26, i.e.

Our next question comes from Daniela Costa from maybe pardon.

Pardon me Goldman Sachs. Please go ahead your line is open hi.

Yeah, I think your directionally correct um will be a few percentage points higher in the current planning, will be a few percentage points higher in large than in small act.

Hi, Good afternoon, I have follow up on the what's implied for Q4 in the guidance because most years, we have a negative seasonality into Q4 I understand you have a little bit of delivery growth here, but even when we have delivery grows we tend to have negative and you mentioned you don't offset the tariffs entirely they're higher in Q4.

When we look at production hours, it was 26 over 25.

Our next question.

And there are sort of all the other headwinds. So can you walk us a little bit to the tail winds that drive you to a better than usual seasonality in Q4. Thank you. Yes. Good question from a margin perspective, the improvement versus history as we've got line.

Your line of sight to improvement in quality costs in our manufacturing cost so were looking for.

Good product cost improvement in Q4.

And of course those are those are growing so that's something where we're expecting when you compared to versus 2020.

<unk> levels so.

Everything we've talked about before the 225 target we put out those initiatives are underway and are delivering we expect that to continue in Q4.

Our next question comes from Mig <unk> from Baird. Please go ahead. Your line is open.

Thanks.

Just a clarification, if I may I'm, a little bit confused about the moving pieces in the guidance here. So I'm looking at slide 17.

Go ahead. Your line is open. Hi, good afternoon. I have follow up on the, what's implied for Q4 in the guidance because most years, we have a, a negative seasonality into Q4. Um, understand you have a, a little bit of of delivery growth here, but, but even when we have delivery growth, we tend to have negative. And you mentioned, you don't offset the tariffs entirely they're higher in Q4. Um, and and they're sort of all the other headwinds. So can you walk us a little bit through the Tailwinds that drive you to a better than usual seasonality in in Q4? Thank you. Yeah, yeah. Yeah. Good question. For the market perspective, the Improvement, uh, versus history is we've got, uh, again the line of sights Improvement in quality costs in our manufacturing cost. So we're looking for uh, good product cost Improvement in Q4 um and of course those are, those are growing. So that's something. We're we're expecting. When you compared to verses 2020, uh, 4 levels. So, uh, everything we talked about before the ID, 2025 targets, we put out those initiatives are underway. They're delivering, we expect that.

To continue in Q4.

Right.

If I look there.

11% revenue decline used to expect six 5% margin now.

Our next question comes from Meg, dobre from Beard. Please go ahead; your line is open.

Now on an 11% revenue decline, we're looking at something more like three 7% margin.

Just a rough math would be we're cutting EBIT here by $430 million give or take.

And this is all second half of 2025.

What are the moving pieces here because of that because I understand the tariff assumptions.

That alone does not account for this for this move so maybe specifically within this one.

A clarification. If I may, I'm a little bit confused about removing pieces to the guidance here. So I'm looking to slide 17, right? So if I look there, on an 11% revenue decline, it used to expect a 6.5% margin. Now, on an 11% revenue decline, we're looking at something more like a 3.7% margin. So just the rough math would be we're cutting a bit here by $430 million, give or take.

Um,

and this is all second half of 2025.

What dollar figure is associated with tariffs and.

What are some of the other elements.

Yeah.

Good question, So page 17.

Corporate rate.

The entire enterprise.

What's not broken out there is the mix effect. So we've got construction.

CE business sales growing those are incredibly low margin, so not happy with where those are at with that.

But not delivered margin with those earnings that revenue.

And the AG business is not growing at the same pace, so youre seeing a.

Within the segment between second mix happening there. So that's that's also explains why the industrial activities Decrementals were so poor in this quarter.

<unk> sales were up AG sales were down and that has that same team dynamics thats, what youre seeing part of what Youre seeing on page 17, as what we experienced in Q3 and that will that will continue in Q4.

What are the moving pieces here? Because as I as I understand the uh, tariff assumptions, um, that alone does not account for this for for this move. So maybe specifically within this, how what dollar figures associated with tariffs and uh, what are some of the other elements here? Yeah. It's a, it's a good question. So page 17 is, um, corporate, right? The, the entire Enterprise. What, what's not broken out? There is the mixed effect. So we've got construction, uh, the CE, does the sales growing, uh, those are incredibly low margins. So I'm not happy with where those are at, but that's that's, they're not delivering margin with those those earnings or Revenue. Um, and the ACT business is not growing at the

Our next question comes from Mike <unk> from D. A Davidson. Please go ahead your line is open.

Hello, and thank you.

It sounds like as you've been saying Europe, a few months away from getting to the right level of new inventory in the channel.

The same page. So you're seeing a um, sort of, within within a segment between segments mix happening there. So that's that's also explains why the industrial activities decimals were were so poor in this quarter. Uh, CE sales were up a sales were down, and that has that same same Dynamic. So, that's what you're seeing. Part of what you're seeing on page 17, is what we experienced in Q3. And that will, that will continue in Q4

Also a few months away on the used inventory side, just update us on what's happening there.

Our next question comes from Mike Schlitzie from DA Davidson. Please go ahead. Your line is open.

Is that the point, where both new and used are decent levels of optimal levels, we will start to see.

Your wholesale sales be above retail something some kind of restocking again happening at the dealership level.

Hello, and thank you. Um, it sounds like, as you've been saying, you're a few months away from getting to the right level of new inventories in the channel.

Yeah, Great question, So I think I think.

We've seen good success on dealer.

Um, are you also a few months away on the used inventory side? Just up to us on what's happening there. And is that the point where both new and used are at decent levels or optimal levels? We start to see.

Used inventory side, I think theres been three quarters in a row proceedings AG dealers declines in the used inventory. So we're pleased with that trend.

Above your retail sales, and some kind of restocking again happening at the dealership level.

Wouldn't say it's done at the end of this year, though it's still higher than historical norms would would imply and so I think there's more work to be done there. That's always been less of a concern for us, though I think it's more of a broader industry concern the bigger concern for <unk> and Phoenix dealers, but it's higher than we'd like we're making progress over the last few quarters, we think.

Yeah, great question, Mike. So, I think I think...

It will continue but we won't be done that effort won't be done.

In Q4.

Our next question comes from Joel Jackson from BMO Capital markets. Please go ahead. Your line is open.

Hi, Thanks for taking the question definitely a couple of months ago. There was some optimism expressed by the management team around South America, maybe turning wasn't clear, but there was optimism covenants later now as you mentioned earlier the optimism is sort of die down to that can you talk about what youre thinking then on what Youre thinking now what you've seen the last couple of months things.

we've seen good success on dealer, uh, and the use inventory side. I think there's been 3 quarters in a row for cnh, a dealers declines in. The used inventory. So we're pleased with that Trend. Uh, I wouldn't say it's done. Uh, at the end of this year, though, it's still higher than historical Norms would would imply. And so, I think there's more work to be done there. That's always been less of a concern for us, though. I think it's more of a maybe a broader industry concern as big a concern for c h and C, H dealers. But it's it's higher than we'd like making progress over the last few quarters. We think it'll continue but we won't be done. That, that effort won't be done. Uh, and and and the Q4

Our next question comes from Joel Jackson from Beimo Capital Markets. Please go ahead. Your line is open.

Well look the.

The South American market experienced higher attention from China, when it comes to not only soybean oil sorghum and other commodities and.

We had the sentiment there that overall when trade clarity comes up that this region would react first to this increase an increased level of certainty when it comes to global trade.

Hi, thanks for taking the question. Uh, definitely a couple months ago. There was some optimism. I know expressed by the management team around South America. Maybe turning wasn't clear, but there was a lot to them, a couple months out later. Now, as you mentioned earlier, you know, the optimism is sort of died down a bit. Can you talk about what you're thinking, then, and what you're thinking? Now, what you've seen in the last couple of months, thanks,

As we are still in a moment.

Uncertainty I mean, there is a deal announced between the U S and China about 25 metric million metric tonnes of soy over the next couple of years.

Three years.

We still await the exact numbers and we will still need to see as an industry not only <unk> what are the actual purchase volumes of China.

When it comes to South American soybeans, and other commodities that will then refueled commerce sentiment in the region when it comes to <unk>.

2026 planting season and related equipment.

Well, look, the, um, the South American Market, um, experienced a higher attention from China when it comes to not only soy, but our soil government other Commodities and, um, uh, we had the sentiment there that overall, when trade Clarity, you know, comes up that this region would react first to this increase increased level of certainty when it comes to global trade. Um, as we are still in a moment of, um, uncertainty. I mean, there is a deal announcement between the US and China about 25 metric million metric, tons of of soy over the next couple of years. Um, 3 years we, um, still await the exact numbers and we will still need to see as an industry is not as only cnh. Um, what are the actual purchase volumes of China?

But the purchase considerations. So it's really around continued.

Ambiguity of global trade and a still existing lack of certainty because I mean, you have heard many trade deals being announced but then the details are not yet disclosed are not there yet and so on.

Farmers are and so we were curious to see those details coming through which will then lead to more certainty and that will also then lead to.

Higher level of predictability when it comes to purchase equipment sales equipment purchases. So that if that is the difference. So we haven't really improved on on certainty as it comes to global trade conditions. So that's the main thats the main driver.

Uh, when it comes to, uh, South American soybeans and other commodities, that will then refuel farmer sentiment in the region when it comes to, um, you know, the 2026 planting season and related, uh, equipment sale or purchase considerations. So, it's really around a continued, um, ambiguity of global trade and an existing lack of certainty. Because, I mean, you have heard many trade deals being, uh, announced, but then the details are not yet disclosed and are not there yet. And so,

Jim alluded also to an increase in Latin American increase in delinquencies.

Our farmers were expecting a payout from the from the local.

Brazilian farm Bill.

As it comes to purchase of seeds and fertilizer.

It was delayed and so our farmers.

All farmers are and and so are we? We are curious to see those details coming through which will then lead to more certainty and that will also then lead to, um, a higher level of predictability when it comes to purchase, um, equipment sales, I mean, or equipment purchases. So that is, that is the difference. We haven't really improved on on certainty as it comes to global trade conditions. That's the main that's the main driver. Um, Jim alluded also to an an increase in in Latin American, increase in the Linux.

Preferenced authentically prioritize purchases seats fertilizer and inputs that purchased.

<unk> facilitate giving priority to.

Our equipment or the industry's equipment.

Our rates and so that is another drag into market that he is another indicator for uncertainty that has.

Very much unfolded in the third quarter and we are taking a very cautious view here and so do the pharma, so more uncertainty and wait and see mentality in Brazil, that's really what has changed and we need to see what trying to really buys Indiana one thing as a deal. The other thing is the actual purchase and the consistency of such purchases.

After a month.

Our next question comes from Todd Jackson from Northland. Please go ahead. Your line is open.

Thanks, very much <unk>, thanks, very much good morning, or afternoon, depending on where you're at.

Our farmers were expecting a payout from the, from the local, um, um, Brazilian farm bill, um, as it comes, um, to purchase of of seeds and fertilizer, uh, that was delayed and so farmers, um, you know, preference or basically, prioritize purchases of seeds, fertilizer, and inputs that purchased, um, rather those instead of let's say, giving priority to, um, our equipment or the industry's equipment, uh, rates, and so, that is another drag in the market. That is another indicator for uncertainty that has, uh, very much unfolded in the third quarter. And, uh, we are taking a very cautious view here and so do the farmers. So more uncertainty and wait and see, um, mentality in Brazil. That's really what um, has has changed and we need to see what China really Buys in the end. Yeah, 1 thing is the deal. The other thing is the actual purchase and the consistency of such purchase

This month after month.

Two questions for you one with regards to the tariff guidance and.

What is it.

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

$80 million I think you said youre going to have.

Thank you very much. Excuse me, thank you very much. Good morning.

good afternoon, depending

Where you're at?

Fourth quarter.

What was when you at the second quarter, what was the deal for a tariff impact for the remainder of the year honestly I don't recall, what it was and I looked at the.

Uh, two questions for you. One, um, with regards to the tariff guidance in, you know, the—what is it?

Past presentation, you didn't see anything in there I mean is this.

Is it $80 million? I think you said you were going to have it in the fourth quarter.

The costs that you're putting forth there is that incremental relative to what your view was.

Exiting the second quarter going into third.

Yes, good questions. The section 232 costs were not part of our.

Guidance in Q2.

We indicated 110 $120 million of full year net tariff costs and then we bumped that up to the current view. So that's that's the big the biggest reduction in guidance is not from tariffs tariffs were a small small piece of that there is a bigger reduction was more of the.

Presentation, you didn't see anything in there. I mean, are these the costs that you're putting forth? Is that incremental relative to what your view was?

Uh, exiting the quarter and going into Q3.

Yeah, a good question. The Section 232 costs were not part of our.

Yeah.

The items, we'd be gone through with SG&A increases and.

The mix effects.

Okay.

The mix came in came in tougher than we thought.

My next and last question, obviously as you know.

Guidance at Q2 uh I think we indicated 110 to 120 million of full year net tariff costs and then we we bumped that up to the the current view. So that's that's the big. The biggest reduction in guidance is not from tariffs. Tariffs were a small smaller piece of that, the bigger reduction was more of the um,

Even with all this stuff and you look at the change in guidance you did take your sales number up.

The items that we've gone through, what the SG increases and, um,

uh, the mix of effects.

<unk>.

At the midpoint it would be up.

I understand you got mixed came in, came in software that we thought.

650 to 700 million Bucks.

Your third quarter at least relative to consensus was a bit higher because you're growing so even if we just say, okay, well third quarter was better just to be as conservative as a proxy that out there is another $200 million.

Um, my next and last question, obviously, is, you know, even with all this stuff and you look at the change in guidance. You know, you did take your sales number up. Um, you know, at the midpoint it would be up, you know.

650. 700 million bucks. Um,

Sales in the fourth quarter.

Relative to kind of.

<unk>, yes, do something like this with prior guidance.

You know your third quarter, at least relative to consensus, was a bit higher this year. I'm going, so even if we just say, okay, well, third quarter was better, I just use consensus as a proxy and back that out.

It sounds like its construction.

What's driving that and then how much of that increase is am I right with that and then.

You know, there's another $200 million of sales in the fourth quarter.

Is there how much of that pick up at a revenue is from you being able to push along pricing.

As you are compensated for things like tariffs and such.

Yes, yes so.

Pricing remains a positive driver of revenue in Q4.

Definitely.

A favorable item that we've got baked in.

The second half change in the guidance that you are seeing though is again, mostly driven by higher volume sales with infield areas with sort of lagging margin. So the margin that you would associate with any given dollar sale just wasn't there given where the sales occurred so.

Relative to kind of, you know, what would have been expected, you know, to do something we want this with prior guidance. Um, you know, it sounds like its construction in India that's driving that. And then how much of that increase is, am I right with that? And, um, then is there how much of that pick up in revenue is from you being able to push along pricing, you know, as you're compensating for things like tariffs and such.

Yeah, yeah, so um, pricing remains a positive driver of revenue in Q4. Um, so that's definitely a.

Higher sales without let the margin delivery coming through it that's what's really affecting the what would appear to be a bad incremental or decremental. It's really just the sales mix.

Our final question today will come from David Raso from Evercore ISI. Please go ahead. Your line is open.

Hi, Thank you when you speak to global industry retail next year being flat to slightly down the order books as they sit today, where are the order books right now versus a year ago.

A favorable item that we've got baked in the the second half change in the guidance that you're seeing though, is again, mostly driven by higher volume sales with uh, in sales areas with with sort of lagging margins. So the margin that you associate with any any given dollar or sale, just wasn't there given where the sales occurred so um, higher sales, without let the margin delivery coming through it, that's what's really affecting the um what what appear to be. Uh a bad incremental or decremental? It's really just the the sales mix.

Ideally if you can help us between the North American large AG commentary for next year in EMEA.

Our final question today will come from David Razo from Evercore ISI. Please go ahead; your line is open.

If you can give us some sense of the order patterns in those two regions would be great.

Yes, I think the order coverage.

We see right now is basically as I said Q4 is basically covered everywhere.

Q1, largely let's say very well on track, we have a bit more auto coverage on the north American side than in other regions, but this is pretty comparable I would say to prior to prior years.

Hi. Thank you. Uh, when you speak to Global Industry Retail next year being, you know, flat, it's slightly down the order of books as they sit today. Where are the order books right now versus a year ago? And ideally, if you can help us between the North American large, a commentary for next year and AA. Um, if you can give us some sense of the order patterns in those two regions, it would be great.

Yeah, I think the order coverage, um,

I think there is not a particular pattern here, we're working through obviously early order programs and we're working through.

Which would be quite exciting for us to showcase of the machines next week at the <unk> technique.

We see right now is basically, as I said 24 is basically covered everywhere. Uh q1. Um largely. Um let's say very well on track. We have um, a bit more Auto coverage on on the North American side than in other regions. Um, but this is pretty comparable, I would say to prior to Prior years. Um,

We have a full lineup of renewed attractors on offer and.

Similar upgrades also on the combine side, so I think the agri technica as well it would be another stimulate enrollment.

All pharmacy with great machines, we're putting out there.

So we're pretty excited to walk you around and show you what we have on offer but the order books are very much in line with expectation David one more data point that we're excited about and it's very.

I think there's not a particular pattern here. Um, we are working through, obviously, early other programs, and we're working through, um, which would be quite exciting for us, um, to showcase the machines. Next week at the RV Technica, we have a full lineup of renewed tractors on offer and, um, same similar upgrades also on the combined side. So I think the Agri Technica as well will be another stimulating moment when, um, our Pharmacy, what great machines we are putting out there.

Comforting and validating our.

Our flagship combines in North America. The production slots are sold out for the entire year.

Evidence of how how well that machine's performing how well it's been received and the value proposition. So that's another good good sign about.

And so, um, we're pretty excited to walk you around and show you what we have on offer, but the order books are very much aligned with expectations. Yeah. Hey, David, one more data point that we're excited about, and it's very uh,

We're building the right products and markets receiving them quite well.

That concludes today's conference call you may now disconnect.

Comforting and validating, uh, our Flagship combines in North America. The production slots are sold out for the entire year, and it's evidence of how how well that machine's performing how well it's been received, and the value proposition. So that's another good good sign about, um, you know, delivering the right products and uh, and markets, receiving them quite well.

now, disconnect