Earnings call transcript Q4 2022

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Operator

Good day, and welcome to today's CNH Conference Call and Webcast.

At this time, I'll hand the call over to Jason Omerza. Please go ahead.

Jason Omerza

Thank you, Serge. Good morning and good afternoon to everyone. XXXX. welcome Industrial's the Results Fourth period December to call and for like ending CNH for Quarter XX, would you webcast to conference the We and Full-Year our This Web CNH call broadcast is live Industrial. site, is copyrighted being and by on use, of any recording without this portion Industrial CNH transmission consent written expressed of or is other of broadcast Any the strictly prohibited.

use Web from CNH Industrial's CFO, They will and the CEO, Oddone download for Industrial Wine; are the Scott call available today's site. Hosting CNH material Incisa.

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

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

certain presentation company financial includes The non-GAAP measures.

reconciliations including directly presentation financial is to most information, Additional GAAP the included material. comparable measures, in U.S. the

over I Scott. now call to the turn will

Scott Wine

Thank solid you, revenues quarter and as Construction. mix thanks, Jason. were our full-year revenues results driving over improved up XX%, fourth both up finished XXXX XX%. for Agriculture and call. consolidated joining We And Deliveries in with product everyone,

industry costs, profit The was chain, elevated broad-based, increases. supply both in margins inflation. Agriculture year, and expanded many from coming input including ongoing and during We cost the strength Our despite choppy regions. with double-digit realization other year-over-year freight all a Construction significant headwinds price faced

year, into work, company net adjusted up for strong earnings XXXX. share, we these XX% $X.XX, improve. year, execution resulted team's over the $X creativity, adjusted per and issues hard modestly the and And Late CNH anticipate both up for continue that will The to at billion XXXX. income, in records in began

of the billion quarter the a put our $X and from We This full-year and on our of plan. industrial flow net partially in accumulation $X.X also our billion generated over-delivered and activities position as plans benefited complete for built in cash in fourth ahead well we our units. us to cash free dealers ship

Last initiatives, has to CNHI the Business CBS. is mindset, Strategic embraced hard, the Continuous lean which we Program, Sourcing margin and poised improvement value the year, potent two across this we System, But of results. especially to deliver pursuit as team our launched refer and is improvement breakthrough business. in

team year-over-year which was product development. remain rate up XX%, for Precision executing investments business including factor-fit and saw by Neilson ahead, significant precision including his fourth focused drive largely for options sales exceptional quarter, out realization, performance, America. especially robust both a delivering and increased mix, Derek on strategy, our continue propelled price significant South and stack improved and growth AG incremental from sales. in full-year benefited We Looking industry the rate North in to up product we tech This revenues net AG with an XX%. in strong demand and take

XXX up required third and with and gross EBIT pleased by impacted performance points, healthy, Margins Overall, quarter basis sequentially the up an AG profitability mix points down against performance non-standard adjusted record comp. extremely finished our AG margins XXX remained were with the versus regional QX I'm results. work units. margin admittedly and easy to team's

in $X.X decade. highest XXXX, marking than billion, was profit more our nearly EBIT For adjusted AG a

at for production our executing responded increased customer-centric We high-end continued with cost. escalated products offsetting have prices our are customers and on strategy demand

center team are of is and right ensuring recognized driving in behaviors results. also at have do, and us with net we than customer promoter the improved Derek all XXXX. the scores, They X% higher that his

integration, noteworthy two-thirds the to manufacturing enhanced XX% fourth for the his remainder, remainder and outstanding the enhanced and even up accounted Sampierana. in XXXX about growth Their quite from customer provide Sampierana were excavator we of executed and better sales platforms and America. with with electrification. our progress to both the team South meet for increase focus; innovations quarter Organic for full-year in XXXX, beyond. strong Stefano Eurocomach improvements, growth portfolio net in Construction their in ability and foundation and customer well the Pampalone momentum the technology needs, have attributed Europe an and quarter, expect with fourth

Construction. EBIT This well-positioned initiatives, adjusted in to and million gain up past a engaging the was margin. better exhibited on of an share. held the automation, the live showcase XX%, precision dealers their stations, applications to of [Ph]. at our team market December, Day deep encouraged series ongoing demo extensive edge support Through for groundbreaking AG adjusted Construction our by and $XX EBIT in the deliver X.X% we we is to million. are Full-year platforms technology. team to was the understand strategic of real and The $XXX met our progress experts connected developing. quarter team products And [Smart their we Attendees Tech are a suite world Iron] customers, autonomy, of cutting

health CNH for precisely to develop taking is minority Technology our recent our want on releasing and sales demonstrated in that years, prove to to staying over this over commitment investments companies we highlight being in the Ventures technology Industrial portfolio, Ventures precision customers. see technology edge on startup at measures advantages of implements. these a emerging through products $X leader on page agriculture and reiterate to of our cutting soil provide we CNH Tech proprietary the sensor also two Stout We deliver in you those through and Precision The arm. similar to By expectation will our billion real stakes next agriculture. is XXXX. has made structure. I smart AI-powered U.S.-based that Day here a Industrial be few and technology focused that AG EarthOptics solutions

through and sustainability. adding growth creating remains committed and profitable CHN to its value for customers shareholders

that of excavator to XXXX, will science-based our In operation's and goals, first-time Scope as to our Holland recognitions and which this related we X performance and We emissions New establish by X evidenced history pledged innovative and here. have sustainability strong including pictured products, our we'll electric a the methane tractor a year. targets our products, announce decarbonization set goals enhance later mini

over With to take that, turn results. I will you to Oddone? it our Oddone through financial

Oddone Incisa

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

were sales quarter XX% were sales up or Activities, fourth $X.X of up net adverse XX% Industrial $XX.X So, currency. of XX% at impacts. over Full-year billion, from FX nearly over of net Activities, of billion, Industrial net constant

and line for accounted the increase for mix quarter, XXXX. drivers XX% also growth in volume top and significant were adjustments price Continued around sales QX, the from

margin Industrial Our quarter for fourth gross segment's XX.X%, the full-year. and XX.X% was

of is initial QX in slide. of X.X growth million South EBIT basis as billion versus million, $XXX net from a his EBIT adjusted XX.X%, Industrial into with cash Activities mainly and America, points the in Scott due came XXX to discussed improvement, a introductory a offset flow $XXX in up The of rising strong was Industrial XXX a of disciplined EBIT XX.X%, from position price cash up and productions than turned the business profitable improvement points XXXX, margin margin adjusted year, more $X.X year-over-year margin billion Free at which Full-year cost. our corresponding from realization XXXX. of in which points, prior million globally, with $XXX net XXXX, Activities at Industrial Activities end $X.X debt was of year.

full-year per $X.XX. adjusted prior EPS net or earnings tax and pre-tax income tax compared tax was This was for was mainly million due profit affected will $XXX for due to a the see to net XX% Adjusted year. resulted Adjusted jurisdictional rate lower income quarter to point mix up $X.XX, we coming the South about discreet million, share with adjusted was America. adjusted in items the QX. by likely $X.XX booked in in quarter year-over-year, the of $XX rates rate up of XXXX. two higher full-year higher a And rate from effective The

CNH realization double-digit production little distribution to continued Annual newly our recommend our is increase the accounted businesses. Energy acquired Available were and $XX.X increased And shareholders. $XXX Industrial expenses an total per costs. December still in higher for quarter, of In liquidity, the SG&A common a over to the $X.XX planning to shield us annual dividend price in of R&D was as totaling by from costs at inflation, Meeting, but Board XX, costs and the of General steep year-over-year and fourth of million share, volumes strong investments, half-a-percent billion. worldwide. cash about technology

to profits in R&D a million Agriculture $XXX than and and volumes XX.X%, compared margin XXXX. billion products points driven XXXX, offset from EBIT to with was pricing, of expenses. $XXX profit reach by higher $X.X basis which SG&A, favorable million increased up up $XXX margin QX adjusted were more the XX.X%. of same quarter million, XXX The with higher Gross cost, exceeding higher a by

full-year, and sales regions mix, by XXXX the up better was margin-rich up product strong from points all driven $XXX profit XX%. growing For from XXX largely or basis realization million price gross coming including technology-related by about

due compared site-related with headwind for to Gross to $XX of the XXXX, results volumes adjusted an Equipment full-year $XX realization. positive and by year a business. EBIT Construction stronger including were was by pricing. to outsized QX These cost, compared X.X%. profit margin price driven QX volume across increased favorable million But product for XXXX, reaching million the costs, million mainly and up higher were the $XX

high $XX service America For the cost, those business provisions increased North as XXXX. margin well fourth mitigated in on Factors million in compared risk robust the the net in recovery include was business, of million, construction the high across termination income quarter by agreements. cost, to $XX and linked compressed volumes to our region financial down slightly China, labor

at of on year, was up the billion, basis $X.X billion XXXX. The $XXX account remained XXXX. of end basis. portfolio constant that year-over-year were December Delinquencies XX XXXX originations for points $XX.X the quarter in-sourcing X.X%. billion a million October credit managed a was $X to the by resolving at billion from explained in the level, purchased up $XX Increase portfolio to reaching from Retail up the is currency low in XXXX

Capital part over $X as of on total the billion large the previously a in activity flow change net by driven was CD inventory a gross and from held private in industrial cash was $X.X end $XXX the our in we on Free capital activities Industrial by back position in that be industrial debt At CNH run of the the acquired company. with mentioned booked quarter for reduction million. before. billion America by working receivables billion $X year, of manufacturing cash the program will now label

takes and combing to This period, R&D our the growth. $X.X of allocation financial were XXXX three CapEx operations. net the the in first what we our committed we of $X.X to In to first fuel years. improve target over generated priorities. in capital by the invest spending remain within able business we to almost - our back doubling position of XXXX have were And on year And by XXXX, So, billion cash $X.X the spin-off, that. billion billion spent the plan we profitable the previous in spending we the

the service the the share are shareholders rating million which We has higher and would through to maintaining generation and with and in cash improved or ensure spending will agencies performance to product repurchases. spin-off. been Strong our financial by We bring helps after customers. grade in higher efficiencies dividend we near $XXX the future, all more XXXX importantly, to investment nearly us re-affirmed confident returned our the the market rating

proposed And million. our will plan share itself buyback earlier, mentioned And we -- program. as the dividend continuing XXXX $XXX proposed we above total

you capital We seeing We have value for liquidity organic on growth to opportunity when arises. allocation shareholders. for strategy focus the ventures committed on minority and our the our are and use investments to funding maximizing remain

turn remarks. Scott. now prepared back it to And This concludes my I will

Scott Wine

And are are industry Thank continues which as Overall, Spot industry's cost actually are near prices ability fertilizers But to for to the dampened fortunately outstrip least demand you, despite dropping still down. generally trending other input commodity levels. Oddone. levels. supply and pre-XXXX farmers, term, the in above they record at the has sales well.

elevated America, horsepower high North In incomes are tractors and sustaining farm for demand combines.

the starts impact demand over Ag tractor small We seen see the macro-environment flattening two European demands from level the there. years. While has slowed equipment lofty to a industry as past

for America market and conditions a a particular Brazil us. in following South good in inflexed election. business The Brazil are very is presidential

the that fundamentals for agriculture believe positive in But we are region. still the

and and good expect long-term rising opportunities North XXXX Europe residential down. be trending also We to year commercial due In But will we And rates. APAC. in see global construction, is decline lower. demand to in slightly this America markets is interest likely in

partially States. in in those However, gaps public United fills least construction at spending

In Europe in overall reaction be down South the markets will to America, and macro-environment. construction

the sales to our XXXX net cost gains our of industrial on to system. more we expect We With to taking margin X% increase in of XX%. increases, stickiness confidence build out our activities expect price of by

growing committed network to products, the brands, We market share. we are And just that. to and have do dealer

Returning also our help. to American full in plants production will North

a for industry. $X.X pressures, in $X.X billion. lower million $XXX than we from billion as the the be as year SG&A Our cash little earmarked despite Free and growth. about last lowest percentage one have sales up will XXXX. inflationary A limit CapEx, of remains will And $X.X between severely SG&A flow billion and R&D of we

projected slightly line. to Even R&D than accounting top for the is our EBIT our grow faster increased cost,

every industrial Board expect a company year. announced today, that States. determined has the in Directors single of And leaner throughout listing would Earlier by simpler, be shareholders best day. improve a becoming margins modestly are United that our our our served to we We

will The investor New majority Exchange single further focus, stock, Revealing new York and fit profile, Concentrating allow more of attract our that profile broader Stock the the New investor better CNH Stock investors. Iveco base simplify our enable trading increased to and with stock company's Industrial passive the of market of liquidity trading CNH's has Exchange York listing. one snip-off Group. since the in inclusion, index improve been in for business shifting

The be will another open with CNH expected on qualify. Italiana exchange. exchange. exchange EU when Exchange the acceptable Industrial European Euronext. Stock the York them listing. on modernization the dialog Italian an regulations And only include of of about Italian definition, not an is and to we By they underway, or intention the told current the stock of leave our are listed delisting stocks The does system, has permit which harmonization financial to as New Borsa is

delisting from But preferred not only our the is smooth option path becomes This if this for Euronext Milan. untimely.

that are will NYSE But the it to by XXXX the We Netherlands do change tax this the point, sole intend could as incorporation trading possible. regulation At targeting legally timing assured, Rest shift U.K. the we our not our domicile XXXX. change. the we is part or on of into single as delist on of soon in in listing. it of end depending

shareholders. tax trading Therefore, we or do not expect any material our consequences for

full for Our excited this Board market. are and being listing commitment to the management want past to of longstanding team stress grateful for change I Directors our does to the the Euronext years, Italy venue Milan and XX return NYSE. and to not that about the Italian company's company's the

investment XXXX employees its Italy country Sampierana opened XXXX, fifth people acquisition late with made CNH a XXXX. in in significant over in the plant in

products R&D three the have in that Italy also around are developing We world. centers sold

the business. in While the delisting comes from step another real is creation corporate value simplification,

remained We taking are And now some QX into demand overall markets. orders in strong.

strive of XXXX the especially macro-environment, dealers, toward customers, requires to end employees. vigilance suppliers, our and the uncertain support But as we

and escalate we R&D We out new the build CapEx investment exciting products as combine launch stack. and expect tech to

in But precision real We already we introduced payoff Raven-enabled products, have kicks will more some these in solution XXXX. and margin XXXX. higher the for unveil

this to week. and We we are expect to employees And returned ramp reached have affected with to a the is America. months. our finally to company. the for North full production happy the fair Employees two for secured work agreement sustainable The UAW coming we in plants contract up

have our expect R&D inflation and it an XXXX. While cost energy, slowing, manufacturing, in impact pace it we inflation. the is still And on is of to SG&A,

note, supply are we a improvements. chain seeing more positive modest On

yield will again close improvement to And start strategic prepared do in I concludes to XXXX. XXXX. emphasizing in proud ready ensure team accomplished. results by are we want margin have and sourcing, of to CBS the more how am they initiative, our I that for primary Our That remarks. what even you

line Serge And for open I to over now to call the turn questions. will

Operator

And Oppenheimer. Owen Kristen ahead. question Thank from [Operator you, Please Instructions] go our sir. from comes first

Kristen Owen

XXXX, last intentional short. to of Thank quarter, being far wondering the order in was year-over-year for for about are If you driven by books recall, keep more you talked XXXX? were outlined some How maybe about more declines your you Hi, outlook of of that versus the the view order industry on now, some I release? and more could I for relatively book talked if Scott, decision you the say you demand trends some good open levels the how question. you just morning. press about order demand comment

Scott Wine

Yes.

it's books about, that open. -- the read. is see order But we in bit, environment you are you talked everything As and choppy not little a macro really our

up we We yet, still opened are and QX in any haven't markets allocating.

of delivered in manner order -- I proud The tractors. in choice we I'm is of timely So, happening markets. one clear down we've of not much on the book a what's where is horsepower is fact, been the it's allocate lot but very market mean to our low XXXX. not a have

So, to there. a we in softness mentioned, taking farmers, I situation are Brazil, seeing I provide referred taking pause. just really a -- it's political I And are think, the just

was they closely. that about just are the that bit watching But that We market to production fundamentals to it but our equipment do need in execute slightly and down, a way flat little keep the strong; But feel in order think very in Europe XXXX. ability world overall, and the we're market needs that we to that. relatively incredibly agriculture good is

being as as through just and this and we year, expected the being be I don't cautious our I quarter. as open very think the quickly. much as can quarter about careful yet, it have factories point. are fourth is that running we where but mean, and orders could at for as probably And really, overall, where than have this So, the demand talked I at at to fourth We we have look that we we're I it, think better The fast we can would we book environment up point. is

Kristen Owen

thinking how follow-up produce builds, just line inventories, And just dealer as there? any to a helpful. just levels you XXXX, that's you're have about then in existing that with comments Okay, expect you question, inventory to do dealer

Scott Wine

our us horsepower -- below are below exception dealers levels, the We our we and inventory. would still frankly, the like most still historical with still quite really, with low are of of again tractors, to be where

But So, up. We'd push protect market looking a lot the build inventory of acceptable are them not we catch watching no, inventory. keep of historical provide is to dealers plan down to goal dealer to to We've you're give going that But that We for lean. get shipments, to the fast is and to into relatively and sure to levels not got there, dealer slow we're careful XXXX. got into as back some just inventory do some our going we've can to because inventories to running work at make to to as we're you what levels. part going do like balancing channel. It's more point. we

Kristen Owen

Great, thank you.

Operator

you. Thank

Fisher Our next comes from question go UBS. Please Steven ahead. from

Steven Fisher

morning. Good thanks. So,

yet? open the need just Just them QX? for Scott, will you order opened fully the order books haven't QX you curious, And on why up to see to up book what point,

Scott Wine

horsepower manner. it's got it's we've long. it I anymore, is think inability in backlog, just quite -- get to proud refers more our our but inflation of and to, timely to I'm fact, ability tractors, deliver. that in a there. to And again, trying our I still confidence Steven, the -- in rising out the really we're not deliver We is mean, just high again not especially

we So, manage we also sure are cost. our making

the when job business, seen from up making deliver that. managing are going You know, the nice ensure to sure also, history, a really doing we're doing their that and open in books. really and of Stefano but equation, cost we it's we say balance we if cost-price we that Derek we're inputs really our can good deliver at But you've

Steven Fisher

and number just Okay, us can on that's strike give terms the to guess, there? you I be I in supply color AG have chain, helpful, maybe And mix would Precision there for inefficiencies for fair. takes of any XXXX, in a think, imagine of XXXX. the then, were margins due XXXX, I in then puts should production, the AG the and and you

and So, versus in of price takes, talk expecting then for can you're you about what some XXXX? and puts cost those

Oddone Incisa

Let of me pretty -- you a you we than to this, predicted cost pricing. take I Steve. mean got more XXXX play of expect play Yes, it. a be

organized then year strategic at. coming more expect in in cost, sourcing margin having and higher in And the But -- to XXXX. getting price to cost well the And and will have cost XXXX that's combination have pricing from over throughout sales will be system be and game That generally rather been getting the beginning We some smoother the than big systems. probably pure you some as a cadence, still supply in But at our And in we're end improvement of out as for which steel equipment. we possibly tech, the reducing the program. production what on production that's and have of positive kick in. we the year. a chain, growing than mentioned a the more of looking of carryover

Steven Fisher

Okay, thank you.

Operator

comes Please ahead. go next question David from our And Evercore you. Thank Raso ISI. from

David Raso

that up mean, volumes. a Hi, much levels. you When to look price I'm X%, the square these of thank the -- of currency guide, trying revenue shouldn't the sorry, drag you. be implied at I at just the

flavor volumes So, price the and any way basically volumes in us flat? interpret of that versus the of that if where right you is that the And down absorption? we kind overhead just so up case, to a square mostly it's Is are if can little up it looks like guide. just give chance it, revenue

Scott Wine

greatest backlog slightly, the we've strength, where but see do. America low got are there, most North slightly don't biggest work single see the modestly -- to modestly digits. the know, defined and up and Volumes I is we really where it's we where

there's to lots that think volume that'll there, other world, comes And the of of most from. extent. still areas in the to be do be to the great -- will rest where a volume work play of really the deliver of I So, but

David Raso

that's are units speakers] AG of and comment, an -- bigger more And the -- I [multiple large know

Scott Wine

it. high No, It's and and you horsepower order. combines, that tractors go in

David Raso

about about -- [indiscernible] price, I steel more are And understood sure and you year-over-year think implying around so up our 'XX? do all we to steel want I steel comment more the think I wrapped it's make than expand a price? what there, we understand in in margin were that costs do thought Oddone, And than still comment. gross margins can just

Oddone Incisa

I sorry cost, general. cost I'm And And talking in of material, so cost, but general, so includes over if our cost. wasn't production was raw I cost, all clear. price in

David Raso

But margin? be the -- for to so, year price-cost positive so expected to

Oddone Incisa

Yes.

David Raso

margin? to Neutral

Oddone Incisa

Yes.

David Raso

Positive margin?

Oddone Incisa

Positive --

David Raso

is costs should So, are margin. expand? infer margins I a price net if from and positive up be assume to volume to bit little expected gross that can we

Oddone Incisa

Yes.

David Raso

sales than growth was -- at SG&A the guide. correct? slower that least in As grow with That as well

Scott Wine

correct. That exactly is

Oddone Incisa

at. looking we're What

David Raso

so right, All you. appreciate you And I thank Thank on delisting. much. the detail

Operator

our question from ahead. Jamie Suisse. Credit from go Please comes Cook And next

Jamie Cook

are morning. to two thinking I relative Thank there's target, I you're performance just synergy AG financial question, on targets? about up, upside your where the you for put implications up we the think there? can just second guess, Raven your talk then, my and whether an and quarter. And about you. XXXX update the Scott, you guess Hi, that financial performance good you've given put positive you've -- Nice questions. cycle, the how

Scott Wine

But year, Okay. the soft of Day, better Well, as is that driven we overall, doing from then impacted at our much look by are to if in that's back Ukraine, than well. prices played And not related, -- XXXX both have we some and market -- first quite war anticipated we're all, actually go had of Capital than obviously significantly But our a commodity expected. we which better 'XX, performance out by we anticipated. Markets you couldn't unfortunately 'XX, that. really

path we're to look in but better obviously on like areas, XXXX feel do some we work got we areas. some As in a to targets, our do we've at

targets, speaking, we and path So, we feel like, ambitious those. on hit generally set to we're

to is be at though, looks are I The pessimist, AG soft remarks, I could talked talked a be to -- we're pay not reluctance elevated equipment commodity could in a but like, still farmer a the could good levels. still it relatively cycle. 'XX. desire -- prices are -- be as at don't positive but we we And But that taxes, hold. year. more won't good to like therefore we think about now, feel And setup in a I levels. 'XX income right still their and for their makes forever, starting want turn cycle that It about, just stay call my difficult by And their prepared it to AG about to negative

We because more and And culture. the committed the our positive Raven we As embraced far like that integration reverse to we team well has I has gone. be a on how as integration that. concern, I'm honestly could not team sure like

But we and their giving on talked sprayer resources. We we we and our tools with system, tech we're tremendous to about and -- full out that, pleased value are done brought and their hiring. embed really, a amount of But done synergy We'll learning value capability. from Patriot them Raven. Huge tools on really, building overdrive real the aftermarket overall, our just unlock I'm Raven team opportunities the -- them is where have in there, retrofit that targets. forward. customer-focused in new the it's stack agile how opportunities bring the everything integrating with And that We've team can, team into both Raven is. our really going

Operator

Morgan Stanley. Dillon you. from from next move We'll Thank Cumming now go to question our ahead. Please

Dillon Cumming

Thanks guys. morning, question. for Good Great. the

some opportunities Just the more you margin producing of wanted mentioned. on credit to ask improvement

tail more more it sourcing the kind mentioned sense ramp could of end could trying bit a You what maybe just how get to starting be still basis, just quarter. of you or year? so back-half-weighted. dollar could program called the Oddone But margin on and out an a a of kind earmark the of would to that basis next I a know opportunity CBS in of be more be quantifying much

Scott Wine

where what is are And on significant, Yes. lean do of get we're obviously, from using got great the are in costs the in accelerate Well, just looking what the the tools we that's lean do throughout various actually year. lifting. And other push now input to year and And year Oddone lot not were are of starting lean areas shape remember, we've see and we pre-pandemic. XXXX that's focus. referred plant plants. how the do nothing. I to we not our taking -- a tools working But What initiatives CBS the and that's it are -- that teams you'll -- price, the deploy network. is business, this is it, a to think not to WCM to going with and cost the but of pulling heavy is XXXX opportunity of And how was back back be quite cost a history

taking those, I opportunity, customers. across those 'XX. quality a make going significant get accelerating to lean it's value so create that's, -- -- The be will tool work but to value overall, short-term, that a delivery way use tools after cost margins. get and did importantly, the make delivering that. expand expand us and that in we not do some about better, business, to use can way a It's tools that we We're the of work great to we're margins. to just our more better, say, out, in for we help XXXX, those wouldn't we And But that after

and results drive start got probably a I in to But some those, summer is fall. really but sourcing. expansion strategic We've working and long-term through show But kicked our initiatives, got team off more year, sourcing Strategic beyond. -- later It's significant longer-in-the-tooth opportunities notable with last a this both margin with CBS it. opportunities say, 'XX, of near-term that would it will strong program.

Dillon Cumming

know you you just were my that Oddone, Okay, exited revenue color. Precision that's helpful follow-up then Thanks, guiding, it's that that originally the And AG I rate, target, point? the I think, fairly at billion Scott. XXXX. the year to up still in with mentioned any on you at would XX%, for $X recent target exit you XX% but a this consider up it's Day, target, 'XX upside just Tech given

Oddone Incisa

stick that will time being. for I target to the

Dillon Cumming

thank you. Great,

Operator

from go Tami Zakaria ahead. question JPMorgan. comes next Please The from

Tami Zakaria

you Thank Hi, good so morning. much.

to higher just it? of some low it color call for that how out for that a so about single-digit, but to we that is expectation nets be Is on So, single-digit, negative company. volume should the get thinking single-digit the Construction, overall growth low AG, for mid

Scott Wine

to a and No, environment, we difficult had is it's year our actually last that Construction in overall limitations quite backlog actually Despite many good. produce, -- good. the so is ability business reasonably business that

in businesses both have volume So, will XXXX. positive

Tami Zakaria

what second super-helpful. kind incremental Construction it, should AG question, margin expect year? this segment Got and then And of that's we in

Oddone Incisa

affected on go time, in will Construction the because difference the line I to big we more a year, in that. past. over had what no little headwinds had was margins by have pretty the line I mean, incremental but -- have some use in with kind Construction more much would and it that this I have AG, of bit the we -- of -- be what for we Probably will cost from

Tami Zakaria

much. Thank it. so you Got

Operator

from from And Mig our Please Dobre question go ahead. comes Baird. next

Mig Dobre

your morning. us in a equipment. more declines book order up And and wondering that also than peers order as you AG? are pessimistic I'm when that the the done for and and be your arguably, to helpful little in more seen own here well. a would you limiting on here, if of Construction So, on with I'm seeing, following in XXXX? framing Good can industry, the heavy the XXXX, Are some And again, Construction book around light what color little curious, for maybe you we've both give you've similarly context outlook

Scott Wine

Well, really but [Ph] I the didn't XXXX. [CAT] don't don't was I obviously, being But positive this -- numbers remember week, digest them busy I overly -- I on overall.

Where under-serving we're and line that with network that. really our So, dealer Construction side. what I we're on think we're with diligently somewhat working to improve heavy excavators, was the in

for opportunity some where So, area. But of backlog has deliver because that's been a in us. the cannot we that's that significant just reduction

was start that we just strong the expand with repeat. for America light very can bring and last the don't to Sampierana, expect year; -- South that. markets will side, it good to But got with we've Construction really progress where serve we On

like -- a it's And for that a business. little going. a it bit bit with to job was overall, be doing it's long-range year. will than again, last side, we got little market sure a going that from that Stefano in it's Construction are a But be lighter where positive business, year. nice upside So, a be his and and team

Mig Dobre

price-cost I Okay. can well. if And the then question try as

price looks expect had if figure couple consolidated from or on significant million holds Looking of variance a about And you quarters. contemplate $XXX you've positive the if XXXX, should I'm any we past like that? this wondering as of basis, it cost

Oddone Incisa

expect positive directionally, as No, XXXX to price-cost well. we in be

but seen wouldn't take we take different going are terms what throughout I be view absolute of we of in I So, different what seeing. much much And to wouldn't a are different, have those view XXXX.

Mig Dobre

Great, appreciate it.

Operator

go question from Please Marta our comes And Bruska ahead. from next Berenberg.

Marta Bruska

for haven't at And you taking the industry, it normalize [indiscernible] little past, in see where please. good out in in of whether hear change so, please, start was on to the your would would given you you XXXX. that? this more, mind, steel you Thank understanding, of they're competitors would anything that had my giving or price, would Hi, positive a and At the suggest I already some or And my would I But afternoon. helpful pricing be then question. dealer, if discount XXXX of the -- environment one thoughts to handing to your your specifically, risk react that some raw just to out the case to had how bit. [indiscernible]. wondering this this been hand discounts competitors the the starting don't a with steel with all

Scott Wine

chain are inflation, a but it impact XXXX, so did to and in still our therefore than rate declining to business, of expecting extent we our XXXX inflation in a lesser supply So, still inflation. seeing

a some is that down. in So, decrease coming we've we're overall the areas, but paying cost seen not

intend we and that decrease don't in in have the on And industry, price. because in So, fact, putting start pricing. see that products suggest the XXXX, we And approach. price, into think still again, that levels to don't we're at don't to innovation need overall, of a we're that, But lower I increases. lower the that going quality again, competing and take to we is to our go would likely going going

Marta Bruska

able from big the cutting just cut kind opportunity into were you. the benefit from your the was with I talent please? wondering to tech of workforce, you And Perfect. hiring pool, tech Thank for then AG, to pool all the Precision the

Scott Wine

team, with pushing quite the have and for been I we hiring some on I done mean, the something have technical and layoffs actually of a the many programmers But Autonomy. we've -- team actually time. our That's significant are engineers. Precision not

in Precision hire value So, opportunity. as our we But our we others don't what accelerating that we little probably a get doing. can we'll is really 'XX. our to commitment talent did hiring that more And -- We'll are most in 'XX. of to an and reasonable great certainly continuing bring see we But that extent to customers And are prices on down slow from of because bit. there. at the Autonomy

opportunity -- of we're there's where hiring there not most where those and a significant of no, but because So, employees for those just us are located.

Marta Bruska

you. thank clear, Very

Scott Wine

you. Thank

Operator

Please Nicole our Deutsche go from Deblase question from Now Bank. comes next ahead.

Nicole Deblase

guys. morning, Yes, thanks. Good

Scott Wine

Morning.

Nicole Deblase

bit moderation start of seeing such we just levels, values, 'XX, a all high any Can with used what by little at AG equipment signs about within or respect in Construction? from to you're talking

Scott Wine

the talking not and horsepower Used that's horsepower in large still a tractors different at because side lower. anywhere in and side. there, scenario, values high we're low in fleets seen a the And AG, seeing the large used or stabilize market hanging side again are because I'm just not still about availability. we've OEM that at But

are prices reasonably staying So, high.

Nicole Deblase

it, 'XX got return see about And But normal about want on normal thank kind throughout would guys you of a the is versus cadence year, Okay, quarterly anything throughout seasonality. the to you that thinking that to you. earnings helpful? Thanks. comment think be just seasonality, suspect would would of there if I to

Oddone Incisa

seasonality, normal we to will well of and sales. seen back I go between production No, we the sort XXXX retail say which in would have as

So, going I would normal. back to say, yes, the

Nicole Deblase

Thank it I'll you. on. pass

Operator

you. Thank

now will ahead. next Please Timothy from Citi. question Thein take from go We our

Timothy Thein

last in others curios, Yes, so just and does is of so so, year how to and be There's these releases order you shifted noise it's thank Derek much have how you. seems and comment a terms that? interesting life the their just But an -- has unfolded of to world kind the first, Scott, of I taking or team own. over think these mode. much -- board Yes, in how the interpret I'm allocation

in Just are deliveries, really underlying these order that's of question? all light significant issues know, that they, you getting at the the nature just guess of around the significance how of boards of meaning, timing I

Scott Wine

than and just recently Derek are we think Obviously us, getting there from demand, to is call, if up and but open that a off it for has I are reasonably see markets. would as seeing I to slowing in a you how we really are more think call farmers good would it. overall, some good. lot coming up caused low for I Brazil regional I -- in and we but the strong. bit could so little didn't having in positive -- portfolios an mean are tone orders the it's and for think I on been would and are ,"Pause," reading pause the be, in what I we him Yes, But net it in market unprecedented region, tractors taken, seeing would a very a that still much but we been see election it's it, still Lula call I hear think we you changes in expect Europe, lot and a the speaking, collection but generally overall, used very, hour of it all that, in book of But have in almost an there. I expect overall, is, a horsepower markets, that The you what

properly. we is sounding by to at manage on of think timing, we and a Derek's matter seen make you are he side and well, a not orders and execution, trying and it's the an 'XX. includes that think I all that that right I on come But business is sure So, the to extremely the as to through, the managing in that sales in make putting year retail sure measures he deliver place alarm, solid orders just have

Timothy Thein

and for market to And known and again, your pretty weakness, back earlier more 'XX. likely it. bottom line this low horsepower -- guess again, well the stocking dealer dealer, comments but I this just or it, of point, at ag, think is sort gets notion I happening dealer a significant Got not from large perspective that any about obviously the telegraphed CNH, restocking far sticking to got and it in

takeaway? know, presumably tailwind as that whole. in Is ways 'XX you some is the So, off, still but a could front we fair -- as that's that company a pose long of

Scott Wine

but same I intent we want inventory, markets as takes dealers, discipline so be and going we I like our back levels that -- some cash that's discipline to we the as get we our for and our are to protect to think that go will to make that I flow sure to mean manage this. the reasonable we and of through have our do, is own don't goal, do --

right end them to we for some And didn't it over were significant much work very happens tricky those orders, out the there team year had in very this the the and to where complete inventory away, us, get but good world, ended literally just was end going of was so we so there fleet job and are dealers. it time the quarter, we retail up happen. the get needed the it components that, much with places more little in done to up just it that we done bit the a all that nice finish at tested of has to in with a for has to pick customers The because build missing we inventories

especially up," retails opportunity the and factories feel in up us American year start So, point, great to significant, I end year, keep we telling the overall, is the of running North get but dealer it say, stories, to back, for not this just the market, like produce for "Back and historical means there levels, inventories tremendous to think really our of end levels. a aren't acceptable was at that I it's at to possibly when customers up inventories where

Timothy Thein

righty, thank you. All

Operator

question next ahead. Our Please from comes Feniger from of Michael America. Bank go

Michael Feniger

XXXX that bit my a this Thanks Hey, taking believe wanted the more. phrased little year cost, was questions. for understand to Scott. the you year XXXX I just priced, is

premium If cost you the costs won't to attributed XXXX, cyclically model the look won't embedding freight at like you just can -- that quantify that transportation, some elevated XXXX? buckets of be in

Scott Wine

is all started know, down, way. start We've contracts And are that that there. And Well, we our being always Again, away. cost, you spike not we that boxes, stuff. transportation have the But way to give just hit a just nevertheless, it big already you seen inflation come - one. is seen to cargo overall, are one, it right seeing that's in we don't prices. of see

with dealing are it. We

I think ability manage our proven that. team's to

down. come also have Semiconductors

through And quickly it's have or level to had looking be up our business to that years. might we to And efficiency couple of that's talk very all running in that the little about lost after bit efficiently. a how we to I -- during talk aspects work. the customer have When cost, do do getting we get last so orders. of business of I acceptable it, higher going in XXXX. are But us. reasonable much the pandemic we I are entire That prices are saying to pandemic. in And for it. about where costs response overall, when talk But then that's at So, guess the we portfolio. be us the business back And what ramp for incurred

Michael Feniger

did a went year. XXXX the be in global could Understood. they Cook to also just you seeing we the And about comment expanding. economy be difficult actually made I more think earlier Many XXXX could Jamie economists order could book through -- a but comment,

So, as Why you you I XXXX just think just more wanted to a year narrow in challenging can on do that a become little said? bit.

Scott Wine

more the than Remember, are are to exposed GDP. the global cycle ag significantly we we to

at a So, a have year, line. high for ag which forever. it that not at strong that saying fact flat other acknowledging global market, we comment. a I an we It's just talking that very some as with reason I others. not am it And actually. and here. we I is direction a impact means a am call one It's doesn't be not about very may not a not as just negative strong demand. cycle And all had it a point in 'XX that's isn't market peak but am actually year negative. ag a mean may go had inputs I And a

Michael Feniger

Alright, understood.

last one inflection like times, generation your debt, industrial the cash of did of some from see in squeeze Just in ahead this you the net business in to 'XX.

aggressively How are about investing how think that time? in Just on peers? of share industrial your are -- repurchases in I debt ahead of CapEx. valuation to you can look thinking lever of we that business. terms know a we and to And you how the inflected about I potentially net think aggressively to of kind R&D of you should fact pull, are in you know that? How your that? close discount you at investing But maybe just kind

Oddone Incisa

we as we past. say take We probably pointed our continue doing priorities. at in one. our went investing hadn't let in very repurchases in levels we are We want allocation that the in dividend. share clearly R&D, back doing In me We share out. stepped this done XXXX, you set So, We to up that repurchase capital more XXXX.

in mix of there. some have for the growth we we tech space want helps in that's also then, profitable to that So, availability if part particularly have of the sort that M&A in some And there.

Michael Feniger

Thank you.

Operator

And final Sachs. from have we Please all. ahead. one you, for time Thank Goldman go now question, [indiscernible]

Unidentified Analyst

taking on I very last question. just cash. wanted my much thanks guess Hi, I for touch to

sort weaker sees 'XX for of guidance cash Your conversion.

So, moving you seeing you. sort And Thank a the on could comment there? I you was are? what wondering more just maybe parts are of bit what

Scott Wine

answer a team gave the the the fourth quarter, strong thank for question which to your to I'll opportunity Again, us the cash delivering flow use just year. reasonable in such for Yes.

We strategy CapEx. is I share. But part in are and to $X.X expecting higher cash in we hundred billion another billion million that gross our of of do to margins allow Again, range $X.X are have dollar-plus to flow think several products dollars more gain spending XXXX. billion bringing market new market to us

So, come don't those free. things

the we factor that's spend and So, really going it. of get to are driving money that, key more to

We flow will but will still the and inventories between be discipline with generations. year-over-year managing that, that be differentiator cash

Unidentified Analyst

Fair, thank you.

Operator

Thank for you may you This your Ladies you. today's concludes call. disconnect. Thank now and conference gentlemen, participation.

CNH Industrial (CNH) 2 Feb 232022 Q4 Earnings call transcript