Deere & Company (DE) 18 Aug 232023 Q3 Earnings call transcript

Good morning, and welcome to Deere & Company's Third Quarter Earnings Conference Call.

Your lines have been placed on listen-only until the question-and answer session of today's conference.

I would now like to turn the call over to Mr. Brent Norwood, Director of Investor Relations. Thank you, sir.

begin. may You

the Officer, on are Jepsen, Josh Hello. Josh call Rohleder, Financial and Communications. Manager Chief Also today of Investor

take outlook to for your at look year XXXX. spend about a we'll quarter fiscal markets we'll respond that, our current then talking some Deere's our and questions. After earnings, time Today, third closer

note slides are at this be can They our that available website call Please accessed johndeere.com/earnings. morning. to complement on the

recorded transmission and in Deere future First, Any as call, express Q&A copyrighted their earnings session, live of portion This on consent of Participants use a Deere transmission remarks of call broadcast be by Internet prohibited. reminder. that and being the including other media and is stored the use, is all the part of this call. for may used the the & in Company. without recording, agree broadcast or written and strictly likeness any

the and forward-looking includes and statements call for to and that changes, uncertainties, other This are predict. company's factors circumstances are concerning plans subject risks, difficult to projections future the that

Additional the information Form Exchange most could concerning updated as risk to actual filed Form the by Commission. X-K, annual in XX-K, company's factors the recent contained is reports factors differ materially and results with that in cause Securities

in may United States measures call conformance GAAP. that accepted financial principles include generally the This with of also are not accounting in America,

is comparable our measures, Earnings to Additional Events. website Quarterly reconciliations under included the information johndeere.com/earnings & release concerning measures, these posted at GAAP in and on including

over to I Josh will Rohleder. call now turn the

joining. Good morning, and for all thank you

the as in both finish fiscal for Performance a XX.X% Ag Construction fundamentals with sustained quarter remain healthy, of third operations. sentiment positive strong shipments robust units. construction a driven the remain execution & year retail business Forestry sold-out full year margin expectations as demand all farm strong equipment, as and with order a Meanwhile, and fiscal result equipment for rental for remainder well by sound to strong of across re-fleeting. supporting the book customer resulting continue performance, demand to with exceeded finished XXXX. and Deere operational John another

begins billion, billion XX% sales the equipment XX% diluted for net or Net for were per $XX.XXX operations & results Net $X.XXX to X Deere third to sales and $XX.XX while up were income the revenues billion. Slide with Company attributable to $XX.XXX share. was up quarter.

subsidies. Third favorable quarter from of $XXX included results net income stemming million tax on tax a interest tax benefit a $XX income million ruling VAT and Brazilian associated

business. Slide & review now with Currency third points. our X, year, to $X.XXX X also the last for compared was approximately Production XX let's segment by point. quarter Precision the Turning just of realization to billion under the positive price to was up positive realization. quarter Price due begin Ag by Net translation were primarily sales XX%

spending, and profit shipment Operating the higher margin mix, SA&G by favorable and operating exchange. costs, unfavorable offset XX.X% was by improved and favorable was a partially R&D volumes which realization, production for driven sales $X.XXX increase year-over-year quarter. price in was billion, increased resulting currency The

was slightly lower Shifting to price of $X.XXX also a up which Net Slide Turf slightly X.X in by partially Small billion realization, positive were by X X. under was third over was result points. The Ag realization positive on offset sales & point. increase volumes. quarter. X%, the by Price was totaling shipment Currency

by was $XXX partially year-over-year price XX.X% offset realization The million, spending. to higher due and profit lower operating increase Operating and improved shipment volumes, margin. R&D costs, increased production primarily was and in year-over-year SA&G to resulting

put strong year, demand. Canada, In to we remain further to farm estimates conditions ag net U.S. sales pressure yields, record be expected the approximately fiscal during ag from prices. levels. Drier solid, summer and down even supporting fundamentals weather turf for downward globally. a the commodity and Slide XX% last over stock year's equipment ending Ag up near continuation of with and the X grain shows highs our industry industry historical of expect some be outlook markets if income large on reflecting tightening

visibility high order we of level confidence fourth the Solid as provides quarter. move a into

have Within production be Small strength rates. bring for inventory between Midsized range continues Canada Hay while part U.S. the tractors down cuts weaker by XXX offset estimate Ag the in from XX%, be high been remainder levels the equipment by Turf, fully industry as & in as increases the we shortages out abate. sales XX of production range in products, to to to compact see midsized down and consumer-oriented to for and and in sub which in XXX interest April continues pulled significant down forage are the year, horsepower tractor year-over-year horsepower sold helped XXXX have X% highs.

for X% Turning XXXX. the flat be is to fiscal to Europe, industry to year up forecasted

as XXXX the books at excellent, this visibility year. in order pre-sold rest remains largely for Our point of the are

provide financing In Positive remainder industry record uncertainty record and South XXXX. X%, order be the a we in XXXX production by grain year sentiment The to a stable somewhat expect of through around America, remains down and flat equipment offset visibility of books of was to tractors combines government and plan. political following now delayed sales in market sponsored XXXX.

moderately, Industry when Asia in volumes down record XXXX. forecasted in remain to to compared are be India as in levels subdued sales

on forecasts segment X. to Slide now Moving

full and XX%, minimal the for remains the continue & forecast between for roughly year price The year reflecting XX% forecasted to positive be Production XX% net impact. Precision Ag, around XX and margin for points currency operating of globally. strong execution For up assumes fiscal Segment year. sales realization the

XX% segment. between around and now efficiency, approximately about The segment's year operational positive margin of sales gives for price Small & realization X expected remain Net Europe. includes the of XX%, fiscal point our forecast and X Ag Turf operating points Slide in up currency XXXX. Guidance X are stronger-than-expected reflecting in to projected X% notably is headwind.

positive sales by and Forestry billion, & $X.XXX also XX Net realization volumes. by by nearly XX.X% were year-over-year Construction million, translation operating price a approximately price and X. positive for was increased volumes. to currency realization Slide shipment currency These increased to were quarter higher offset and XX%, realization the impact. partially points switching point. Operating was SA&G and margin due and to production $XXX X.X shipment up due to primarily expenses, Price unfavorable on Now resulting profits improved costs in R&D higher

fundamentals forecasted and X%. performance real we which markets X%, robust, sector, early and the spending to industry strong X%. rental to America estimate benefited will also be as & industry industry The emerging outlook XX the the Demand Slide for of equipment efforts U.S. flat are stages remains to equipment supporting in In by South growth India of commercial up in and construction offset from to our with down sales forestry, are and North by some projected roadbuilding global housing, North primarily Global XXXX compact be Strong infrastructure in Construction in Forestry. flat in in Industry both earthmoving to helping re-fleeting. and for America remain compact up are are and earthmoving Europe. construction office manufacturing well driven Canada. estate. weaknesses softening the in reshoring to markets and as flat across markets offset has America in stabilization Europe shows

outlook Forestry C&F net XX% likely Construction XX%, the segment Continuing forecasted are range. up on sales towards XXXX with to Slide and middle of now on XX. results that converge & Deere's between with the

is points margin positive expected now Our about between contains price be realization. net Operating XX.X%. XX sales guidance of for XX.X% to the year to

increase Worldwide XX. partially Next, due attributable a income income on we'll earned year-over-year to third average Services transition $XXX by to our The financial to on Slide million. higher & in Financial quarter X% Company services financing Deere less spreads. operations was favorable portfolio, offset the was net

financing For reflecting at fiscal financing higher on balance. lower the partially increased the quarter outlook million, SA&G dispositions. provision of credit for XXXX, correction offset from portfolio gains favorable higher accounting operating-lease remains average and These benefits $XXX a treatment a second losses, spreads, were incentives, year expenses, by our for less

guidance outlines operating flow. XX income, for rate net Slide tax effective our Finally, cash and

For reflecting and $X.XX billion we continued of by strong 'XX, and remainder results for raising fiscal income be our billion, of the billion outlook the year. year quarter between for net are another optimism $XX $X.X to

an favorable tax incorporates a tax impact rate in as guidance ruling updated our effective XX% Next, between earlier. of the reflects and mentioned which Brazil, XX%,

the Lastly, from in cash flow equipment billion now operations to range of projected $XX billion. to be is $XX.X

concludes This remarks. formal our

the specific We turn quarter before for a to will line to the opening Q&A. relevant topics now few

for the this year-over-year, expectations. Let's what Brent. our quarter, were with up Can strong We went break begin results came you of just while Deere's for quarter, had Net margins performance us in another operations ahead quarter? XX% for XX.X% equipment sales well at operational operating in really own coming down with quarter. this

Thanks, Josh.

progress delivering to return our important a is supply it the on our commitments XXXX First, planned. almost our well normal really are incredibly base, customer get normal in from quarterly cadence, from to a ran means as schedules to show return in top-line we continued execution our our seasonality third to compared will machines hit season. This which And enabling operations when in factories that the exactly production XXXX. factories because to seasonality We to evident is precise our us in quarter. saw

to testament is our a real this Importantly, teams. factory

lower-than-expected to, disruption is production right? having Construction inflationary All inflation around many over delivered as & teams story, to the performance. our of divisions year-to-date real This alluded years. of notable And eliminated continued cost cost last driven was the costs deliver for Forestry, the three record which saw margin couple especially as operational margins, reduction activities, on you and

also integration on the the have Construction exceptional joint by Wirtgen, helped In & us our as strategic execution, executing addition actions near-term that our Deere-Hitachi focus our of venture, business. benefiting portfolio from and business shown the successful strategy is dissolution Forestry of to

to supply results to been the reduce commitment to compared have to excellence. able reduce chains we able in XX% our to to relates last base. we've year premium when costs it continuing resiliency As year. improve, operational and freight been quarter, this supply alone, With underpin improve these nearly In delinquencies by our

we've cost the From a come seen throughout standpoint, down inflation year. production material meaningfully

leaner trend better of in you the commitments, delivery this seeing and which execute ability that smoother get board, throughout lead experience. rest simultaneously, on we're these initiatives continue a when year. customer operations, better to you different factories ultimately run our expect to fundamentally meet inventories all process the the Across to We of successfully better. And

than of like we perspective. operations to side and on Brent. start maybe ag That's an amount great. from can There's equation. more $XXX in with announced running CHIPS the other a large few Thanks, fundamentals amounts already industry construction of focus Act, funding construction How faring flip worth I'd Alongside years. a to has more been smoothly, the the clean much billion both equipment. With government record fundamentals, and IRA We've today? construction IIJA of past the are of announced the projects. energy seen

while XXXX supporting and by potentially industry context, job mega fundamentals to the expected the most of in continued tailwinds of remainder for infrastructure sales. Josh. re-fleeting, funds, quite remain that's particular, construction government remain spendings Earthmoving will cycle great Yes, strong, to most And even is sectors we project industry project growth XXXX, from elongated see and, benefit these steady spending. tied with Coupled driven large an demand projects across construction nice equipment rental year. throughout primarily

term, near stabilized despite interest rates. from the while market, In housing XXXX, has highs the in elevated down the residential

and while manufacturing space sectors book For month quarter demand of sluggish. XXXX. building trends backdrop strong second linked the construction apartment to to six remain a non-res demand, projects, translates extending office reshoring order rolling this into quite driving Ultimately, are

success to well have remain still we sales had some while levels. ratios finally, below inventory increasing historic inventory lows, And target from

That's perfect. Okay.

and on So, fundamentals XXXX. the to well remain side construction very appears heading be near-term the construction resilient business into positioned

have to fundamentals, on stocks down another thinking How week, Brent? latest are historicals. WASDE its and released about relative showing now ag fundamentals, just Focusing to should crop farmer yields tightening. expected forecast year last farmers be strong we

amount of particularly volatility year, demand Grain strong, large has equipment prices remained for seen large definitely but a ag. this have

third the have to decade. be another North to are forecasted projected in And net income. over are a of America, farmers prices healthy highest crop year-over-year, down year While in

margins. stocks inputs Additionally, as levels, for and use to weather adverse ever-volatile trended back remains production geopolitical tighter benefit have a events, farm farm providing down pre-COVID finally, expect year's patterns subject next to to longer. a grain And remain bit to to

continue will So, healthy fundamentals in globally. grain ag summary, are to Farmers input North downward supportive by still cost continued the in and trending market. constraint economics, relatively see on American supported supplies

Brazil? how If Thanks, Brent. color fundamentals North U.S. That's see look America, impacting outside these the and great will on Canada. we we

been political Brazil government-sponsored Yes, sentiment. and a the year, Earlier on the financing plans has we dynamic some uncertainty year. in real weigh delayed the saw market this of

good, generated to grain prices dollar. lower-than-expected has been some a Brazilian lower strengthening to currency relative profitability combined very income While farmers due U.S. with the

As we pre-sold such, we point, the a back half in position trimmed the combines. bit. And production XXXX. equipment industry as book our year the a of is the XX% order come saw for our extends forecast through this eclipsing At and in some robust, fiscal result,

this Jepsen. Hey, Brent, is Josh

Brazil Just to add this continued financing year. place. seeing still to acreage record in expansion program that, experienced a supportive We're and production is now government-sponsored

term, accelerate technologies market continue for us, future as for key the the to invest long Brazil region. we remains we'll So, a in that precision in

Thanks, Josh.

we are as new market. exit American and order inventory books North the begin of full shaping for how planning the XXXX levels end through With the up year, 'XX? field to back switching Now

question, large ag North of is out Starting a this great top, the America sold year. That's our from production for Josh. all

in field currently in down saw quarter have its corresponded expect ending inventory inventory fourth to from for level quarter. come its to largely is second inventory, the modest. will We peak. the Combine highest year-over-year schedules, changes new which down and In-season in quarterly be example, production increases our

to further see sequentially drop inventory third are mind step of will and we'll already. at in while And with remains retail We flattish the that tractors sold quarter, the the quarter combines which off of Keep down see tractors. that for harvest. highest quarter, in retail the retail horsepower customers end high XX%-plus horsepower typically seasonal is activity fourth tractor ahead high in figure connection that

Perfect.

So, expect quarter. further fourth wind inventories we down see will to throughout the

historic Now last seen their what about lows rise those used inventories? significantly from We've year. pretty year-over-year

phrase Large our roughly been modest in owners life reflect have had key will even has managing increases. the dealers When we like units large inventory them with changes But useful XXXX, percentage is used ag inventories small year. existing watching historic That a been five have. four starting lows you We America. historically to said, here its proactively. have last base, and closely very in in equipment North over are

transactions way combine for additional dealer trade three to tractor typically four or we as a facilitate its equipment the will So ladder. every down used sell, works

sense Now the calendar comments rise that in when part context previous saw new the inventory levels of would you we the put it during around my it middle of inventory, make year.

in at for look Also, we inventory. However, a inventory August if example, important used be we decrease since tends May. saw used used XX% an combines, to month for

closely So we'll how watch that trends.

and than Importantly, tractors a combines used for average seven-year lower inventory gear basis. remains about the both on XX% unit

Maybe highlight. thing is This Josh. to one

inventory think to takeaway and year-end, historic I by new important below levels here expect on is we the unit a Just used levels that both basis. be

exit position 'XX really we well So us into as 'XX.

we doing in perspective how an America? are But Perfect. from EOP North

the early. programs we here is for our EOP while points. ended still And off, are and and to programs cases, it this early order us want sprayer program don't giving product lines. data I have in XX. At caveat kicked point, We order a launched we've the our a early in that closed May, some fully some early back formed July view, few

production have all in year-over-year improved We slots to disproportionately digits sprayers. which year model year had unit supply sold XXXX. The our limited 'XX sprayer 'XX up sales reflects with XXXX when of out conditions, compared production increase model double

last weeks to Phase left relative opened program. program down same of are in year's to and as in under last flat has to and X point the time relatively the mid-July Orders just X% year of planters EOP. the in two go the end compared

final early the until on end read won't order August. program have this of we the year's However,

towards on take our favorable mix rates seeing technology. higher are planters and larger we Importantly,

has program Our extrapolate points this start, the the combine continue to program early of nice at order the month opened remains but beginning it off just and November. gotten any of early XXXX as through for a to will end data too

week time. currently this is the have book not we just the -- this to book has that however, don't through note, order Likewise, I points full our would we share any year data 'XX. XQ order calendar tractor 'XX, and opened had for have at

early America, it sounds up things we for Europe how Clearly, To color there too round can the supportive. here, data focus for next and on on year? are tell is to Thanks North Brent. preliminary out our but like discuss shaping discussion,

Yes, absolutely. amend And are want actually, Josh, to I statement, sold not just calendar my out tractors through prior 'XX, 'XX. year

with to Europe markets decent the a view providing some quarter seeing Meanwhile, see input arable but outlooks -- order are financials early and Eastern In cost second bit Europe books Europe, on in arable into may Central to are while help levels, having Expect early going with some will visibility, dairy next programs declining remains however, remain flow a seeing varying off, cash in XXXX, cash just XXXX into stabilize are order Western form versus supportive outlook. XXXX. markets stretching markets. between it kicked buttress Western too dynamic year. at of margins pressure margins

going close our markets get a access view other as Europe as contend the year. closer reduced are means grains On in, with remain hand, have we'll to with expect prices to to informed prices. borders, more local All commodity we XXXX, pressuring market lower fiscal a Ukraine into flowing and the dynamic of port over start proximity will neighboring

And dealer our in I'd network. add one to point highlight is Europe

market levels businesses and Deere. through of rates adoption dealers We This continue flowing stronger higher and better dealers ag higher of precision share, scale. to sales see overall driven of has our for

question I you, one have last now insight. great Josh. That's Perfect. for

walk our of to this capital year decisions to of in execute returning high and back some business, we've allocation all investors? an capital organic both respect year, priorities. had inorganic, flow investments further the the with same time Given while this our levels the made at cash you funding Can of elements higher on through level we've to opportunity of

returning able what and direct this same the Yeah, yield to billion between strong been the cash encouraged very year, at the amount to performance we've foremost, of accomplish our proud great question, of which and reflection equipment flow invest for business, first of $XX.X Josh. This is, to projected significant in in both year billion shareholders. and to We're operating a this time ability while operations. is the aggressively are our earnings by a $XX

some increased shareholders deliver unlocking ahead managed we've reinforces R&D excitement value year-to-date has CapEx It to $X.X we the billion and over to on strategy, as further the ahead into and We our dividends execute pulled year, the still share During through XX%. XXXX future customers. opportunities simultaneously projects for for and the we repurchases. see

And thoughts have to the you'd final for you we before Josh. Thanks, line open share? any up do questions, like

Thanks. Yes.

the inflationary see As a and years, of is in to costs XXXX, evident working is previously high actively executing the noted, and some team at expect couple results. we that our over past continue. the experienced benefit reduce level of disruption We're which in to

Over value units, new revenues levels higher is more sales on a decade, on our visible us lower deliver the journey This per making been of through new increased to unit to clearly drive we've today dependent last performance. unit. on less

each this the our accelerate profitably continue jobs more sustainably. our purpose, As and and That can trend about is to and By do it coming their we day. execute tech utilizing leveraging even systems stack, we are the more help faster our excited production we approach years. our customers over strategy, should

Thanks, Josh.

for line our the investors. up from open questions let's Now,

we're portion of to the Now, begin ready the call. Q&A

line is Sir, Our open. your first from is Sachs. question Revich Jerry Instructions] Goldman with [Operator

value wondering morning, higher continue if just you Good discussion Josh, touched we in hi. I'm Yes, unit. could the everyone. per on of terms just

X% might like a mind? can precision been as year able of And 'XX? as don't So, touch beyond take that you could how conversation per you well, just outgrow Do to tracking have on you past, look that in they're ASPs that what X% by finer in rates ag share if the you on if and part you point have to price. folks

I Jerry. Thanks, question. Yes. the appreciate

price we're I as on of technology seeing into think X, technology to X seeing continue of and continued drive it that relates the the machines. to to the appetite inflationary we're top trend points

through see create look forward, we're shift, that on continuing model a we to see bit business to little and start we technology all recurring in, we I more and As a the drive what value build doing little the may revenue. we're customers. benefits and the for in But can think the unit as that change economics

I up near our Yes, Jerry, it have technology levels. in lines are to rates those and program those a of on And that really embedded technology, rates Those digits high year-over-year. see of product are degree of ExactApply, sprayer those take some take mainstay relates are obviously, continue technology early order on as like mid-single increase solutions. for finished approaching we innovations to those planters. complete both ExactEmerge high we and two just mean

I around little think is XX% XXXX. XX%. a over for ExactEmerge is ExactApply

So progress those. on great

Other products like Combine Advisor have almost just become standard.

a at XXX% premium true activation we're rate think our almost which our XXX% there, near same I and rates. is for for is almost and take suite the tractors, take automation

we higher 'XX things that selling Josh and these as the begin revenues some average get next-generation And that we've are beyond. talked supplement got we some prices really price think as with those launch 'XX, higher into opportunity to I recurring technologies, driving to So, selling of about. average

Jerry, bodes acres. headed we're direction growth is we're acres of too, in seeing seeing that engaged Yes, well and maybe thing one add, in the terms highly last we're growth engaged I'd in

we So we're that we're with create drive can and one customers our value seeing continue tools the and seeing, Deere our interaction in Center our that to for continuing in value that Operations aid digital to place business. Thanks, having the is John in Jerry. the all

you. Thank

you. Thank

with Suisse. Cook Jamie from is Credit question next Our

line open. Your now is

Congrats for probably like is supply my -- a getting well Good as bodes morning. to relates quarter. first sounds I guess it which better, question, chain nice XXXX. on Hi. it

seeing getting your so program, talk So, better you're chain far approach -- the you're with can supply what to order in of thinking looking about as you and you're early at terms your both whether achieve think for you the [to retail level demand and normalized inventory that's inventory levels? Deere you first question. overproduce at would more some] my guess both I dealer year, (ph) next

the second how my of volatility resilient just question, margins? was your Josh, of would you. be? that it your a regards where you to initiatives? towards to are then talk the performance some How And can of internal margin there Since Thank company, orders the coming, with is on reducing detrimental you downturn again, the

factories Hey, good question. next think morning, year, Thanks for on some Jamie. our third able third the our you've margin that the that well a really results quarter. next that on been the production position in but see on to and robust still quarter. with progress. really cost the supply our start in made from what pleased inventory for the I inflation, I'll we're progress means chain year, ran in cost We've comments to reducing and Josh got can particularly we've come comment But agenda

anticipated. half mean, If in had came inflation about you what production I originally look numbers we in at QX, cost they our

supply So that management our work was by teams. good really teams factory our and

supply really programs I And designing the robust then pre-COVID we've year. just purchase cost in in And is progress up, driving some on reduction base further costs seeing base, in but of terms future and the for bit seeing things got think delinquencies next to almost a you're of still the year cost around in what are and direction. resiliency think little I for further a are agenda of the freight of pressure next components, right a lot energy labor levels. We're out We're getting and down. trending supply down we're driving

going All manage to us help of that is inventory.

levels we sort noted, below levels. for been As of large historic inventory, below target ag we've and

position, is in build season. you we ourselves some selling leave if line through quarter retail year sales, sort the get said, retail to optionality sales happen. and beginning relatively the as fourth position to we will, year work end we of we'll always as Now, with then we'll starting the to of sort that any of That our fiscal anticipate through low would sort default produce our or

will are after ourselves So, tractor on next leave our we've determine order optionality some we little have after of a attractive on leave But default with that from book, to we'll the dealers fully view for really our of year. inventory. exit our that and an And some line, we'll what's inventory programs ourselves which optionality given order progress but again, all year the early now, next will help we'll input in made as obviously, is have, right well. formed position done perspective, right to our produce be level a position

Yes, reducing an technology system, will inflation we've our we're through it one. what near-term and drive be cost to some unit into some beneficial. to important the management, as mentioned, seen perspective if machines, that you disruption out working we're about doing from an to of economics that's Jamie, volatility, I Continuing driving, I just on. more per value mentioned that of things relates the Brent think as think cost there's continuing take

first work will help of and And cyclicality fifth well. activity There's on take and life through that some the the a how customers from great our as we of to care of fourth in lot owner. our down owner work, going solutions terms of dampen lifecycle products

to is as model importantly, little more shift customers And building technologies. is new some are help term the us I last quickly. more a more and that's to we deliver And going value of we more one a think to acres, maybe customers. to how on the to our business and our longer drive infrastructure terms bit business service of in solutions for

area. focus that's a So

we about early journey. of executing Some on. really Others, the what in good we're we're those feel

as And a And is I think where would move we're importantly, volumes structurally, we we feel that like performing. down we're up expectation performing today, you with or our different look down, performing perspective shift at up line and based on at level. move from a profitability or we're where they

structural in keep meaningful on. working to So and this we profitability going that we're shift is think a one

thanks, So, Jamie.

Thank you.

with next line is is Tim Thein from Citigroup. Our question Sir, your open.

of, of Hi, in a that think great. Brazil, again, volatile go do think question. mentioned production second you in parts obviously, guess, Thank just on the I maybe in back you year. as where you're, into dealer us half Thanks. you. the and ag, an perspective the the obviously, you help terms comments But in Maybe targeting on Good of a a can how Brazil bit market. up to do you coming How you inventory frame the of cuts just lot that if some -- moving That's we made 'XX the the end morning. inventories? year from just you'll

Tim. morning. Hey, Good

really we as As it to dynamic noted it's been year. Brazil, our relates in opening a comments,

down of and the takes. been healthy from from opening had in interesting. back soy, for less lot lower order probably corn again, year sizable a little managing book customers and cotton than comments, puts difficulty our this XXXX. I rest to record expected had has think crop think is full production to profitability they bit And our forward there, there and of really seen We've selling levels sugar, the and At I a for the near-record some 'XX. And production for point, this for the they that of refer XX%. customers year, as the marketing,

really strategy Brazil to almost been has we in dynamic in reduced that And embedded and dynamic in X%. industry market in political example program. You more But always for quarter. operated all down from great our proactive a was guide uncertainty the time. manage -- how we had pricing our of went that be in -- that flat government-sponsored us, production delay a real the we to how production We've book, kind from there. And financing kind our fourth of of little order terms we're and lower way. managing the of intend reflects, in a

is with the that year some really fourth took goal production end of is quarter in the with that we So, we cuts the at target. modest would the there inventory

And so would the in with start that line we default again of intent for in sales to retail position produce that an year XXXX.

in a I we're sold. there is news particular, good over The retail XX% think combine from perspective,

one markets. going in this for year, still of the our is a the term, us read production which of pretty should market year. the invest good short we maybe despite a of important heading continue end even Thanks, for for dynamics though, to to most manage it's have while term. Tim. that So we position is of And we're long well in should Brazil year, some market the be to growth going where the next Longer term inventory on

next Steven question from with UBS. Our Fisher is

Your line now open. is

Thanks. Good morning.

Production it's really maybe is I'm before. headwind if your pricing? year-over-year you activity you step down comparison forecast, you're the X% QX any expecting such in pricing were the the in surprise. kind change in year a need mean in from how the So X% step of for you from I had in not guess, big of Ag down didn't environment & And and tougher to a here? bit up Precision incentives? curious order shaping than bigger I so But still pricing, what the incentives including of the seeing a pricing supportive kind is was

Steve. Hi,

that But come Precision the Ag for it of took price as a forecast in. some had a expectations, the forecast. would retaining relates this almost Turf the all lap price is largely Ag particularly that in as would with than we we price the percentage Production right say & We expect 'XX. & probably Small of in mid-year came more Forestry, to little on to in a pricing, shade increases and basis they're & better see from just Construction I our line As we that realization fared in quarter second

That high be in the we digits For the Ag, I fourth Production XX% should & as Precision were quarter. single quarter expected. in think third

though, similar production importantly, a down seeing we're ratchet pace. inflation And at cost

So the half. when Production billion positive we for and first price Ag, & think example, I about in were between cost, at $X.X for the Precision absolute you delta look

something Second dissimilar not to half should that. be

discipline, maintaining I we So, that are cost year. throughout think, price the entire

Now, that. it we've as there, year, of range. certainly embedded in no spend X% pertains incentive has which out the next we in pricing that been in some the sort to to of And as early X% are our managing well put change

market overall whatever to be to would into for we range get XXXX. within Thanks. expect realization layered that begin inclusive back discounts of the So,

you. Thank Perfect.

Owen is Kristen Ma'am, Our your next Oppenheimer. question line from open. with is

Thank margins. question. about you construction the for to Great. the ask Wanted taking

is with a ag again what You really the arguably your narrowing cycle. in is that gap the lifted the point business -- once different and target

normalization and the segment? we XXXX, improved comments that pricing talked portfolio about the prepared should in some construction in you. the think margin for given remarks Thank the how of the of Just in across what sustainability about you of performance

Hey, good morning, Kristen.

your has business more the reformed As Construction business couple last things really it some that years been four structural margins, Forestry we've that that relates would a and doing sound over in really the to ag & the I between the of solid of to the that, around we made of opening five our & some point, large Forestry Construction closed to in for kind refer of to have gap comments remarks back last years. into

First we it's That's growth, to via and inclusion the volatility, number was And of view important Wirtgen. we asset most business. attractive a as business move very the high an acquired market market we lower a and that the in that foremost, roadbuilding made be end in. one

executing early We're excavator our really days strategy. still

important first joint was business next the excavators, think Deere we're really successfully the sort of we drive last of delivering see The forward. strategy line negotiated continue performance there dissolution how further and our designed way Deere-Hitachi year, full of a the which phase to I which venture, there of that is step going we'll and on the to margin

play portfolio management most And the but didn't focusing we a we're in active and really we years, the on win. very have products a portfolio tout to right a right over this to publicly, we differentiated. the really couple where where were that And last of in markets lot

of continue think structural we go-forward -- all a that's things those So on basis. and are

about is and customers how that add and and we to leg I'd C&F, as and more integrate journey thing one we -- in technology look do around Kristen, for more there and and do it's them do productively more efficiently, what technology help there you forward do Yes, another better our and jobs the this is think we is, believe sustainably.

value So, marketplace and more value leverage going automation paid in things tools, we customers, We think into and we're see in construction, particular, differentiate seeing control. roadbuilding, can opportunities well. get We for as that real for with our the more as we to in create technology that grade first customers. create turn into of like that to are suite

there, about we excited opportunities. the Thank future and see you. we're So, continued

from with is Rob question is next open. Melius Wertheimer Our Research. And your line

[indiscernible] just I or charge just rising technology up a largely Thanks. part achieved (ph) do wanted to to price question, tech customers. market I enough follow price overall? construction to you like as to in deliver But had more value an on date? you've as you Josh pricing, that support related, sort feel that think. And [indiscernible] you [what what you've your maybe suppose, if where, flow talking about, And Is actually, was] a a there's assume volume, widget, of definitionally, I for that overall I have products of

just maybe are you technology Thanks. in talk So in construction? about where

relates the I disciplined that to and in try the lead as Rob, of price the be more construction Yeah. as first -- pertains one to achieved, relates as mean, then I'll industry you've to as to equipment the it work price. we We seen to about think broadly it pricing players hard talk markets. it technology best We we broadly. can comment most start with in can. we've around I pricing But that

early on technology, in more more equipment. I innovation of terms think of we're getting higher days in account still prices average selling the

starting see are to we So, that.

lines, rising, I that of in the definitely there. we're can terms early think portfolio we on still see product days entire specific

I begin include coming the integrate the So, we in product technology a higher average technology. us for of to going Wirtgen more one from most selling the is as price headroom to be benefit lines that as certainly think more we years.

about began, say XXXX, we ag the think we're went Rob, I in similar journey on I'd large when we to 'XX, on, that would this say timeframe. side probably timeline-wise, if you

not that we're testing I from we're tremendous a as getting in integrated example design we're our and we to and that technologies really but that machine a the going starting early minds, more hearing started see fully decade, we're but where think quite what is customers we're drive in are maybe excavator what days of And of So behind, usability. -- those technology seeing to good just where in.

about future early and excited we very there, So, Rob. the think Thanks, we're we're days.

Perfect. Thanks.

Our Steve question is Jefferies. from with Volkmann next

line open. Your is

morning. Good I fitting back. for to wanted me here. go Hi. Thanks in

be to these of we production year? the see I times. Is if couple positive couple kind deal where any about better a sizing this a word robust costs about just have could way continuous for that? agenda waterfall sort Or of us think you chart And cost I'm in think actually big of for improvement, your think this could a used year there's sort wondering next like that? a next of to of is way

over cost operations. Hey, Steve. couple years of question. It's into seen flow great last a of We've of the billions inflation our dollars

will 'XX. it, coming contract and with systemic cost of coming also that, of though, our I inefficiency from Some that cost, inflation. COVID from just, of ratification disruption in our UAW associated portion call deferred A is

those of do. than All cost, normally things overheads to run higher they

back of a those So lot in XXXX. we're bringing

more there's to think certainly in XXXX. room I run

in materials in have in raw our price, mats in that we it purchase a have prices at back an commodity third continuous characterize here particularly some spend, want to out, purchase raw as we improvement quarter. those specific Deere go material that that have for to did because easy a opportunity probably the costs to just line raw not normal to would take I and our and do tailwind But of see their really program it's a we down, as renegotiate. actively lot capture sight embedded there's components come of

action place do formalized very a proactive in strategy process XXXX. further take we we're have there So, executing the on in to and

procedures disruptions, Yes, disruption chain of operating cetera, from of that on its and were is have in that demand. just add three on is out been far et way of to I'd Steve, in in the coming cost usual continuing come top the thing strong seeing top only supply had through we that pandemic, years, which made root last terms

and out back cost operations. I we efficiency there's of terms And be done drive in to I in ongoing that going take continuing to cadence would So certainly. think to expect a work think the getting

-- room go to we for Thanks. sure. there's more So think we're here

Thank you.

Now David Raso question with is next our from Evercore.

open. is line Your

very that extends year-over-year? quarter your second book backdrop, that of rolling quarter? the saying in book? were book you would the saying Are that be help & up orders pricing -- into Forestry great. growth through comment The you order And the on demand comment 'XX. about Thank construction much. a the second earlier Is that give order within Hi. us right, sense the what you six-month Construction any Can that meant? the order implying Is --

Thank quarter quarter weak question ag. revenues are it, just back I go implied but or know on sequential something fall the going fourth quick much a are down costs as the negative are almost large mix, down. have I misreading ag, sequentially the large as to I'm Maybe as there unique would normal making seasonal fall almost sure much just Brazil, fourth ag, sequentially? as have the you to pretty margin. any revenues times, a does large mentioned profits on I'm then for for And understand why But you profit you.

David. Hey,

question then the I'll that side, and on the & Construction first ag last with let part start on Forestry. -- the me comment Josh Let of

to seasonality, you they were your a there to which normal and/or come then driver and month fourth big we'll will normal in September factory Works, shade shutdowns to, we again, the that in shutdowns does revenues margins a from seeing big done point, flattish we see factory quarter, we've is where The this maybe in at of a third return down are which The October. particularly in mean Harvester the historically the institute think quarter. about there, will little If bit ag. driver

you're shutting And what is the that down. so, impact of to going see I think

way delivering years through and XXXX. really couple as in of We haven't customers behind that late the machines the been to running on we've last done then 'XX all in

the impact to the going we're really big that that's see quarter. happen So in fourth

R&D specific see other a that's three quarter, fourth divisions, actually for would fourth we'll timing note I all thing. spend the be in think I the true heavier thing would a the this to and quarter,

most true Our a going an fourth from little be R&D years as quarter heavy certainly to is well. this year does be That to tend perspective.

a would the add is quarter. I And then, mix you'll fourth Brazil the quarter as see little fourth in well on less the other thing

of those things when in you bring three just compare conspire to of shade a margins quarter fourth the down results. third So, will kind to them all quarter together

Yes.

is to bit you look relates say, order comparing because if year-over-year book, little last it we C&F As I difficult would a at and the I constrained mean, year. were

would production saw to say So is order 'XX, activity. 'XX in in I we to looking total realistically, at just so not a compare good less a obviously, there. rates change disruption probably Thanks, have, not And expected But well 'XX book way the similar what on order that than we we're as significant 'XX. David.

next Our is with question is line open. Tami your Zakaria Ma'am, JPMorgan. from

so morning. good much. you Hi, Thank

and about step to plant. new So, trend your quarterly I away you battery the from wanted ask

thoughts When battery any this in operating? manufacturing a it (ph)? volume] or us feed Can [run So, just products new with] expect picked initiative? you you think impact cost bit (ph) location. you be what [And to do exactly potential on that you on to? it I that? on savings? expect more will margins What a Any tell

Tami. Certainly, for Thanks question. Yes. the

we So, with little acquisition made over Kreisel Electric. ago stems the from this a a year

week this I really the build was which in this particularly continue the that looking say to strategic this, off-highway. manufacturing step capacity this evolution charging, in Carolina. at aimed our is announced for production in -- to investment So as capacity earlier stepping we growing being is as leader, a next batteries we would and back and here North

in to prioritizing is off-highway support portfolio a evolving, our products. of electrification development adoption robust battery in As of can charging that the technology, we're addition long-term

technology a and the like. begin XXX-horsepower or Europe charging batteries to below facility forward. will in plan up probably timeline, see a and have forward, as we portfolio you'll really relatively in evolve or So, as portfolio go the We're pipeline probably terms continue And that near drive we're we technologies incorporate we robust with that in relatively of we've Starting producing running. to a the for here we go out Deere year here at hybrid the But we'll them so scale. and opportunity term. the to this today products developed Kreisel and see then small

Tami. thanks, So,

You're welcome.

Our next question Dillard from with Bernstein. Chad

sir. line open, Your is

Hi, everyone.

of owners you're spend I I So fleet. to where different within the year be fleet. just versus guess, you time will some how the I on average we there talking the five Can the about talk about are, exiting And want age normal? recall

average question in the bulge the is the fleet? age why higher in the terms just structural, where age And why not? last think I or then of is

Chad. morning, good Hey,

I to beginning And slow think really deferred you're XXXX. you of what as production industry this -- to but is right? suffering as delinquencies, at when production. Deere, inflected the the down industry relates of factors the had about the really delayed of for conspiring the impact sort the just age seeing replacement If it start, As well average cycle having not think large, -- you the it affecting significant was inflation really supply had from right? fleet, for We a really demand chain, delays, shortages, of was labor

tractors, a the one what brought little years the continue is at we've a the of and age in demand three of to -- I out of we than of curve averages. couple most older and started that's XXXX bit. So, the all years I those, we're to for really say the slowed age still fleet. and or flatten either four-wheel drives those it really we XXX-plus historic age the down to bring look sort significantly even the ability of outpaced probably horsepower would has since supply, down has industry at done and If years, last

probably where one a bit year, industry historic but be fleet still the -- the -- was of bit. 'XX, further make progress we'll make there. progress last that kind were age little We'll to averages bringing of is of above Combines down a little able we in this the last

you data little one fleet. seen. in going we the some X-wheel been challenges just time can on product guys AEM see just maybe particularly similar to to So little we've of take I I We're think perspective, for the age it's an the the lines sprayers. kind more time of the a more of tractors, a more bring from going had, this of It's to industry just constrained think given drives, which to haven't down take that

is able where go of base, to -- back part kind in aging replace the years. I big has on machines XXXX, so installed that's of a last fleet? of that in were ask and of still the the vintages at kind it those the ones the couple you are the If that the rate it's speak, of to the are age than us you to a really out to bulge, if faster XXXX of industry really mean, been

So, the question, for Chad. thanks

weeks continuing ago, ladder, in those and matter equipment. think may and Yes. were owner, Maybe the be driver of about the It's see the was piece, of are third, the second, fifth. top fleet the about the with chain. on upgrade for is speaking talking is that the technology but one we latest think he thing that health of a the important that trade no And technology I it's the desire when I'd we or to technology trade for by big, first across principal fact. where add age there's just -- of big think demand in couple is the because customer too, just to the fourth a We demand I dealer a this not just ladder our very

piece on that the think demand. I not only So underlies that's important the an age, but

question. the think we Fran, caller. have thanks time for Chad, one last I for

very much. Thank you

is line our So And Weber now Wells question open. Securities. last Fargo your is Seth from with

guys. I wanted small ask ag than in. better Thanks Hey, about business. we lot me the Good was I what expecting. Margin a fitting to guess morning. for were

structural about I those about wondering, we say should being place think are heard in I'm that that Europe. going is I as think something changes forward. you just --

and kind just Do just going better then start inventory ag you forward? Thanks. comment we're things the getting that past there coming less challenges And going your bad think the to peak? or off you're about of small

Hey, for Seth, question. thanks the

Small As prior Ag it structurally to went to sounder certainly today back we business Turf, relates cycles. it's a than &

there. As talk you margin puts think little takes of about a some about and and bit I'll the more

Let first. your question me inventory answer on

Ag tractors. So what like as inventory there's I call to so for compact small the focus know end Turf, Ag on of been under Small utility it Turf, Small lot XX-horsepower of relates would the & I of & a category

I little out down think recently. here level seen industry we've the come even a bit or

we're of kind levels operations, the early tractor So it past hay that of high-value revolves livestock midsized And But of inventory in going the elevated those I we're on that inventory maybe side. there. forage probably really does and around business appear closer compact getting tractors the bulk dairy or -- into stages past or utility elevated to level is that are that we're target and operations crops. think

inventory So those the we quite machines. abundance don't categories of for see of

from impact that shutdown tractors, Ag so, portion some We'll and just seasonality for single a it Series the year the those up our those just factory perspective. of to rest a Monheim, mid-series margin also significant that as source in which makes matter. going And Turf of X relates & do see we're Small the revenue to is for location a margin tractors

a you from margin Precision forward solutions of & wouldn't from say Ag to like demanding Precision customers, see more went of if of into midsized Ag. electrification. our Turf, think leverage perspective, technology you particularly going as years, systems, I you're autonomy to those & on in like be Production Ag from is leveraged to higher particularly gets levels tractors Going is see that they're prior technology crop but I see, that what would that a Small back though, high-value & Production lot and going production you'll

be buttress years to going profile year and we've to, that And the opportunity an come. I further so achieved to think, extend this that's into that margin

just Turf. deep one diversity Small geographic the add Ag last I of would and Seth, Yes. thing is

on into to Brent's broader the global there. across tractors be driving much farm and really terms connectivity And it's point, driven India, we're bringing telematics the coverage, we're technology, in strong leveraging in and of So to performance utility technology globe. seeing seeing

than of that in see So in we Small both to value there's the different drive customer Turf is & you've lot a a that business past. and activity also seen create Ag going

So, thank you.

right. All Thanks, guys.

call. today's time, concludes and us that thank joining We So, for you everyone's appreciate today.

concluded. for participation. thank you your has conference Again, This

at You may please disconnect this time.