Deere & Company (DE) 16 May 242024 Q2 Earnings call transcript

Good morning, and welcome to Deere & Company Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Josh Beal, Director of Investor Relations. Thank you.

You may begin.

Hello. for on you call. thank and joining today's us Welcome,

Precision Josh call Financial Agriculture Joining Australia; Production Investor the Manager are Josh and Americas Jepsen, Rohleder, and division, Worldwide me on Communications. President today Chief of in Reed, Officer; -- Ag Cory

some are current respond take spend slides outlook johndeere.com/earnings note to XXXX. that, closer we'll for your call They earnings, a our questions. this that about we'll ]. on can at Deere's fiscal talking Today, quarter complement the be markets to Please [ second our available look then time and our morning. at website After accessed

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

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

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

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

the Josh I call over to will now Rohleder. turn

markets included abate year. continue the Good back end more second solid leading quarter Trends we challenging Financial market unchanged from Ag Deere for of morning. concluded the fundamentals serve to conditions results quarter. XX.X% last the in broadly margin the for the operations. that in remain the quarter a equipment execution. John with to half

lines fundamentals our product most out end markets. at and across the fiscal reflected supportive our financial these of production balance management the dynamic construction performance with stable the are many of forestry, in under levels for In remained production results conditions Demand cycle. to ability better with coupled close inventory schedules proactive shifts, demand retail XXXX. anticipating to demand projected year, market demonstrates our Notably, deliver business in across

while down now Company and second & for $XX.XXX to Slide billion, XX% begin for attributable income the to share. Net equipment were operations XX% X results diluted our net the revenues and billion or Deere quarter. $X.XX billion. per with to sales were We sales $X.XX Net $XX.XX was down

X. margin Operating were roughly price into were X last business for shipment was due year, precision Slide to a price realization. primarily offset due were which billion we'll the XX% by shipment Digging start and realization. on volumes, production sales business compared $X.XXX primarily ag to the Price partially to down of our with individual offset segments, realization Net second billion, quarter higher the $X.XX was in just points. partially operating Currency by by The These under costs. was resulting flat. XX.X% and was positive decrease production segment. year-over-year translation volumes profit lower lower

price resulting partially to by offset lower XX.X% $XXX margin. Currency profit lower The shipment by offset Operating second down result was on totaling in of XX%, shipment million, Turning were partially declined volumes, price were quarter to volumes, points. year-over-year translation realization. realization. realization flat. decrease Price was positive X. sales a turf to X.X billion primarily by a operating small ag as and Net the $X.XXX was roughly due Slide in which

see we markets decisions. provides globally. for combined commodity major outlook continued softening interest as impacts high Slide of sentiment industry turf lower global and ag rising and weigh prices, backdrop, all grower which customer industry quarter. stocks, our the in in changes this weather volatility is X on markets, Across and discretion purchase the equipment our rising reflected Amidst in customers uncertainty, rates in their our purchases, this exercise guide we're greater seeing

of are ag large Large the primarily reduction U.S. and in the sales industry equipment XX%, back in expected demand in reflecting tractors. Canada to decline now further year, half the

an In impact inventory headwinds farmland values partially fleet balance the tailwinds, pharma levels, fundamental decisions. model These and machines are addition used factors, increases particularly in are offset on age, elevated aforementioned strong to by late year sheets. stable purchase including fleet having

in ag the down and behavior for turf in XX%. lawn we riding rates industry In saw particularly following are high quarter, purchase the now and of demand reductions Canada, U.S. our where expectations segment, the turf impacting demand. small For equipment years estimates strong interest market are several notable

raised is roughly to forecasted grower Wet input averages, have elevated variable at dairy while and crop the pricing reflecting feed to softening, In XX-year weighing remain margin improve amid flows industry uncertainty concerns due on Europe, costs fundamentals winter region. stronger livestock to for expectations. now the expected -- conditions and XX%, are cash the Despite yields, in costs. increasing lower are

down the decline stemming between industry of XX%. with market commodity Conditions year's Argentina yields, remains expectations from last affected softened and to in production levels are further recovery pressure rates strong expected quarter. corn the additional an America, driving elevated prices. South strong global expected over drought. tractors In XX% Both margin following and impacted interest soy sales largest now combines Brazil and to are by

down Industry sales to moderately. in forecasted continue Asia be

on begin Next, X. our forecast segment Slide

down precision The be year of for full year. roughly assumes and positive price realization XX% currency full minimal ag, the forecast the forecasted impact. for X.X to and are XX% points production and between net For sales

the full and forecast XX.X% softening For inventory between proactive segment's and management. our XX.X% to operating year is due margin, demand now

flat of XX%. translation. XX% The guide the between is now Slide X segment's in expect margin for to turf between XX.X% with small operating line X.X ag and We and shows net slowing The points now our forecast be and realization and XX.X%, price sales net sales. currency includes down segment. positive

point were Net $X.XXX year-over-year, billion Slide was X.X higher for XX.X% SA&G and translation X. down lower to the resulting volumes. at quarter and in forestry shipment Operating was Price sales currency roughly primarily by year-over-year million while R&D on Shifting positive due and $XXX margin down lower to X% a of volumes flat. was realization due operating profit to shipment expenses. construction

Investments construction Slide Industry demand remain equipment fundamentals Industry with XX by and U.S. our balance remained in be in and expectations of the XXXX housing continue for as to persist Canada compact into earthmoving government is throughout supported and in the the demand unchanged and further outlook. flat. improve. flat the healthy real in forestry stabilized markets the gives to the U.S. industry to vastly while to sales starts down estate year. year, Tailwinds equipment spending expected single-family X% commercial tempered softening and balance infrastructure manufacturing of are visibility by the Canada construction rental be in and U.S. declines increases.

Western U.S. flat continue are as road be is are Global markets markets strong in infrastructure in continued forestry the be to markets expected spending forecasted as XX% now building to down Europe. offset by to X% softness to be down all Global challenged. around global

Slide and to points currency the sales and year margin the price between X% sales forestry guidance about around XX%. XX%. X.X to of net XXXX, for on to realization The is segment's down segment outlook includes remain construction and operating Net translation. projected Moving positive XX. be forecasted flat be

by Company financing services & income in the partially by Transitioning Worldwide was favorable XX. attributable higher to a spreads. quarter balance, financial services offset Deere positively Net and portfolio provision financial for losses our impacted to which net a operations higher $XXX average million. on credit was Slide second less was income

the impacted income by in net XXXX nonrepeating second reminder, a of accounting also correction. a quarter As onetime was

offset at a as XXXX, for For net provision higher portfolio for favorable remains and spreads. losses million from higher less income fiscal year balance average outlook credit $XXX our financing a benefits

Finally, Deere our operating Company's income, outlines tax and for rate our effective flow. net cash Slide XX & guidance

outlook approximately expected year fiscal is For income our 'XX, to be $X net now billion. for

in tax between cash and rate to effective And $X.XX is the lastly, an billion billion. be XX% from range $X equipment incorporates guidance to XX%. the our operations now projected Next, flow of

our few topics to specific formal a We'll to quarter. shift This the concludes now comments.

roughly all business Across with We quarter. net this Let's backdrop. performance XX%. operating despite saw better-than-expected we yet decline year-over-year, margin over saw Deere's XX% sales segments, performance begin at challenging just in macro more came a

Josh Beal, walk can you for what well went Deere? us through

expectations organization. tough slightly earthmoving better that Josh. executional across and We exceeded than were held saw demand a story is despite particular, road we discipline line up we the outperform the as expected. competitive environment. able our to top In on resilient a market Absolutely, Yes. This building really of

quarter's favorable equipment encouraged said, solidly worth we as in margin executing on moderating performance quarters earlier, and of plan to history. as are production adjust the offsetting experiencing production Turning noted it's Freight as that the operations came XX% remaining over to costs. X headwinds All demand. one We're However, you we're the by to focused ranks being that this company year, in quarters. our the best year-over-year and overheads noting with start in we

great year a and year, executional but strong That's guidance. summary a revised up. our you for a Josh. clearly start full point been great we've bring the Thanks, It's

year? back the delta What's fiscal the the driving in half of

a and tougher turf in segments. change in global opening backdrop forecast as primarily mentioned ag, The is Underlying the softer you Right. is in really base. a months decline decline has comments, a result, ag which your ago. demand a seeing sentiment. volume-driven, to than just And our retail we did has X Uncertainty customer weigh we are environment today on as caused farmer continued in our

expected conditions be global to crop multiple risen record to thanks rates inventories margins of down. historical forecasted years have globally used favorable and are be persistently to interest high growing averages, are purchase are decisions. above impacting yields, Feeds and Primary

production highs experienced XXXX, of turf. headwinds, strong albeit drove solid all from volumes Despite which first the in down year, we half the and ag the demand first of these for half

demand decline down for our best proactive half build the tractors. drive This back America positions markets, South us approach demand major We of inventories. half steps to this of do our for Given the the and for that North decline to field believe back large retail all true more demand Europe will than 'XX. environment production the incremental we're is XXXX. Notably, mentioned, in also just now in we taking as I expect volumes America,

Maybe couple to Jepsen add. This is of things here. a

business in commend this I the overall done structurally they've margins delivering cycle at the better the value work our and this of decrementals for the We're for to declines customers our are First, drive before. for that point want ever year. to despite experiencing the velocity employees than driving operating we're

our in better, future. to throughout to of action we'll and opportunity year do still always remainder continue take costs the there's investing the However, while on

additional that more associated Josh. margin for a being products the being impacted significantly We're regions and higher usual declining than decrementals. point with you significantly. make more Thanks about unfavorable definitely more color, by by And definitely great mix impacted the

But differentiator production. in to I year think the around which at Both key proactive more you bringing management. the and rate Bill we're alluded is this

like into to now. I'd you Cory, bring conversation the

You've been career. is in in the your have we different in how managed What entire nearly business the cycle? changing of environment ag terms this

Josh. Thanks, Yes.

[ of of down coming higher the demand, field would turf ] that and detriment levels change. to react slow from historically, been have we following an are to Often, as We would we years. to inventory industry, the high drive

have cycles. fact managing testament our large America tractor demand to past learned dealers year. to Deere, is a underproduce half is the in and year we're of exemplified this differently, our the from that the probably which retail back best the North in by decision This both we Within

ourselves to think those here prudent really next with we the staying by low that it's demand to as efficiently react the close of most whichever tractor moves lower year. market our large drive in we levels optionality ahead we're XXXX levels The giving changes, key ended out of to inventory, We 'XX. even way is but the

I think season's the XXXX even note crops important yet. this that will in it's to demand where aren't be, implying frankly, we ground know that not we're

that. our on with balance management for But demand. ensuring that still inventories it's in focused better profitability to structural key component on to way proactive cycle is we keep too a we're early opine business. So This throughout to ensure the

us, This strategy the we but other to with sold One engage beyond We're to of the about see technology leading farmed. our the how total not only as to starting units customers. and market Deere by as technologies a of is environment, think products related and we as share, highlight thing percentage Jepsen. acres number the long-term and where is current of number covered acres

continue to offerings. the as going Solution-as-a-Service utilization as grow accelerating In business future, precision upgrade we of our the we're technology well as retrofit

progress the for helps engaged journey making acre Our jobs their customers we've to and delivering do. easier in value made demonstrate

XXX highly by In fact, make a acres Deere end grown which, alone. engaged means quarter, steps this performed, now million of the value-creating engaged XX% globally, having double the are we past at as the acres John three acres operations in cover over digits amount, quarter and over the reminder, of up production and engaged importantly, activities center

as in as all given the is as While growth, operations. Brazil America see with well customers than the market, And communications particular efficiency, and engaged each parts to improve sustainability engaged in year multiple more highly bring increased a acres, value seeing of there to satellite technology we harvest coming ability soon. their are on the faster crop profitability is positive world both which sign growing North the and

proof A key seeing associated is cost price covered of cycle of another But be Those year should are we thing costs. proactive theoretically excellent yet savings. one positive benefit management points. haven't the We're cost.

But you down that positive us? for what's can differential break driving

a we cost our reductions, and referencing means to back great what pull and Josh production Josh, continue to in, which along to to That's begin structural start. to bring definitely. come about in levers essentially talked we I'd I'm earlier, prioritize point, with costs. as by sales happy Jepsen managing structure lines, Yes,

the those right bar show of hitting production subsequent bottom outcomes speed Our in in actions earnings those these line levers The cost pulling in the our bridge. efforts and a timing top up of quarterly is priority now. the

cost there's a into a that through that might goes to notable Given walk the of it that components. be category, lot helpful few

of reduction value we material work as and on efforts. and back Starting both our cost partnerships opportunity structure spend. building ongoing with to benefits our the by jointly to in freight material, that creates encouraged cost supply for the well with to freight we're We're our as beginning significant see a get parties. in way truly sourcing as strategic We're base ultimately logistics

dual chain lower supply with Coupled tandem enhance been resiliency to we've crucial strategies, which returns optimizing sourcing to able savings, amidst cost demand. in our has been with

are given with lever we manufacturing This actions those to timing seen The back impacting overhead managing efficiencies associated levels. some on of to timing cost reduction pulling of references efforts financials. my have important the the production comment lower and

for as essentially production see year steps down given the a taking we're level. as is inefficiency cost up rightsizing costs But some actively we make as manage We're to in headwind moving those bar when logistics we we've year. demand the in in seeing showing change, structure cost adjustments. This a this production experienced volume, spend material we're gains largely freight, and offsetting well, that the in

compared look is come that's year, worth rate is the reductions down mentioning of on flow thing we source you guide the see of pull half we're is This inventory Maybe And cash the our also first in assets. one levers creating of this change, fact evident when which less in our guidance for cash to a change at following to in net the Jepsen. our the business. income. is reflective This starting production now

to manage expect working year. We're of capital the reductions continuing throughout and remainder further the

to an and expect half Perfect. the you on us inventories. like inventory of And back could Josh of today in give used we management, what in and the where spirit stand touch on to I'd update year? the briefly new Beal,

are ratio with ag, to I'll line with interests increases as inventory And significantly stand fall said, inventory below previously numbers where norms. we inventory start albeit absolutely. North these they That historical levels sales XXXX Yes, and underproduction with America, expected, by down today. In industry in build to year-end new proactive from beginning seeing in we're ratios discussed, given large to equipment. sales our expect

the Furthermore, we levels for fourth year-end largest by planned normal see during seasonal the as inventory in are expect declines new year. decline the to amplified quarter to occur our underproduction

year-over-year. total units used On we've seen the inventory side, up used

seeing up The North key to they more of retail below are combines value our horsepower the have that average seen While and last horsepower increased America. the Meanwhile, was in remain equipment. the to the used underproduce more used up decision skewing driving high in tractors high a later trend models, factor downturn. rapidly in decade predominantly tractors we're in highs are demand from lows,

Cory. is this Josh,

the Just one a you add at as we've disciplined. thing as to look relatively been industry here is whole,

Our large sales This to on an ag represents currently unit of new significantly the of the below basis. inventory ratio the cycle. reflective is inventory America in than in and industry North less this we're half showing inventory discipline industry's

to are maintain inventory, their appropriately our they And that them ladder dealers on a side, the customers. a and hyper-focused ensure for on used managing used healthy trade

this example, to our packages then Dealers equipment. cycle, these help help sales dealer focus create new pool on inventories. them a we manage and use For competitive strong on move based equipment used to put funds funds accumulate to used

up years, valuable build prudently environment. the current market last dealers balance providing support Our the now nearly total their in is funds available which tripling these several over

Cory Josh. seasonality and swings our on Thanks, production those and management. larger a inventory That's into and good intra-year reminder play how

to there and devastating talked a I'd There's the harvest, quite ago, of a we first weeks much agri show Sul. on haven't Rio recent flooding Brazil. crop Grande region X to about been now de Shifting yet. in focus down between buzz bit like

off business there? Josh Beal, with of do you us state want a on quick the to kick overview the

dynamic And number priority of security event. our and of suppliers. that and and the impacts employees respond safety well want you the by is I of significant market our wish happy to. including unpack. we deepest I'd And flooding assess want to a employees, tragic everyone recovery, Yes, in extending our the the sympathies first those and by first to our to affected like a to definitely customers start as to Josh, mentioned, the emphasize We to

while do at we Operationally, in the the to facilities not do long-term anticipate this we time. have any region, business impacts

Turning to ag the environment. broader Brazilian

adverse global profitability crop corn provide and a better-than-expected favorable sentiment and year supply some surpluses. expect That said, XXXX offsets this a should with season. the do conditions saw farmers to which some weather cotton to strong crop, due Soybean decline farmer for we support

All the decline, region our in guide. change equipment to in the demand driving in, retail continues industry ag

year supportive came inventory XXXX. of cuts in the we anticipated. as target retail came Nevertheless, underproducing sales the we as year. retail levels, reduction to region in of remain of than retail lighter quarter, demand for year-end production in through more While the this planned expected in committed back inventory for the region we'll in see with Ultimately, building line the half the

Perfect. Thanks for Josh. setting the stage,

Now just down were an us were you give dealers you Cory, hearing Could saw update I believe customers? you and for on what from there there sentiment you Agrishow. the and

Absolutely. the reached that latest our for an That not was was Beal's is given say inflection Josh. positive, think retail biggest point, about sentiment earlier offerings. seeing to tech we've we're excitement that the But Josh I takeaway activity. comments This

for In the Select Bairey of for by fact, also similarly success. we're oversubscribed [ out first day taking and and up solution preorder allotments Precision great show. a our ] the St. StarLink our was connectivity bundle ended Essentials Ag of sold We that interest our

the are their market, Fundamentally, They customers they're market. ecosystem of and technology bringing to is faster the and investments. when or of North solutions for in sense, we're able than American crop our of forefront there even to financial the triple much payback the given rotations full the equipment at and Brazilian achieve, makes our adopt very sometimes in it double calculated significantly our

only solutions value rotation we're a cotton bringing soybean the XXx an the take as so spray a sprayers enables But connectivity Brazil, Xx and them operations. much as on This our example. as why may the could a to in is on their customers that year. think more and corner focused In farmer spray I'll farmer annually. U.S., from soybean drive

about half equipment from our And and like year's the offerings the [ [ the order in Brazil. product We great thing rebound XX sugarcane tractors some the lows, of future most including is [ show of Adding and Agrishow productive new last was at saw interest strong that tech only adoption at ]. in harvesters, the ] fundamentals we demand agriculture XRx combines. feel for optimistic our ] story

the hard out. there's support our differentiated region, and to confident ability only helping our network via dealers also to to while an customers, in to feel but environment providing industry not continues dealer These reliability uptime deliver customers in build the integrated strong competitive required to we value where worked expand that landscape our we've to drive solutions, through in additional So our off-season. are no the

Cory. Awesome. great That's insight, really

more Now last in has while quarter-over-quarter, construction remain to forestry, this on minimal topic, I'd and briefly which is relatively for Earthmoving building stable some like shifts unchanged quarter. the we end seen road touch markets largely on North give levels. you the America, color albeit for what Beal, business of and part remaining at balance a . Josh strong the expect demand the of should year? this can us little

Definitely, for takeaway change minimal of The demand. the you levels key healthy noted, Josh. at quarter is what

noted inventory expected as calls, on less previous build unrelated we we we've some relative to XXXX. As market to year end year-over-year this decline demand

and contractor healthy in rental levels, sustainable remain currently levels and backlogs seen CapEx new at in, averages. used inventory long-term around our While come we've utilization

by months quarter. also equipment guide fourth out Our extends approximately supported order X into book for the that an earthmoving is

around pricing. other only is highlight point I'd The

by strong the landscape to a and bolstered a competition, seeing competitive inventory U.S. addition also strong recovered stronger demand, In that industry with shift dollar. we're have in levels

approach continue However, better to seen than a and we deliver earthmoving segments both our historically. performance balances building share Overall, to market that financial road remain committed disciplined price. and structurally we've

great open That's Jepsen, a to the we comments? Josh. line Thanks, update. final before any questions, Josh And

market and results good Despite we structurally a at half dynamic North levels higher the global in construction quarter second with was the competitive across environment performed first It round strong to year. America, of out a ag the Certainly. business.

we ag year now expect below the to seen mid-cycle we've in pullback moderately the Given end markets, levels.

remain in to value-accretive spending. investing business also $X.X billion returning repurchases CapEx and committed shareholders cash and in to via we R&D concurrently share via approximately quarter, This to the returned shareholders while cash and dividends

a cycles, resilient reinforce new to market from making learned we're more business prepared that than and we've us past, better not before. the ever to and want I

and proactive position are forecast with we possible are equipment Our unfavorable for ourselves a rapidly future. a reflects in demonstrates despite margins business that management result, we above environment. that feel today shifting And putting just mix the XX% best in this global we structurally as the better

be of we where and solutions we cycle, support the ensuring in business The Deere progress, and their to our are the their and utilization highly real need and customers value to Regardless adoption committed remain progress ACRE technology successful. and offering dealers our on equipment, to in -- our earlier tools. provide our digital with integrated engaged they of value of drive our the evidence engaged technology provides needs, while

focused At lay every excited end the vast day, more customers the less, can in front of our day so doing and us. of amount about we're we the of do that on opportunities more are

Josh. Thanks,

Now it our open let's up to investors. from questions

[Operator you call. We're operator polling will now instruct portion on Q&A begin the procedure. ready the the to of to open The Instructions] --

Goldman Our Sachs. Instructions] Jerry question first [Operator with comes from Revich

you expand on I'm could wondering the... if just

Jerry, we lost you.

back You've broken Jerry, bit. Jerry. you up move through. not saying. can't can need coming you're might We a hear to hear if us, you're what We to little

comes Morgan Stanley. Our Angel with Castillo next question from

-- Grace question. [ is ] This on for

XX% updated guidance and for your teens I and implies precision rentals think I high believe, ag, margins. production

you that range? low comfort margins see [indiscernible]? level mid-teens lower segment? will will the part see as we the what talk about the gives to And you ultimately for of of So normalized profitability to underlying can And that, the move you as

comments, those mean our precision Yes. question. in for we saw North globe, in the what talked as result, saw the on industry markets we ag you softening production Yes. really and our And again, as pullbacks of really, I Europe, saw in we've across Brazil all the was, America, a further around reflected guides. call. in quarter we adjusted accordingly, described that and we markets. Thanks production in the

with Our demand. to #X to position in focus is retail ourselves line build

And as we've so those seen shifts.

markets, end us line. making the to again, those adjustments, in In keep we're

as of North large pullback, North result, softening to ag this saw is me. in levels. market tractors, probably our around some year some we bring And tractors in notable we've large the our I the we've America. seen commentary we as increases decision America think from the excuse one also made to was Really, retail underproduce in a down used prior large inventory. around that in demand saw in And change tractor, -- that ending high-horsepower inventory the that

XXXX, that that's think healthy again, of what seen. retail the you've reflected we're first with demand. the And seeing at were in positions market. best line some producing us We levels given half for in We that in the year, strong of declines

what have seeing that decrementals is you're in seen that seen. of in pullback that some and we've We terms change to related pullback

Yes, maybe is Jepsen, just to Josh comment Grace. This around decrementals.

expect year, I to think do I full XX%. around PPA think we

kind which during of of did time. that today of is look back ag. position not actually was half around the around, some the XX% onetime profitability think XX% it, where I terribly call business Josh's that we that, compare just And are in terms we for that production is if XXXX, mid-cycle, precision business we things margin from similar of different. pretty is to occurred structural for far the back adjusted operating so not materially to And maybe important

of is guide So 'XX, our XX. today, middle

from So I as underlies products been we're structural think than well that as favorable earlier, with, the from shift has a profitability we both noted regional as us, for seeing even shifts. less mix perspective,

Dobre next Baird. with question comes from Our Mig

and What exiting inventories, XX underproduction a should to us this you PPA the of in related I'm is that wondering under number for on or would, dealer revenue at is you drive X-wheel how decline, if disclosure maybe tractor if how both SAP? can help this we production? And understand 'XX? percentage your revenue large think and looking point as finer Slide we're about fiscal put

little the the segment. large it's digits Thanks, questions. bit starting Yes, America, in about it, at is complete with ag higher. Globally, to a underproduction underproduction tractors, think large the that worldwide be high you worldwide. total in retail Mig. good range, single year, Appreciate North probably when looking the to maybe for sales and going

On the and call tractors, X, Brazil, that tractors we in the combines about again, excuse higher you with ag, and in down of bring Europe, if in kind me, X we South But inventory and it's precision globally, single production guide -- as in and similarly, midsize. line or digit end Region high our sorry, in America Region at a as little look it, Combine under production. bit is heavier. in

and inventory for As levels referenced slide, the we're right now. the XX% you on current tractors, of about

that's maybe bit seasonal little And I think slide in but historical on range. average, a higher XX% of pretty for relative to kind build, there. the normal of the that this level

I a ending significant that row-crop XX% to This of about level year. year, going significant we're were probably production. half close to and going think on to in to Last under as basis, reduction year, closer XXXX. notably, be we a it's in inventory sales the inventory XX% the back out unit see tractors

taking Mig, the that of the is below as mentioned new of a sitting we're rest of I'll unit total an we're on on inventory we're example, even give terms for crops, -- the the down industry unit Yes, On basis significantly that industry. side. in the row Cory. inventory, below further. basis, this you at but finer half a a point to just I we're

that So the range at as year. go down XX% of percent from we're mentioned, going XX-plus to Josh of the to end

while the best to the in of demand back us The throughout retail margins is maintaining putting PPA, in future. but half, responding going obviously, position effect relative to the forward lower productions net good that, in

at down. So the the end be row tractors those we're new inventories year on They'll side. the for the crop taking hundreds in of

add, thing this Josh one -- maybe And Yes. is Jepsen. to lastly just

place, in a to inventories to proactive prolonging the and the not right historical, stretching ensuring bit demand, have as past. higher not the that a longer, which think learned out being as potential getting possible is I from we're clearly are compared we little demand lesson

I position. So see more in also cyclical proactively, that being a overall what impacts puts an from we able duration us to do think think we It of impact. better

at the that peak and final support that saw industry pulling a the proactively we April, the point row of crop tractors, is the Yes. in Maybe before comes. back actually peak decline we're to actually month on in Josh

I So another think that's indicator.

points tractors. asked mean, but high kind You about compact significant couple has of some those maybe segment, Small It's double digits. just break there. don't utility Pretty for it inventory, particularly under I have well. you subcomponents. ag I been down whole as had the production in of there. if tractors, a small

sort space, kind of they're digit it's On a of kind high with the mid on tractor comments the in midsize. single tractors, of our around line

comes Kristen with question next Our Oppenheimer. from Owen

Arguably, year, the given mix be of a to high more implications if form a level underproduction margin? large mix. should which you talk done high-value decremental those of back the the you've could more factors, be wondering help protect of that as will half in I'm what that little this bit significantly already somewhat Mine given to the follow-up toward and being the about offsets, last, is higher actually

that So production. under year about what how think into back of And actions offsetting the you've to benefits layering that's cost the taken already? the half

well here. as in I'll start, jump and

had and XXXX think I think that those the about have as as in about efficiencies particularly towards of we things. a the the adjustments things. that some business made talked changes. terms we certainly, rates I I of of few some into come back you overhead the primarily and underproduction, think And half year, we've have and mean, in

headwind offsetting excuse material in see You're seeing that's we the me. cost. tailwinds production in there and that that That's freight, a

decrementals. underproduction that seeing having as the impact of plays of far So certainly, is on in some terms changes. part a an And that as

taking cost We're definitely steps.

back material out year. taking the helping and is of we decrementals the of the on part of in and freight That that focus latter plan some in the we as Our business expect on offset production build continues, half. to the

say Jepsen. -- and impact the seasonally would bigger I shutdowns see as it's seasonal things. XQ level get higher sorts in retail, see we you of but definitely, those then also we Kristen, a of

the work We're we getting as through aligned. the production resetting cost back As structure of we're rates, year, Josh also mentioned. half the

benefit as forward. will that So go us we

regardless 'XX, would is not to step of moving. end that we I exiting like as we're say, indicative see marks the into So look of expect would what the way year where we we

ever I we're for launch into One product we the the I is XXXX, going probably I'd thing largest would have. one actually points of mean, new additional make preparing add,

the highest, while So some down, products readying pulling we're the we've most of we're to launch production also productive had. ever

place as that going full is terms structure drive customers to all head and in taking all combines, bring of into even forward. doing in of tractors, we all So proposition we're included for new what cost value prepare new the 'XX our and higher

new harvest for of speed automation, with lot I 'XX solutions as There's that those too building great in ground predictive great a on tech, coming think are automation, vision. a coming products setting Cory, exact shaft And just Yes. of well. lot excitingly,

comes Our . with DeBlase Bank Nicole next from question Deutsche

Crop question willing what to quick. you just order I Maybe seeing the may think so a far if that with bit program, be you're Care early were comment and on

decrementals the like So see to And another I in the guess. that's back It C&F going question, this ask margins decremental -- expecting quarter. on were you little guidance. Are you bit the Thoughts that? high seems in I'm a half?

programs. answer You're order Care quick Crop on right that the is early

up So order that just opened beginning programs the at sprayer the of month.

we're weeks X now It's tends that what, early, the build weeks, program. X.X course to throughout So the that. and in to of about,

really this early just stages point at enough very based to that program. not the comment of So on

]. UOP Jepsen on is also this Nicole, [

important I think probably uncertainty, little one bit as activity as is programs view we into a push bit how later seen, of of there. of optionality planting order we've phases customers to firmer reference emerging, go dealers get season want and thing those point another note little and this exercise have a crop more times a how the tends to of little to through just

Yes.

to C&F for shifting, your on quarter. I decrementals think the maybe question Nicole,

price have point there field anticipated. balance I the we really discount some X sales to put due think lower the the thing That we realization accrual is year. was of to originally affect will on than did that a out that for inventory

see that X.X guide points. So a realization. it's price of at why around little keeping you us year full That's timing bit a

change continue. that full that We X.X about of making It's timing support really to a just that points. don't expect in back price half year should

comes Nathan Our with from Jairam next Daiwa. question

side? you to primer on I across year we and just deeper little also what you a What if are be pricing run wanted could in of dig seeing regions a next just could on segments. And that pricing. seeing bit kind on -- the

Yes. mean the year, step realization here, and do as a But walk the XXXX I kind we a price where about kind X.X in talking XXXX points about talk to we it through ag, pricing. world again, for bit stands, I large we're talk the different of think early as regions. and we of around then

North we the normal would actually say in to X%. of is that America, X% price in realization range. range We're

In the on better little there. fact, top if bit a that, end of not

pricing strong So continue year. we've the to and that of course through seen the expect

we've XXXX. that talked built the Brazil America, inventory South specifically in we with

We digits. sort to through will end, in year, have the year of back plays the the of on course was this as price out some of there the starts on mitigate kind negative the mid-single it that front Candidly, higher end.

Europe, expect through And America. very, really normalized of that similar X%. year. range that We're to continue the kind in we And very then the of to X% course pricing to seeing North of

ag Small very similar and turf, comments.

this about again, X.X We feel price year. we managing and I more there. discounts to talked that then year. and forestry, going about of certainly dynamic seen we're and a again, the we've through that competitive that But accrued balance think course the maintain points that construction the we're in realization good environment the

Rob Our Wertheimer with question comes from Melius. next

in PPA the unknown more as just North kind ways. they buyers? farms, the chain capable, cycle? you or this the absorb whether big is second see I'm you about gotten And enough machines market whether you Just of how And bigger, more trade find of know in guys about expensive a one think have of to homes more see cycle? of how moderate-sized My equipment? and all into buyers, productive, you anybody playing America. Or question you the down in on that the second third the whether Your kind owners the in picture better think if the than an overall curious some

model you example, horsepower. the it XX,XXX maybe One back We've about we have is seen to used you late this XXX-horsepower first the Rob, units been that is used I'll very an if but XXXX, in watch a watched stab. Cory. tractors thing industry tractors. Yes, on peak, if closely. would XXX only unit of I and use there industry XX,XXX XX% take But grow, have back example. been can give went Look, as inventory previous above we've above crop I'll row closely

off XX% units are and fast structural to of customers XXX, above they our you for If today, making about is improvement of forward that and above that's predominantly. XX,XXX how driven XXX, the being we're XXXX, that plant

on Emerge, Emerge take the forward. the at think We requirements, to continue Exact those we're throughout better. power drive that plant That in all required of mid-XXs the planters, the end drives absorption So about high to the of speed. of market. you electric ability the toward We're customers see headed the market top XX-plus on adoption Exact as tractors seeing percent drives being

XX% in a plant you about than to able think window. of you time fast less got timeliness, crop we year, this have to an Take then environment shortened the better There's where if already planted. no be

interest has the So Obviously, really through of we're in. in we're solutions I to think people age But pause we headed, we're feel you like and year-over-year market. environment set the trade really where are you confident move timing of at the rates up fleet look that if well. the look an cycles, set at our

and that value each through able into we're the fleet out performance ag we're with with customers. upgrades creating Combine upgrades with those the we'll most what together be of doing essentials, take to precision precision and of

So about we feel good pretty that.

that more desire there's the keep and upgrading other well thing first efficient I think time is execute the piece strong in customer whether the productive, those us one to is I matter Yes, a add frames. able is no to where they're that would -- be Rob. owner gives or fifth, tighter The become confidence more as ladder, the technology, the jobs in

planting is tight a mentioned, time As Cory very frame.

So good we're to where essentials that demand I we're this across example drive, ag precision seeing a connecting and machines. continues think really is

had not on machines have or technology been the those we've that before. I putting more of think X/X

we're like other into using tools bringing that fold or customers been guidance system. the the So things haven't into and

think I So that important. is

best really work around spec those working they're the their well. dealers hands. they They really is part hard. best machines they They well. them right their other and know customers the do And know get how AORs how And into

Goldman comes Revich from Sachs. with question Jerry last Our

will model late folks I to and use rising moving for thinking Yes, that $X what's confidence to billion inventories sound you how of for levers? the wanted I'd I an hear Based your art are issue of -- you've apologize the taken, fund I more you're normally. side, on modeling it versus used ask, focused inventories that stop the on about just destock, earlier. actions hyper potential additional level love of appreciate up it's here? that but from roughly

back. Thanks mean made with new I I'll feel in. Cory, it inventory for start think and the side I mean, it the jump free Jerry. as Glad management well. you to starts question, on I our Josh, proactive

There's And sales to underproduce to environment as that given there row-crop those equipment. in low tractors significantly down year, inventory below bringing is, watery decision XXXX. where we think I current moving We're are, slowed equipment it has Cory last talked. America them. levels ended our where pull given as opportunity, for We through North we're value down, the that in feel rates pipeline. bring really as where is the

situation. we on that. want build to And don't that to exacerbate don't We want

we inventory down. bring feel the it's like so And to prudent new

anything work of we to the a that spring, is planting as in the for the planting with important you'd even it pull again, with use is don't mean talked, value it for as a certainly add? delayed in lot I I if to just U.S. lot the equipment get that definitely high-speed be higher that and there's we that able -- there's brings. know, ever, pull more quickly wetness. as year, time with of definitely see productive But focus a and the So this the the the we And through. Cory, -- there.

tools will all levels do in ground that planting we've I think, and product. it cover quickly both applies also the more spring, but consume drive Those it. in harvesting it ability confidence be in the with age, us end. get fleet and windows And helps all together in more to tighter customers, the place used confidence applies I that think I and example able we the earlier, to got to at drives

profitable markets if solidly Obviously, look and those customers and uncertain used when time, expect we still are technologies technologies, these coming market. we at the adopt look at at down, you are at age But down crops it in that profitability in aren't you but trend-wise ground. it slowed technologies over look those the coming fleet and business. and the the look units adopting to pays know it's you We move that are to the into how

Thanks all for the today. question, Jerry. Appreciate the questions

us. all time. we day. Have talk great I have. appreciate think joining soon. We the Thanks we're at That's the -- everyone's a time here. the for end of We'll

you Thank today's for participating. conference. That concludes

You disconnect at may this time.