CNH Industrial NV (CNH) 2025 Q4 法說會逐字稿

Good morning and welcome to the CNH 2025 fourth quarter results conference call. (Operator Instructions). I will now turn the call over to Jason Omerza, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Kristen, and good morning, everyone. We would like to welcome you to CNH's fourth quarter earnings presentation for the period ending December 31, 2025. This live webcast is copyrighted by CNH, and any recording, transmission, or other use of any portion of it without the written consent of CNH is strictly prohibited.

Hosting today's caller CNH CEO, Gerrit Marks; and CFO, Jim Nickolas. They will reference the material available for download from our website.

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

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

Our presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable US GAAP financial measures is included in the presentation material.

I will now turn the call over to Gerrit.

Thank you, Jason, and welcome to everyone joining the call. We are calling today from our plant in Wichita, Kansas, where we build loaders for our construction business. There were bright spots for us to celebrate at the year as the year ended, even though there are continuing challenges in the markets that we serve.

We had a successful tech day presentation at the Agri technical show in November. If you haven't seen it yet, we encourage you to watch the replay and learn about the advancements we have made and will continue to make in the pursuit of serving farmers on their soil.

At Agri technical, we showed how CNH tech powers digital solutions for our world-class iron from factory fit to retrofit aftermarket solutions. We have the technology to help farmers be more productive with their equipment.

We also introduced a new lineup of mid-range tractors for the global market, but which specifically addresses a particular need in Europe for large mid-range high horsepower tractors. This new tailored offering of tractors helps us compete better and facilitates pull-through sales of combine sprayers and planters.

We also showcased our leadership in combine harvesters. With our award-winning CRNAF series machines.

We have ramped up our efforts to strengthen and consolidate our dealer network with several flagship transactions already completed. This is a critical piece of our long-term strategy, and we are very pleased with the initial reaction from our dealer partners.

We are proud of the progress we have made with our quality and operational excellence initiatives that we outlined at our Investor Day last year. We took out $230 million of cost from the agricultural segment in 2025, which puts us on pace to achieve the $550 million cumulative savings target by 2030.

Those savings plus incremental actions that we that we will take will help us eventually offset the entire tariff cost impact incurred. We also continue to make progress on our near-term goals.

Agricultural dealer inventories were down another $200 million in the quarter for a full year reduction of about $800 million, that is a little shy of the target that we had initially set at the beginning of 2025.

But it is because we shipped out a bit more company inventory to the dealers than we had originally expected in Q4 on the back of the European market showing some green shoots.

But commodity prices remain low, and as the single largest contributor to farm income, it is hard for farmers to operate their farms, let alone purchase equipment.

The trade environment remains in flux, which makes it difficult for CNH farmers and builders to have a sense of certainty when making capital investments. So we do our best and focus on the things that we have in our own control.

So while market conditions were very dynamic and are forecasted to remain so in 2026, the CNH team is focused on solutions today and in the future that delight our farmers and builders. And that will deliver returns for our shareholders.

With that, let's turn to the results.

On a year over year basis, our Q4 results are very encouraging. We are, however, comparing to a very low Q4 of 2024 when we had severely cut our production levels. We will talk about our 2026 guidance in a moment, but I want to caution against using this Q4 improvement as a run rate into Q1.

Fourth quarter consolidated revenues were $5.2 billion or up 6% from Q4 of 2024. Our ex segment sales were up 5%, with EA up 33% and North America down 10%. Construction sales were up 19% on an easy comparison with 2024.

Industrial adjusted EBIT was $234 million up 21% year over year, mainly as a result of positive pricing, higher production, cost saving actions, and lower corporate expenses, which together offset the tariffs and geographic mixed headwind. Adjusted net income was $246 million with adjusted EPS for the quarter at $0.19.

Looking at the full year, we faced another challenging period for the ag industry. 2025, consolidated revenues were down 9% year over year, while industrial sales decreased double digits.

2025 industrial adjusted EBIT margin was 4.3%, primarily driven by the higher tariff costs and unfavourable geographic mix, partly offset by pricing and cost mitigation actions.

We remain confident that our North and South American markets will deliver growth in revenue and profit pools in the coming years as trade flows stabilize and farmers migrate to larger machines with connectivity solutions.

We grew market share in large tractors and combine harvesters in North America during 2025. And as we move into 2026, EMEA is on a great path to further recover from its low margin levels through our transformation, cost efficiency programs, and market share gains in the mid-range tractor segment.

Sustainability has always been one of our main priorities because it is vital to our farmers, as we discussed at the tech day, land is the most valuable asset for a farmer, and soil health is of prime importance. That is why we have always stressed sustainability in our operations and in our machines.

For us, sustainability is not only about protecting the environment, it is also about ensuring the long-term profitability of our farmers, which is central to our conviction of what true sustainability means.

We are proud to have been ranked among ranked number one in our industry on S&P's global 2025 corporate sustainability assessment and to have received a for climate and a for water and CDP's 2025 scores.

These results recognize our leadership in environmental actions and disclosure across our products, operations, and supply chain.

With that, I will turn the call over to Jim to take us through the details of our financials.

Thank you, Gerrit. Fourth quarter industrial net sales were up 8% year over year to nearly $4.5 billion mainly driven by favourable price realization and positive foreign exchange impacts. Adjusted that income increased to $246 million with adjusted diluted earnings per share at $0.19, up from $0.15 in Q4 2024.

Even though we had low production levels in Q4 2025, they were higher than the very low levels in the same period of 2024. So the year over year increase in sales and income is mostly related to a relatively easy comparison.

Industrial free cash flow in the quarter was $817 million essentially in line with Q4 of the previous year, as the lower year over year change in working capital was offset by better EBITs and cash taxes.

Agriculture Q4 net sales were about $3.6 billion up 5% year to year, driven by favourable pricing and positive currency translation.

On a regional basis, the year over year sales decrease in North and South America was more than offset by the EMEA increase which was mostly in Central and Eastern Europe along with the Middle East. Positive pricing was the most pronounced in EMEA and North America.

Adjusted gross margin was 20%, down slightly from 20.6% in Q4 2024, affected by the tariff costs and unfavourable geographic mix, partially offset by purchasing efficiencies, lower warranty expenses, and a 15% increase in production hours.

Agriculture adjusted EBIT margin with 6.5%, down from 7.2% in Q4 2024 as positive pricing and lower R&D partially offset negative product and regional mix and higher SUA related to variable compensation.

On a full year basis, gross tariff costs had a 110 basis points impact on EBIT margin, and unfavourable geographic and product mix had a 90 basis points impact. Construction net sales in the quarter were up 19% year over year to $853 million driven by better sales in North and South America.

Q4 gross margin was 11.5%, down 340 basis points year by year as tariffs weighed on the quarter's profitability. Favourable purchasing and manufacturing efficiencies were more than offset by $35 million a pair of costs those are all knitted together in the product cost category of the EBIT bridge.

As was the case in agriculture, construction SDA was unfavourable due to variable compensation and labour inflation. Before adjusted EBIT margin was 0.6%. On a full year basis, gross tariff costs had a 225 basis points impact on EBIT margin.

In financial services, segment net income in the quarter was $109 million. The 18% year over year increase came from interest margin improvements across all regions, only partially offset by higher risk costs in Brazil and lower volumes in North America and EMEA.

Retail originations in the third quarter were $2.8 billion and the managed portfolio ended the quarter at $28.6 billion. Credit collection rates have been relatively steady in most regions despite the market downturn. Delinquency rates in Brazil have stabilized, albeit at elevated levels.

Our capital allocation priorities remain the same reinvesting in her business while maintaining a healthy balance sheet and then returning cash to shareholders.

During Q4, we repurchased $45 million worth of the CNH stock at an average price of $10.02 per share. For the full year we returned $433 million through $333 million in dividends and $100 million in share reps.

I'll come back in a moment to discuss our 2026 guidance, but first, let's take a look at the progress on our long-term targets. Gerrit.

Thank you, Jim. Our company strategy is centred around five key strategic pillars expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence, and quality as a mindset. These pillars keep our team focused and united in our shared purpose to feed and build the world we live in.

Today, I would like to give you an update on our progress on each of these areas. Innovation is a constant at CNH and we have a robust pipeline of new product launches. We are using rising technologies such as GN AI to increase the velocity of our product introductions.

At our Investor's Day, we outlined plans for more than 15 new tractor launches, 10 in harvesting, 19 in crop production, and over 30 precision technology releases between now and the end of 2027.

You can see on the slide the progress we've already made in 2025, and we had about as many minor product launches as the major ones during the year, and the pipeline is full for 2026 and 2027, underscoring our commitment to continuous improvement and purposeful innovation.

Expanding on this a little bit, I want to highlight just a few of the innovations that we introduced at Agri technical. Some things in development and some already commercially available.

In addition to our green on brown and variable rate application technology, which are already available, we highlighted some of the progress that we have made on green-on-green spraying in conjunction with our partner One Smart spray.

This solution is targeted to launch in 2027 and will improve a farmer's profitability and sustainability. We also spent some time explaining how active and passive implement control can help correct the field conditions. That would otherwise comprise tilling or planting.

FieldOps has introduced new features such as AI enabled field boundary management, and we are constantly adding new features to this tool. More to come in 2026, such as additional machinery support and further remote display abilities.

We partnered up to introduce the fleet pro line of aftermarket kits for the EMEA region at a very competitive price point in a commoditizing market.

These guidance and steering kits provide a value offering for legacy products of all makes, while our state of the art Raven technology will equip our recent and new machines in full connectivity with our FieldOps system.

These and other innovations will help us achieve our goal to nearly double the amount of precision tech components within our access to 10% by 2030. We are on track to achieve that with the eventual rebound of the North American market, which tends to favour a richer mix of precision tech components.

One of the key pillars of our long-term strategy is driving commercial excellence by working with and strengthening our distribution network. This is a long journey and benefits are more back and loaded in our plan.

As disclosed in our last annual report in 2024, we had about 2,500 ag dealer owners operating about 6,000 points of sale. Our goal is to reduce the number of first level owners by about one third while maintaining very competitive point of scale and service coverage, point of sale and service coverage.

Feedback from our forward leaning and ambitious dealer partners, both large and small, has been enthusiastic. Our progress on this front will create some noise in the channel, as it should, but the expanded reach of the dealers can be leveraged for better investments in facilities and service technicians.

We are also giving dealers access to new and better tools like the AI tech Assist. That tool is getting rave reviews with over 1,500 users worldwide who have used it already over half a million times.

Our 2030 target is to have around 60% of our access coming from dealers who sell both brands in their network, up from 30% in 2024. 2025 was already 35%.

You can see examples of some notable transactions we have already done on this front. The message here is not case is taking over New Holland or the other way around.

The message is giving dealers access to all the great products that we have regardless of their branding. We finally focus our collective and unrivalled attention on competing. With companies with green color products. That was not always the case in the past.

Our in-flight operational initiatives have runway to continue underlying margin expansion. Our strategic sourcing initiative uses data-driven insights and supplier partnerships to improve cost efficiency while maintaining quality and reliability and it delivered $34 million worth of savings in agriculture in 2025 alone.

Our lean manufacturing projects boost productivity, reduce downtime, and streamline workflows. We realized $45 million in savings at our plants in 2025 as a result of these efforts. Quality is one of our most important focus areas.

Enhancing product reliability and refining manufacturing processes helped us realize over $150 million in quality cost savings in 2025. Now, admittedly that excludes the warrantee-ups that we did in 2024. But beyond the cost improvements, we see our dealer and customer satisfaction survey results reflecting the improvements that we are making in this area.

Our net promoter score went up 8% points in '25 versus '24. Which has ongoing benefits to our reputational value. Quality pays back in three ways lower cost, better ability to price, and growing market share in a self-reinforcing virtuous circle.

All told, our cost savings initiatives already add up to $230 million in 2025, making us well on the way to our $550 million savings target. Again, the pace of the savings will moderate in 2026 because of the warranty one-timers, but you'll see the cumulative savings grow over the next few years.

Let's now put this in context of our margin goal.

Our commitment is to raise agricultural EBIT margin to 16% to 17% by 2030 on an industry mid-cycle basis. That commitment was made prior to the expansion of Section 232 tariffs, but our intent is to offset those costs and still reach the EBIT margin target at mid-cycle volumes.

Netting the savings that we just discussed against investments that we are making as planned in R&D and in the network development, we improved the margin profile of our ag business by 85 basis points.

In 2026, we will further improve the margin profile between 50 basis points to 75 basis points, which is admittedly hard to see in the consolidated figures as we are impacted by a temporary.

Adverse regional and product mix in sales and margins, as Jim will explain in a moment. We are laser focused on improving the underlying profitability, and we did make sound progress in year one on our path to 2030.

With that, Jim will now discuss our 2026 guidance.

Thanks, Gerrit. Let's first look together at our agriculture industry outlook for 2026.

Commodity prices remain low, below many farmers' break-even point, and they want more confidence in their end markets before making equipment purchases over and above the replacement demand.

North America lagged the other regions into the downturn, and so now it is the region expected to decrease the most in terms of large equipment industry retail demand.

Conditions in South America remain weak, but we forecast a more flattish demand in EMEA with tractors slightly up year over year and combines slightly down.

In aggregate, we forecast global industry retail demand to be at around 80% of mid-cycle or down around 5% from 2025 levels, 2026 should represent the trough of the cycle.

As Gerrit mentioned, we do expect that the North America revenue and profit pool will grow significantly over the next 5 to 10 years as demand grows for even larger machines and fully connected production systems.

CNH is well positioned to capture a larger share of those pools on all the advancements that we've made in harvesters, tractors, and tech. We will still be underproducing to the retail demand in order to reach our dealer inventory targets, with overall production levels flattished year to year.

In addition to the industry demand stability in Europe, we are gaining strength in that market on the back of recent product launches, our focus on quality and the network consolidation.

Consequently, we are forecasting ag net sales to be flat to down 5% when compared to 2025, and that includes favourable currency translation of 2% and positive pricing of 1.5% to 2%.

We continue to take advantage of these slow months of production to improve our industrial processes. Gerrit mentioned that our cost initiatives will improve ag margins by 50 basis points to 75 basis points in 2026.

However, the tariff headwind is expected to grow from 110 basis points in 2025 to about 210 basis points to 220 basis points in 2026.

As we continue to work to fully offset tariff impacts through sourcing, production moves, and additional pricing. The mixed shift between North America and EMEA has disrupted our usual detrimental margins, and that had a drag on our 2025 EBT margins by about 90 basis points.

We estimate mix reach mix to have an additional drag of up to 50 basis points in 2026. When the North American market inevitably recovers, we'll see our incremental margins revert back to the normal levels in the low 30s.

With all that, we expect an EBIT margins to be between 4.5% to 5.5%. In construction, we forecast flattest demand in both light and heavy equipment with the exception of South America, where we expect further demand pressures on heavy equipment.

We expect strength in certain non-residential construction markets to be offset by persistent weakness in residential construction.

Construction production levels and net sales will be about flat year to year, including about 1% of favourable currency translation and 2% of pricing.

EBIT margin is forecasted to be between 1% and 2%, mainly due to taking a full year of pars, which are now estimated to have a gross impact of around 500 basis points of margin.

Putting together all those elements, we forecast 2026 industrial net sales to be flattened down 4% year over year and industrial adjusted EBIT margin between 2.5% and 3.5%.

We plan R&D expenses to be about flat year to year while CapEx will be between $600 million and $650 million. Industrial free cash flow is forecasted to be between $150 million and $350 million.

Our effective tax rate is expected to be in the usual long-term range of between 24% to 26%. Adjusted EPS is forecasted to be between $0.35 and $0.45, assuming an average share count of about 1.29 billion shares to help with your modelling and to prevent any surprises, I'll provide some additional considerations for our first quarter.

In the quarter, we will continue to produce at low levels in order to achieve our internal dealer destocking target. As a reminder, Q1 is historically the weakest quarter of the year in terms of sales and margins. On average, the sequential percentage drop in sales from Q4 to Q1 is in the low to mid-20s.

For construction, the 2026 drop should be similar to past years, but in ag, you should expect sales to be down sequentially in the low 30s, as some of our Q4 2025 sales were effectively apo ahead of what we had originally expected to sell in Q1 2026.

We are continuing to advance our cost reduction initiatives, and while these actions will not fully upset Q1 headwinds, they are gaining traction and will deliver increasing benefits as the year progresses.

The low production levels, the unfavourable geographic mix, and the full impact of the tariffs will likely result in a break-even Q1 plus or minus for both the agriculture segment EBIT and company-wide earnings per share.

Construction EBIT will likely be negative in Q1 due to tariff headwinds. The agriculture segments Q2 will be much better sequentially, albeit likely a bit lower versus Q2 2025.

When we get into the second half, we're forecasting overall profits and margins to be higher on a year to year basis despite the tariffs, exiting 2026 with a clearly positive trajectory.

Free cash flow in the quarter will be an outflow as is typical due to the company inventory buildup at the beginning of the year as we prepare for the spring selling season. We expect this quarterly outflow to be larger than in Q1 2025, mainly driven by the lower EBI generation.

With that, I'll turn back to Gerrit for some closing remarks.

Thank you, Jim. While we may have hoped for greater stability in the trade environment by this point, the reality is that we must remain agile in our approach.

While we carefully observe market conditions, we will be deliberate with our production and inventory planning. Production slots are full for Q1, for Q2. And ag is full for Q2 g is third fourth full and construction is half full.

We're excited about the commercial launch of our new mid-range tractors and our internal organizational changes are helping us to improve the speed of our product launches by a great deal that goes for both our iron and our tech, and you will see an increased frequency of our technology releases.

We're also making progress in our development of new product categories such as our cotton harvester that is coming.

We have made great strides already on our long-term targets for quality and for operational excellence, and we will continue to do so in 2026 with an increment of 50 basis points to 75 basis points margin improvement that will be offset by the incremental tariffs and regional mix, but we will continue to work with our dealer partners on finding the right network configuration in each of the markets that we serve.

The right answer will vary. By region and brand, but we will remain focused on what makes the most sense for servicing our customers. Even in the face of the most significant downturn in our industry in decades, we are delivering better products with higher quality while improving our underlying margin profile.

The markets are moving slowly, but CNH is moving fast to deliver our commitments.

As there is today, there will always be a full suite of competitive construction equipment branded as Case or New Holland Construction available through our construction dealer network and our agricultural dealer network as well.

With no urgency or pressure for outcome, we have restarted discussions with several players about the partnering options for our construction business to fully leverage our brand strength and reach, we will explore partnership options to regain a strong footing in the recovering global construction industry. When there is news to share, we will include those in our earnings calls in 2026 or 2027.

This concludes our prepared remarks, and we can now start the Q&A session.

(Operator Instructions) Steven Fisher, UBS.

Great. Thanks. Good morning. Just wanted to clarify the inventory, situation. It sounds like you didn't hit the billion dollars, but it was really just because of Europe. Can you just comment a little bit on the progress in North America and then just, to frame that in terms of how you see the setup, for 2027, it sounds like your second half of the year seems like it's going to be a little more positive in in the first half. Is that sort of a reflection yet of the setup for '27 or is it just easier comps? Thank you.

Hey, Steven, let me take that one. We've made good progress and by design, we slowed down a little bit the dealer is talking in, particularly in Europe, as I mentioned, because of the market coming back and us getting ready for the season. We had similar stock ups in some lines by design in South America in order again to be to be ready for the season 2026 to come.

So for us this let's say it was about $100million, $150 million shortfall whereas the target we gave ourselves at the beginning of the year, which was around a billion, we landed at $800 million. This is a great accomplishment by the by the CNH team globally, but now as we are now scrapping, scratching more and more towards the lower levels of inventory.

We've got to be pretty smart about where, how deep do we want to dip in inventory because when the market returns, and it won't return in a sudden rush, it will return steadily. We want to be ready with high-quality machines and the full lineup in all the regions where we were we operate as we go through 2026.

But the dealer destocking by and large is accomplished in the last two years. 2026 is now a bit fine tuning by product lines and by market, depending on how the different segments are moving. So, as we will continue to talk about here and there some deal stocking as Jim said, also, we'll talk about underproducing retail pays in Q1.

This is now for us more like the last innings of that of that journey and we'll see when the market starts to show signs of life and a better trajectory as we finish '26 and enter into 2027. So now it is about not going too low, actually, and we'll see what that means by market and by region.

Kristen Owen, Oppenheimer.

Hi, good morning. Thank you for the question. Really appreciate all of the incremental color on the guidance and in particular Q1. As I'm furiously writing down these notes, I'm wondering, can you maybe help us put it all together in something that would look like an e-bit bridge for 2026. How much of that, incremental savings that you're expecting versus the offset of mixed versus the offset of geo? Can you kind of build a bridge for us just so we can put that together into the context of the 2026 margin guidance? Thank you.

Good question, Kristen. So happy to answer that. For ag, I assume you're focusing on ag volumes are about 190 basis points of, reduction in margin, walking from 2025 to four-year margin.

Geo mix, we said between up to 50 basis points to call that '25 for purposes of modelling, 25 basis points negative price, call 175 basis points midpoints of our price guide one half to two operational, improvements.

Well, let me do tariffs about 110 basis points headwinds, and then operational improvements, combined with the higher SGA netting about 25 basis points improvements. So that should get you around 5% midpoint for 2026.

David Raso, Evercore ISI.

Hi, just following up on that. I just want to clarify first before my question. The first quarter ag profitability. I just want to make sure I heard correctly about the plus or minus, ag segment EBITDA. Is it basically around break even for the quarter just to clarify.

Yes, that's right.

Okay, I, I'm just trying to think about the guide what it implies for the rest of the year, right? The first quarters down, talking ag, right, down 5% on reverse year over year break even. It means that the rest of the year sales are still down 2%.

The subsequent nine months, but your margins are up a little bit year over year, and I'm just trying to figure the cadence of that, assuming those numbers are right, that the cadence of that. When do we start to see the margin improvement despite sales still down and maybe the cadence on the sale?

Yeah, you'll see marginal improvement beginning in Q3, but I'll just call it the second half better margins, better profits in total. Q2, we expect to be, better, much better than Q1 sequentially, but not quite as good as Q2 of 2025.

Tim Thein, Raymond James.

Yeah, thank you. And Jim, maybe just going back to your comment on when you kind of walk through the dynamics on margins and add, can you, on the 150 basis points to 200 basis points of price, can you maybe just give us some, regional color as to the expectations for '26. What's in backlog and just, how you're thinking about the contribution is there a notable, geographical contribution or difference that you think about that. Thank you.

Yeah, I think North America, is probably the leader in terms of price growth, followed by EMEA that's where we're getting most of the pricing in 2026.

Mig Dobre, Baird.

Hey guys, this is [Peter Callum Cari], and I'm from Baird this morning. Thank you for taking my question. Quick one here from me on South America Ag. Your industry forecast, call it down 5% to 10% between tractors and combines.

That's a bit more negative than your peers who've outlined more of a flattish retail environment. Is there any color you can provide on what you're seeing in that market? And is there any significant difference between Brazil and elsewhere on the continent?

Yeah, look, the, I think we're just cautious here on the market. We have elections coming up. We're very close to our dealer, partners as well as our farmers directly, and we've carefully listened, particularly as we closed last year to what they expect to happen in 2026. And I think there is a, there's a kind of outcomes, for South America in total depends on.

Several factors, one of which is the global trade and is China going to really start buying those 25 million metric tons of soil from North America, or more or less, or, and how and who is running in Brazil for presidency.

I think there are so many unknowns that we took a cautious view here on the market in in South America. And I think look, Argentina has shown signs of momentum here also politically there was quite some support, but I wouldn't necessarily call it out as a as a bright spot in South America.

I mean, Brazil is clearly what pulls the region and there's not an upside to be expected from Venezuela in case you were wondering about that.

So this is the entire region is predominantly British. Brazil followed by Argentina and we see the replacement demand now forcing a continuous, a level that we currently see in the machine sales, but I wouldn't go that far and say this is now going to be a rebound in 2026 as we actually did expect last year to see more life in in in South America this year. But at this point with all the factors that I mentioned, we still need to see and watch.

A few more quarters to see what happens, but that's why we're a bit more cautious on this end. But in the end, the market is the market, and we'll see, but we are less forward leaning here.

Kyle Menges, Citigroup.

Hi, good morning. This is [Randy] on for Kyle. Just going back to some of your, targets you laid out on the, target to reduce the ed dealer owners by a third, by 2030, and then also increase sales at d dual blended dealers over the same time frame.

So we'd be thinking about progress, on these two initiatives as kind of linear over the next couple of years, a little more backup literature, I guess is how you would be thinking of your progress and the timing that we should be expecting to see some of those things flow through.

Randy, that was kind of hard to understand what the question was about sales and inventory development, through dual branded dealers, the progress, okay, so through dual branded dealers. Look, this is, it's a steady advancement on the, on this number. I mean, you've seen a number of deals.

We just had another one. Announced in Q1, which is a pretty sizable, large deal we did in northeastern Germany where we basically converted, the largest network of one of our smaller competitors, completely to CNH effective immediately, more or less, and these moves are all going to be, multi-brand out of the gates.

And we have picked up a lot of positivity and as expected, by the way, and forward leaning attitude from our strongest dealer partners, and strongest means not only in terms of size largest, but also most ambitious dealer partners to be a consolidator in their respective regions with multi-brand attitudes. So I think from the from the multi-branding.

A percentage point of view, expect that to be a steady growth. We will have a few bigger hits in the earlier years, but then it will be a long grind through the tail of network where we possibly here and there, on, decide to not have all the brands in a particular region. Because again, our target is not to have all the brands everywhere.

This we never said. We said where it makes sense, we will have dual branded dealerships in North and North America, South America, where it makes sense as well as in Europe. And there might be regions where we just have New Holland or we just have cases because it is the farming in the region that requires only one brand. So we'd be smart about it.

So that is how to think about it. It's steady with a few big ones coming over the more near term and then a long grind through the tail of the network. Overall setting we up to once and for all finally focus on who competition is, and that is not the other CNH brand.

Joel Jackson, BMO Capital Markets.

Morning. Thanks for taking my question. Just a two-parter looking at North America. We've seen really farmer sentiment come down across a whole bunch of different metrics and articles and things that associations talk about.

So the first part of the question would be, can you comment about just what's going on with farmer sentiment in the states, how your view of it is? Is how it may play out for your sales.

Second part of the question would be, we've also seen in the US in the political arena, a lot of talk about equipment and crop inputs and what the government might want to do on some initiatives going forward. Any views on that? Any things you want to talk about that? Thanks.

Actually, the farmer sentiment in North America is not great, and you're reading the same articles, plus we have a lot of conversations directly with them, and the farmers' income for 2026 is projected to be more or less flat, I mean slightly up. You need to dig into the data to see some.

Some positive elements here, but it all comes back down to the commodity prices for the usual commodities, soy and soy and corn. And at this point, there's no relief really in sight for those, and hence there is the farmer sentiment remains where it is at this very moment.

We'll see what happens, what the administration in the United States has in store. There is a great level of attention to farmers and to, agricultural industry in total, and there is a great deal of help, being prepared, and, I don't know exactly what is going to happen.

We have a list of things that are under discussion, but we'll see what the administration is going to put in place over the next couple of months. And let's say the near term, in 2026. As a matter of fact, I'm actually on my way to Washington. Tomorrow to meet my peers and to have meetings to exactly discuss these points.

Angel Castillo, Morgan Stanley.

Hi, good morning. Thanks for taking my question. I just wanted to revisit a little bit more on the comments around Europe earlier. You had mentioned some green shoots. If you could unpack that a little bit more, and Gerrit, you'd outlined a pretty robust, product launch pipeline here.

Just, can you talk about which of these we should be watching closely in terms of, particular product lines that you're perhaps most excited about in terms of maybe unlocking or having a more meaningful impact on your ability to compete and gain share, particularly in Europe.

But if any other region stands out, that would be helpful and then just more broadly, if we could talk about the competitive environment in Europe, that would be helpful. Thank you.

Okay, I mean, asking me about product risks the rest of the call. So let me pick a few, items here that that are, particularly exciting for me. We show, we showed that every technical a completely renewed short wheelbase and long wheelbase mid-range tractor lineup.

With horsepower ranges that we've never had before. I mean, our horsepower range was all the way up to [$300], [$340] in the European mid-range tractors, and we are now offering a lineup all the way up to [$450] where we never played, and, the feedback from farmers who now pick our brand and our color over the other that they usually had is really encouraging.

And with our attitude and focus on quality first. We will supply these machines with great care at low quantities in 2026 before we start scaling and the market comes back. That's super exciting. I mean, the feedback we've received on our next gen combine over the last two years is overwhelming.

When we look at the shipments that we have, whether it is to Australia, New Zealand, to North America, across North America and Europe, this point that a really good. Start of the, let's say, next gen combines in the fields across and around the world so that's pretty good.

Another thing that is super exciting for me, and maybe you think this is like small, but it is not, is the cotton picker. That's why I've mentioned that we would be the only other manufacturer with a round bale integrated cotton picker that is going to be one of the centre machines in the farming system for farmers in South America, for farmers in Australia, but also in the southern states of the United States.

In order to build a multicolor fleet here versus just a single color, I mean that is a cotton picker that we were missing for quite a for quite a while. We have our new compact tractors coming out of India as we speak right now, all new, they reach these shores very soon, and the new utility light tractor lineup, which we didn't have really at this level of technology before, is also entering production in 2026.

So we are All over the place on the products and with quality as a mindset, these things will start to show at low quantities in '26 and then accelerate in quantum and financial impact in '27 and going forward. Well, when you think about Europe.

I mean, Europe, there are a couple of positives that are clearly around the resilience of that region, and, good momentum and state support in markets like Germany, Poland, Eastern European there, that has actually helped the mainly the tractor sales in in Europe, while combines are still low, and we're pretty strong in combines there.

So that is an adverse product mix. It was an adverse product mix in '25 and it's still a little drag in '26.

So it's mainly a tractor Europe, mainly Germany, German speaking Eastern Europe, a bit po that we have seen and observed in the Europe, but I would not call this a recovery or a, swing in the market necessarily, this very much depends also on the global trade environment.

Mercosur is out there and farmers have already re-entered the cities with their tractors protesting against the Mercosur agreement. So I think it's it is the region with the best growth potential, in terms of TIV for our industry in '26 and maybe also '27.

But we got to be cautious there because it's still a little fragile and the stability and the solidity of the European Union and their ability to make a coordinated decision making when it comes to such important interest groups like farmers. We'll need to see where this will land.

But it is from all the signs that we see the region with a with a better momentum of all the big ones.

Daniele Costa, Goldman Sachs.

Hi, good afternoon. Thanks for taking my question. Maybe just a clarification on something I didn't, well, maybe didn't hear correctly on sort of where did the previ come? Did you just say that it came from Europe particularly? And then my main question was regarding whether, everyone some simplifications and given you have so many self-help actions going on, are you finding any incremental pockets where maybe AI could help you push faster with savings?

Hi Daniella. So yes, the positive is mainly around Europe. So that's true. It's mainly Europe and its mainly tractors that was my comment here, that is what we see in the near term.

We'll see what we do see is basically if you start on the other side of the world like Australia, New Zealand, that is basically all replacement driven. That region is not really impacted by tariffs, and it's a fairly steady market, and we've seen that. This is going to bottom out and it's already on a more positive trajectory as we can see.

We are holding our ground in China quite well and actually we're gaining here and there in the non-Chinese brand universe there, so that is okay. In India, we have had the highest ever market share of CNH in the region. We are scouting for the next site for our small and compact tractors and continue to grow market share there and make this a hub for utility and compacts for CNH Global.

Yeah, and look, the AI application is everywhere in our company. I know we are distinguishing between not only the generic but also agentic AI. We have launched it in our FieldOps.

Platform where we basically connect different agentic AIs in order to provide a fully connected experience we have, in our machines, contextual AI running as we speak, and when it comes to back office and structure costs, we are looking at AI applications in order to speed up and drive efficiency into our processes because.

Overall, I think in CNH we have a pretty substantial upside in getting leaner when it comes to processes, and there is a, there's a good potential here for the application of, solutions that are driven by. Either generic or a genetic AI, and we're on top of these things.

But I'm not committing any percentage number to AI at this point, because what we experience actually is that it drives the outcome and much faster, more efficiently, and we're getting more for the same at this point, while obviously also cost savings are part of the mix.

Ted Jackson, Northland Securities.

Oh, thanks very much. First question is just pretty straightforward. You had a pull forward, you said in fourth quarter that normally would have been in the first quarter, and if I could kind of fiddle around with your guys and stuff, I mean, are we talking somewhere between, $50 million to $100 million in terms of revenue in the fourth quarter that, I, you would have normally expected to happen in the first quarter. That, that's my first question that I have one more behind it.

Yeah, I saw it's Jim. I'd think about $100 million to $150 million of those sales that happened in Q4, we would have otherwise expected to occur in Q1.

Okay and then, normalizing out for that and kind of, thinking through, your inventories are for conversational sake, at this point your retail inventories are aligned with demand, you've generally been under producing demand for a period of time.

Is it a fair scenario to think that as we get to the back part of '26 that you might be able to put up some revenue growth just simply. Because you'll be able to produce the retail demand and not below it and that we would be able to see that continue into you know first half of '27 you know absent even a turnaround in the cycle.

Yeah, I think that's very fair. That's the way we're thinking about it. That's right.

Tami Zakaria, J.P. Morgan.

Hi, good morning thank you so much. I wanted to ask about SG&A. I think it's a sequential step down, more so than what we saw last year. So anything to call out there and how we should think about SG&A growth in 2026 versus 2025?

Yeah, hey, it's Jim. We, SGA came down in Q4 largely due to lower variable compensation expense, and so that was versus '20 full year '25 versus full year '24, for purposes of modelling and guidance, we're assuming, normalized level of verbable comp among other things. So SGA, I would expect to grow, next year about 40 basis points or so headwind from SG&A growth.

Our last question comes from the line of Kristen Owens from Oppenheimer. Please go ahead.

Hey, thank you so much for fitting in the follow-up. Just because it wasn't discussed, in any of the other questions, I was hoping you might be able to touch on the free cash flow guidance and in particular your caps outlook seems like a pretty sizable step-up year on year.

So, I'm just wondering if you can provide some color on that if that's related to what you're doing on the dealer side or anything else we should be considering. Thank you.

Yeah, happy to answer that. Great question. So, there's a, it's multiple reasons we're driving it's growing in '26 versus '25. The primary use of that extra cap CapEx is to enhance and improve our manufacturing facilities.

The best time to get that, done and deployed is when the factors are slow, and we want to get that done before the upturn and things pick up in a bigger way in '27. So that's the majority of the extra, CapEx. But to your point it is also being used for, to some degree dealer, enhancements and also our strategic sourcing plan and programs we have to, we buy new tooling for that as well to help keep those that pipeline of savings coming forward as well.

So it's mostly manufacturing, some manufacturing footprint. Print moves, as we're calling you today from Wichita. Some of the equipment is being moved from Burlington to Wichita, among other places. So there's some money in there for those kinds of things as well, but primarily enhancing your manufacturing, get lower costs, more efficiencies, dealer enhancements, and also our strategic sourcing program.

And ladies and gentlemen, that does conclude our question-and-answer session. And it does conclude our call for today. Thank you for your participation, and you may now disconnect.