Financial Data and Key Metrics Changes - Consolidated revenues for Q2 were down 14% year over year at $4.7 billion, with adjusted EBIT down 55% to $224 million and EPS at 17% [13][14] - Adjusted net income decreased by about half, with adjusted diluted earnings per share down from $0.35 to $0.17 [18] - Second quarter gross margin was 21.8%, down from 24.4% in Q2 2024, affected by lower production volumes and unfavorable geographic mix [19] Business Line Data and Key Metrics Changes - Agriculture segment sales were down 17% to $3.2 billion, with North America down 36%, representing over 90% of the total decline in ag sales [18][19] - Construction segment net sales were $773 million, down 13% year over year, with gross margin at 15.7%, down from 16.5% in Q2 2024 [22] - Financial Services reported net income of $87 million, with a year-over-year decrease mainly driven by higher risk costs in Brazil [23] Market Data and Key Metrics Changes - Industrial production hours were down 12% year over year, with agriculture down 12% and construction down 15% [8] - North American industry retail demand was down 37% for high horsepower tractors and down 23% for combines [14] - The global industry forecast for agriculture is expected to be down around 10% from 2024, with 2025 representing a trough level of global market demand [32] Company Strategy and Development Direction - The company is focused on reducing channel inventories and aligning production with retail demand, aiming to achieve target levels of newly built machine inventory by year-end [9][32] - Five key strategic pillars were outlined: expanding product leadership, advancing Iron and Tech integration, driving commercial excellence, operational excellence, and quality as a mindset [14] - A new collaboration with Starlink was announced to provide connectivity for farmers, enhancing productivity [11][16] Management's Comments on Operating Environment and Future Outlook - The management noted ongoing complexity and uncertainty in the macroeconomic environment, making forecasting challenging [6][7] - The company expects to produce in line with retail demand in the second half of 2025 and into 2026, while remaining cautious about tariff impacts [10][36] - Management expressed confidence in the long-term strategy and operational improvements, despite current market headwinds [12][13] Other Important Information - The company reaffirmed its capital allocation priorities, focusing on reinvestment while maintaining a healthy balance sheet [24][25] - Free cash flow from industrial activities was $451 million, significantly better compared to 2024 due to improvements in working capital [18] Q&A Session Summary Question: Inventory levels in Agriculture - Management confirmed a reduction of $200 million in excess inventory, with a focus on clearing aged inventories and supporting dealer sales [40][42] Question: 2026 order trends - Management indicated that 2025 is expected to be a trough year, with uncertainty around tariffs impacting 2026 demand forecasts [46][48] Question: Pricing strategies - Management stated that pricing will be positive for the full year, driven by higher value functionality and cost discipline [58][60] Question: North American market challenges - Management acknowledged the pricing differential between new and used equipment and emphasized efforts to align inventory levels [96][100] Question: Timing of tariff impacts - Management expects most tariff impacts to be felt in Q4, with ongoing efforts to mitigate costs through pricing and operational efficiencies [104][106]