Financial Data and Key Metrics - Consolidated revenues were down 22% YoY, and industrial net sales were down 25% YoY [22] - Industrial gross margin reduced by 220 basis points YoY, and adjusted EBIT margin was 8.4%, down 340 basis points YoY [23] - EPS was 0.40 last year [23] - Free cash flow for industrial activities was an outflow of 304 million, with an adjusted diluted EPS of 0.16 from Q3 2023 [29] Business Line Performance Agriculture - Agricultural net sales decreased 24% YoY, with lower volumes across all regions [31] - Production hours in agriculture equipment plants were down 42% YoY for row-crop products and 26% YTD for the entire product range [31] - Gross margin was down 290 basis points at 22.7% [32] - Adjusted EBIT margin ended at 10.2%, with a decremental EBIT margin of 28% [34] Construction - Construction net sales were 78 million, an 2.8 billion, down 1 billion to 85 million in incremental cost savings and 45 million in SG&A savings in Q3 [17] - Strategic sourcing efforts are underway, with a second wave of supplier contracts worth around 2 billion in purchases [18][19] - The company is evaluating options to simplify its manufacturing footprint and streamline operations [12][60] - R&D investments are being maintained, with a focus on in-house technology and product launches, including a new lineup at Agritechnica 2025 [14][58] Management Commentary on Operating Environment and Future Outlook - The macro environment remains challenging, with depressed commodity prices and muted farm income [8][9] - The company expects to underproduce retail demand through the first half of 2025, aiming to align production with retail demand by the second half [53] - Full-year 2024 guidance includes a 22% to 23% decrease in net sales and an industrial EBIT margin of 8% to 9% [51] - The company anticipates 2025 to be the bottom of the cycle, with potential market recovery in late 2025 or later [55][56] Other Important Information - The company has spent around $100 million in 2024 to address field quality issues [12] - Share buybacks have reduced the share count by about 7% since January 2023 [46] - The company reaffirms its policy to return 25% to 35% of adjusted net income to shareholders through dividends and share buybacks [46] Q&A Session Summary Question: Underproduction Plan for 2025 - The company plans to underproduce retail demand in agriculture by 30% to 40% in Q4 2024 and continue underproduction in Q1 and Q2 2025 [63][64] - Construction will also underproduce retail demand in the first half of 2025 [65] Question: Pricing and Inventory Management - Pricing pressure is seen in Europe and Latin America, but the company expects positive pricing for the full year [72] - Inventory levels are expected to remain above target, with efforts to reduce dealer inventories through underproduction [69][99] Question: R&D and Product Launches - R&D spending will remain stable, with a focus on in-house technology and product launches, including new combines and tractors [102][109] - The company has gained market share in key segments despite quality challenges [112][113] Question: Financial Services and Leasing - The company does not expect significant losses from operating leases, with resale values holding up [115][116] Question: Manufacturing Footprint and Cost Savings - The closure of the Burlington plant is part of a broader effort to streamline operations and reduce costs [60][124] - Cost savings from manufacturing efficiencies and strategic sourcing are expected to continue into 2025 [40][41]
CNH Industrial N.V.(CNH) - 2024 Q3 - Earnings Call Transcript