2025-05-01 13:00Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2025 were down 21% at $3.8 billion, with industrial adjusted EBIT down 73% to $101 million, and EPS for the quarter was $0.10 [12][20][23] - Free cash flow for industrial activities was a $567 million outflow, which is an improvement compared to Q1 2024 due to better management of finished goods and component inventories [20][23] - Gross margin for agriculture was 20%, down 380 basis points year over year, primarily due to lower production volumes and unfavorable mix [20][21] Business Line Data and Key Metrics Changes - Agriculture net sales decreased 23% in Q1 2025, driven by lower shipments across all regions due to weak industry demand and dealer destocking [20][22] - Construction net sales for Q1 were $591 million, down 22% year over year, primarily due to lower shipment volumes in North America [22] - Financial Services segment reported net income of $90 million, with a year-over-year decrease mainly due to higher expected risk costs and taxes [23][24] Market Data and Key Metrics Changes - Retail demand was slow, with production hours down 26% compared to Q1 2024, with agriculture down 27% and construction down 19% [13] - The Turkish market showed continued softness, impacting joint venture results in the Other category [22] - Delinquencies increased, particularly in South America and North America, aligning with expectations during a downturn [25] Company Strategy and Development Direction - The company is focused on operational excellence, advancing technologies, and executing cost-saving initiatives while preparing for a new model year lineup [11][12] - A modest price adjustment was implemented in North America for new orders, with the aim to share tariff cost impacts with suppliers [15][63] - The company is committed to maintaining a balanced global exposure and is actively engaged in scenario planning regarding tariffs and trade impacts [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current market headwinds and the necessity of keeping production low to navigate the downturn effectively [12][17] - The company expects a gradual recovery in the second half of the year, with a return to double-digit profitability in agriculture [68] - There is cautious optimism regarding the potential for a rebound in demand, particularly in Brazil, contingent on global trade developments [88] Other Important Information - The CFO announced his departure effective May 6, with Jim Nicholas set to succeed him [5][6] - The company is preparing for an Investor Day to provide more insights into its product roadmap and strategic initiatives [11][45] Q&A Session Summary Question: Can you quantify the EPS headwind from tariffs? - Management indicated that all changes in guidance are due to tariff scenarios, with a midpoint estimate provided for potential impacts [51][53] Question: What is the outlook for production costs in the Ag business? - Management confirmed that production costs were down, with expectations for improved quality and reduced warranty spend in the coming quarters [55][57] Question: Can you elaborate on price adjustments and procurement efforts? - Price adjustments were implemented to balance cost increases, and discussions with suppliers are ongoing to share tariff-related costs [63][65] Question: How should we think about Ag segment margins as the year progresses? - The first quarter is typically low, with expectations for improved margins in the second half of the year [68] Question: What is the current state of dealer inventories? - The company reported a $100 million reduction in dealer inventories, with plans to continue monitoring and adjusting production levels [85][86]