CNH Industrial NV Q3 FY2024 earnings call

• Cost Reduction: Saved incremental $85 million in cost to shore up gross profit and $45 million in SG&A savings. - Strategic Sourcing: Kicked off second wave of strategic sourcing program with 700 suppliers. - FieldOps Launch: Fully launched new offboard farm management system with positive feedback. - Quality Issues: Addressed quality issues from labor strike, spent ~$100M on field quality priorities. - Organizational Structure: Refocused structure operating for ~2 months, leadership team aligned better.

Agriculture: Net sales decreased 24% for the period with lower volumes across all regions, and an overproportionate reduction on sales of combined harvesters. Production hours in agricultural equipment plants were down 42% year over year in the quarter for raw crop products, and 26% year to date for the entire product range. Cost margin was down 290 basis points. SG&A expenses were $46 million lower year over year, R&D expense was $40 million less than last year. Construction: Net sales for the quarter were $687 million, down 28% year over year. Gross margin grew by 70 basis points to 16.6%. SG&A expenses were down $13 million, and R&D was down $3 million compared to Q3 2023.

• Revised 2024 outlook: Full-year ag net sales expected down 22%-23%, ag EBIT margin 10.5%-11.5% (down from prior 13%-14%). Construction net sales expected down 21%-22%, EBIT margin 5%-6%. Industrial EBIT margin forecast 8%-9%. Free cash flow expected negative, outflow $100M-$300M. EPS forecast $1.05-$1.15. - Intention to underproduce retail demand through first half of 2025, target to produce in line with retail by second half.

• Industry cycle uncertainties with muted demand and retail pace slowing. - Geopolitical developments like Ukraine conflict impacting European agriculture. - Inflation and currency translation impacts, e.g., Turkish lira inflation effect on joint venture results.

Q: Operating leases and production costs for 2025.

A: Operating leases not causing losses, production costs reviewed with no significant issues, expecting lower production costs next year even at lower volumes.

Q: Closure of Burlington plant message.

A: Relocating plant work to other facilities to streamline operations, part of ongoing global initiative to boost competitiveness.