CNH earnings call transcript, November 9, 2026

This has been compounded in EMEA due to hot, dry weather and in Brazil due to low credit... ...availability. We will see what the recent and upcoming elections will add in terms of certainty, opportunity and support for our farmers. We continue to execute our self-help actions and track... ...towards our path to 2030 objectives. Operationally, we are delivering better quality, achieving operational efficiencies and focusing on supply chain readiness. We are also continuing to invest organically. ...and inorganically in the products and technologies that strengthen our competitive position through the cycle. We announced an example of a strong and mutually beneficial partnership and strategic alliance with Bogo Industries at... ...the end of August that expands our global seeding portfolio. This is another proof point for how we bring strong technology to customers faster by combining leading innovation with CNH's brands, reach and dealer network. We invest in upgrading our strongholds and future core technologies, partner with great players who complement our lineup and seek out inorganic opportunities to accelerate our transformation as we deliver on our... best-to-day commitments. A farmer's freedom of choice is non-negotiable for us. We link that with our technology focused on soil health, along with a view of community health that we take jointly with our dealer partners. Together, this is what we call total farm health. Turning to the results. Consolidated revenues were $4.4 billion, down 1% year over year. Industrial net sales were $3.7 billion.

Approximately flat year over year. Our X segment sales were down 2%, with North America up 2%, while EMEA declined 6%, and South America declined 22%. The volume declines were partially offset by favorable price. Industrial adjusted EBIT was $202 million, up 94%, and adjusted industrial EBIT margin improved 270 basis points to 5.5%. Adjusted income was 200. $5 million in adjusted diluted EPS was $0.16. The 2026 results include $71 million in net IEPA tariff refunds after some of the proceeds. received were reinvested in the business for time-constrained one-time efforts that we would not have taken without the refunds. We will make further investments of these funds during the fourth quarter. Free cash flow from industrial activities was announced. flow of $10 million and improvement of $178 million year over year. Earlier today, we announced a definite agreement with Kobelco to establish CNH construction equipment business as a joint venture. Which we'll call CEJV for now. There will be a final company name in due course. CEJV will be a global full-line construction equipment player, 70% owned by Kobelco. And well positioned to meet the needs of today's construction equipment customers. This transaction is the next step in our years-long transformation of CNH into a pure play agriculture equipment technology and services. Building on our acquisition of Raven Industries in 2021 and the spin-off of our on-highway operations into Iveco Group in 2022, today's news advances our portfolio simplification.

And sharpens our focus on agriculture. This transaction will position CNH as the largest pure-play agricultural machinery OEM that covers the full crop cycle with a strengthened financial profile, able to innovate. And create value for farmers and for our shareholders at every point of the cycle. It also meets the brief we set out to find the right long-term partner for the construction business, as I've outlined previously and elaborated on since I came back to see. We were looking for a partnership that would do two things. First, upgrade our construction segments, economies of scale, its geographic reach and its competitiveness across the full product line, most notably. In heavy excavators with the leading technology player. Second, deepen the breadth and the technology of the construction machines supplied back through CNH's agriculture dealer network to ensure we continue to provide farmers with a work. World-class lineup of construction machines for agriculture applications, such as landscaping, irrigation management, or even internal farm road building. It was also critical to find a trusted owner and operator that would steward construction strongly. Brands, high-performing teams, ambitious colleagues, and excellent service and support business. We were patient and deliberate in our selection, looking for the best fit along several dimensions. We ran a comprehensive... ...process to evaluate how best to position construction to succeed and drive shareholder value to CNH. As part of that, we had conversations with multiple parties over an extended period of time. There's only one...

...case construction and its heritage is unique in the industry. Our discipline led us to today's agreement with Kobelko Construction Machinery, a global excavator and crane specialist with a proven track record. ...and the technology and geographic strength that complements CNH's construction business. Kobelko is the right owner for CNH construction for exactly the reasons I described. CEJV will combine Kobelko... ...Belko's expertise, geographies, technological capabilities, innovation resources and product strength with CNH construction's brands, products and global sales and service network. Together, CEJV creates a better resource... ...and focused business with the ability to be more competitive, innovative and agile in the construction industry. Through the creation of a stronger construction equipment player and CNH partner in CEJV, both CNH and CEJV dealers... ...will benefit from a full suite of high-quality, cost-competitive construction machines that incorporate leading technology. And above all, Kobelco Construction Machinery is not a new partner for CNH. You might remember the... ...time when we were already operating joint ventures in Europe and North America up until 2012. This next step is a new chapter in which Kobelco assumes control over the entire case construction business, forging a powerhouse ranking among the global top 10. CNH will focus on serving customers with full line agricultural applications through our five core brands, Case IH, New Holland, Steyr, CNH Tech, which includes the Raven Precision Technology Platform and CNH Capital.

Given the agricultural use cases of many New Holland construction products, CNH will continue to distribute that brand directly in all regions except for Latin America, where New Holland construction will operate its own network. Under the CEJV. The JV will be a global manufacturer and distributor of full-line construction equipment under the Case Construction, New Holland Construction and Eurocomark brands. Kobelco will own 70% of CEJV. And CNH will retain a 30% equity ownership position in CEJV for at least three years. The transaction is expected to be accretive to CNH margins. And strengthen our overall financial profile, enabling enhanced value creation through focused investment in our ag products and global dealer network. In addition to the cash proceeds, CNH will participate in the upside from our return. And retain stake in what will be a much stronger construction equipment business. Leveraging Kobelko's complementary strengths, geographies, innovation and expertise, Humayun Chishi and his team will have the focus and the resources to build. Build more competitive machines and deliver outstanding support to customers and dealers. Being with a pure play construction leader will sharpen and accelerate their transformation. It is all about focus and execution. We expect the transaction to close by the end of 2027. We are excited about the opportunity this transaction creates for both CNH customers and shareholders.

And we are excited about the future of the construction business as it grows with Kobelco. Jim will provide... some additional details later. As we work towards the closing of the CEJV transaction, we remain fully committed to our long-term agricultural strategy and to delivering sustainable value through the cycle. That strategy continues to center around five key pillars. Expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence, and quality as a mindset. As we manage through the current market. We obviously continue to invest in the products, technologies, and capabilities that we are convinced will differentiate CNH over the long term and support the expansion of our mid-cycle margins. Today, I would like to highlight the BOGO alignment. The BOGO alliance is a good example of how we can expand our offering for better customer choices and bring innovation to market faster by combining a proven product leader. With the reach of our brands and dealer network. BOGO has built a strong position in seeding technology. Bringing that capability together with CNH will strengthen our competitiveness and broaden our offering across precision seeding and air drill systems, high capacity. The air cards, digital technology and control systems. It also supports our focus on soil health and allows us to concentrate internal investments where we can create the greatest value across agriculture.

We've always championed farmers' choice with our open field ops system. This alliance is another demonstration of how field ops can connect all equipment mix, giving farmers access to data that they own and can leverage for better. Our management decisions. With that, I will now turn the call over to Jim to take us through the details of our financials and guidance.

...up 5% year-over-year. Driven by favorable price realization and higher volumes in North America, partially offset by lower volumes in South America. Adjusted gross margin improved 400...

...to $65 million from $14 million a year ago, with adjusted EBIT margin increasing to 8.4%. The year-over-year improvement primarily reflected the net benefit of tariff refunds, lower SG&A expenses, and continued operational discipline, partially offset by lower volumes in South America. The net benefit of the EPA refunds was $39 million in Q3 after we reinvested...

primarily reflecting a $156 million non-cash valuation allowance against deferred tax assets in Brazil due to ongoing elevated delinquencies. Excluding that non-cash charge, adjusted net income was $79 million, up from $46 million a year ago, primarily reflecting lower risk costs in South America.

year-over-year, and the managed portfolio ended the quarter at $27.8 billion, down $700 million year-over-year. Delinquencies were 4.1%, primarily driven by South America. Gross margin over average assets on book was 3.5%, and return on assets was 1.3%. Our capital allocation priorities remain unchanged. First, we support organic growth and margin expansion through disciplined investments in commercial actions, operational efficiency, and quality. Second, we preserve balance sheet strength and an investment-grade credit rating. In keeping with this, we plan to use the net proceeds from the construction sale to reduce debt. Third, we maintain capacity for strategic, disciplined, and margin accretive M&A. And finally, we return excess cash flow to

stock at an average price of $10.53 per share. This brings our total share repurchases through the first nine months of the year to $87 million. Before I turn to the guidance for the remainder of the year, let me give you an update on tariffs and the IEPA refunds. First, we now estimate the full year 2026 margin impact of tariffs, excluding the IEPA refunds, to be 185 basis points in agriculture. And 470 basis points in construction. This is based on tariffs in place as of today. For modeling purposes, you can assume the same impact in 2027. Next, as mentioned, we recognized $71 million in net refund benefits. During the third quarter, $32 million in agriculture and $39 million in construction. In the fourth quarter, we will make further reinvestments of the refunds previously received. So whereas there was a net benefit in... the third quarter, expect a net investment in the fourth quarter. On the slide, you can see the approximate full-year net benefit expected in each segment. In agriculture, we will reinvest all but $5 million of the refunds. The biggest portion will be to fund some one-off efforts to clear aged and discontinued equipment inventories. We are also taking advantage of the funds to accelerate an increase in our precision technology R&D capacity. Most of these efforts help agriculture to become a more competitive business. In construction, the full year net refund benefit will be about $30 million after funding some discretionary programs to promote connected equipment.

And help clear aged inventories. The net refunds are now included in the segment and corporate guidance numbers we're about to review. For agriculture, our current 2026 industry outlook. It remains mixed by region and product. We have slightly adjusted down the North American industry retail forecast for smaller tractors. And we further moved down the industry forecast for South America in both tractors and combines. Globally, we still forecast agriculture industry machine retail sales to be about 80% of mid-cycle. With three-quarters now behind us, our view of full-year CNH agriculture segment sales is unchanged. We continue to expect net sales to be approximately flat year-over-year, including about 2% of favorable currency translation. We are narrowing the EBIT margin guidance to 5.1% to 5.4% from the prior range of 5% to 5.5%. The narrow range reflects our year-to-date performance, continued execution on cost and operational initiatives, and the refund reinvestments, offsetting lower expectations in EMEA and Brazil. In construction, global industry demand continues to be strong, particularly for heavy equipment. We have raised and narrowed our full-year net sales outlook to up 8% to 10%, including about 1% of favorable currency translation. We are narrowing the EBIT margin guidance to 2% to 2.3%, which includes the net tariff benefit partially offset by lower profitability in South America.

Putting the two segments together... ...we now expect 2026 industrial net sales to increase approximately 2% year over year. We are also adjusting the EBIT margin range from industrial activities to 3.4% to 3.8%. We are raising our industrial free cash flow outlook to $300 to $450 million from $200 to $400 million, and we now expect adjusted diluted EPS of $0.44 to $0.48 compared with $0.41 to $0.46 previously. Before I turn it back to Garrett, I will walk through some of the key details of our transaction announced today with Cabelco Construction Machinery.

While we believe CNH's transformation to a leading pure-play agricultural equipment, technology, and services... This company will support progress on our path to 2030 goals. We have no changes to our 2030 targets or timeline to achieve them. With that, I'll turn it back to Garrett.

Thank you, Jim.

Let me finish with how we are thinking... ...about the balance of the year and the setup for 2027. We continue to track the macroeconomic factors affecting the ag cycle, particularly farmer profitability, commodity prices, input costs, interest rates, and credit availability. Dealer inventory normalization is progressing and the order intake pace for model year 2027 products in North America has been in line with expectations. This gives us the confidence to say that 2026... will be the trough of the cycle for the North America region. We have to be careful not to assume that certain seasonal products such as large cash crop planters or sprayers in North America speak for the entire... ...global industry demand, however. The global act cycle is actually the sum of many cycles differentiated by regions and crop production systems. While observing some green shoots, we remain disciplined in how... ...we interpret that data. Our priority is to enter 2027 with channel inventories at healthier levels and production aligned with underlying retail demand, so that we are positioned to respond appropriately as customers. Confidence and farm economics evolve. We expect agriculture dealer inventories to decline another 150 to 250 million dollars in the fourth quarter. We will maintain production discipline and stay... ...focused on aligning output with underlying demand, while preparing our manufacturing footprint and supply base for the next phase of the cycle.

At the same time, our margin improvement work in quality strategic sourcing... ...and operational efficiency continues. These actions are designed to strengthen performance through the cycle rather than depend on a market recovery. We will continue to make good use of the slow-moving markets to improve our products and operations. We will also continue our multi-brand dealership consolidation efforts across geographies where they improve coverage, dealer health, and the customer experience. We'll update our full-year scorecard on each... ...of the five pillars of our path to 2030 at our next call in February 2027.

Thank you. We will now begin the question and answer session of the call. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 to raise your hand. Star 1 again. To allow time for as many participants as possible, please limit yourself to one question and then return to the queue for any follow-ups.

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