CNH Industrial

Good morning and good afternoon to everyone. We would like to welcome you to the webcast and conference call for CNH Industrial's full year and fourth quarter results for the period ending December 31, 2021. This call is being broadcast live on our website and is copyrighted by CNH Industrial. Any other use, recording, or transmission of any portion of the broadcast without the express written consent of CNH Industrial is strictly prohibited. Hosting today's call are CNH Industrial's CEO, Scott Wine, and CFO Adoni Nchiza. They will use the material available for download from the CNH Industrial website. Our company completed a significant transformation on January 1, 2022. Today, we will illustrate full year and fourth quarter results for CNH Industrial prior to the spinoff or demerger of IVECO Group, as reported under US GAAP. In light of the successful spinoff of the IVECO Group entities effective January 1, 2022, We will also discuss unaudited pro forma results for C&H Industrial after the demerger. We are providing both reported and pro forma information in the materials we are distributing today. The newly listed company, Iveco Group, will host a conference call shortly after the conclusion of this call to illustrate the full year carve out of their combined financial results. Therefore, we kindly ask you to save questions related to Iveco Group for their analyst call. Please note that any forward-looking statements we might be making during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent report, 20F, an EU annual report, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission and the equivalent authorities in the Netherlands and Italy. The company presentation may include certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures, is included in the presentation material. Once again, our team is connecting from various locations, so please forgive us if there are moments of silence during the call while we manage the transitions between speakers. I will now turn the call over to Scott.

Thank you, Noah, and welcome to everyone joining our call. I would like to sincerely thank our CNH industrial team for their hard work in executing a clean and efficient demerger, which they accomplished while very effectively managing the lingering tale of COVID and ongoing but slightly improving supply chain disruptions. Our record financial results testify to the efficacy of the team's efforts, and today we will discuss how we delivered an excellent 2020-21 while also building a solid foundation for the company's future. we marketed the demerger internally as twice as strong. And as we advance our own prospects as a pure play ag and CE company, we're also excited to see and cheer on the success of Garrett and the Aveco group. Conversely, I am extremely pleased to welcome the Raven and Semperiana teams to our company. And I look forward to detailing their potential and much more at our capital markets day on February 22nd, 2022. Last year, We not only grew sales by double digits versus 2019, but our ag revenue accelerated faster than the overall industry. 2021 was also another great year for free cash flow as our operational excellence execution improved. Market-driven volume, disciplined pricing, and the team's outstanding execution were all key contributors to our record earnings. In 2021, we also devoted considerable effort toward making the company more innovative, sustainable, and efficient. Our ag brands won numerous design awards, including Sustainable Tractor of the Year 2022 for New Holland's T6 Methane Power, the world's first 100% methane-powered production tractor. When fueled with biomethane, this tractor is an integral part of the Energy Independent Farm concept. Case IH also stood out by receiving a total of three American Society of Agriculture and Biological Engineers 2022 Innovation Awards. Concerning sustainability, we recently received a gold medal from Standard & Poor's for this year's Global Sustainability Yearbook. Additionally, for the 11th consecutive year, we were awarded a top score in the prestigious Dow Jones Sustainability Index. We're also one of only 57 companies globally to achieve the illustrious AA score for CDP Water Change. These recognitions confirm our dedication to reaching our ESG targets and maintaining our position as an industry leader in sustainability. In terms of efficiency, we have completed the spin of the IVECO Group entities, closed Raven, Semperiana, and several other acquisitions, and accelerated the evolution of a leaner, more customer-focused corporate structure. Over the next few years, we will drive increased value for our global supply base, apply lean methodologies holistically across our business, and continuously improve to drive world-class safety, quality, and delivery. I will now turn the call over to a donor to take you through some of our key financial details.

Thank you, Scott. Good morning, good afternoon. I will do a quick run through the whole company's pre-emerger full-year financials, and then later in the presentation, spend some time on the performer material, that will help us on the historical figures for CNH Industrial as a focused agricultural and construction equipment entity by providing the numbers for 2019, 2020, and 2021 for our business as it will play from now on. Full year net sales of industrial activities pre the merger at 31.6 billion were up 28% for the year and at $8.6 billion were up 9% for the fourth quarter of custom currency. Fully-at-demand rebounded from COVID-19 to depressed 2020, and solid price realization contributed to strong growth across segments. For gross profit, we achieved $5.7 billion, up $2.2 billion versus fully-at-2020, and up $1.2 billion versus 2019, as higher production levels and positive pricing offset significant raw material and supply chain cost increases. In percentage terms, Gross margin grew 350 basis points versus 2020, with our agricultural segment delivering 22.4 gross margin, 330 basis points better than 2020, and up 160 basis points versus 2019. Full year adjusted EBIT of $2.1 billion, up $1.6 billion from 2020, was driven by profitability improvements across agriculture, construction, and commercial vehicle segments. Adjusted EBIT margin at 6.7% was at 440 basis points versus 2020 and at 140 basis points versus 2019. In the last quarter of the year, EBIT and margin were down against strong Q4 comparable because of the adverse mix in agriculture as production was constrained for medium tractors in Europe and reduced sales in powertrain. I will comment on the yearly and quarterly performance for agriculture and construction equipment, the two industrial segments that remain with CNH Industrial later in the presentation. For the entire group, free cash flow from industrial activities was positive $1.8 billion for the year and for the quarter due to the strong operating performance throughout 2021 and working capital improvements in the fourth quarter. Industrial activity net cash ended at $288 million, a decrease of $455 million from September 30, 2021, after disbursing more than $2.3 billion for M&A activities. Full year adjusted net income was $1.9 billion, or $1.35 adjusted EPS, the highest full year performance in the company history, with an adjusted effective tax rate for the full year of 23% as a consequence of better jurisdictional mix of pre-tax earnings. Adjusted net income was $347 million for the quarter, resulting in adjusted earnings of $0.24 per share for the fourth quarter of 2021. At the end of the year, our available liquidity stood at 12.1 billion, down 3.7 billion from December 31st, 2020, and down 1.3 billion from the end of September. A strong cash generation in the quarter was countered by M&A outlays. Ahead of the 2022 annual general meeting, the board of CNH Industrial intends to recommend to the company's shareholders an annual cash dividends of 28 euro cents per common share, totaling approximately 380 million euros, or around $430 million. Moving now to slide six in our financial service business, again for the entire company pre the merger. Net income was 420 million, up 171 million compared to the full year 2020, primarily driven by lower risk cost due to improved market outlook, improved pricing in North America, higher recoveries on used equipment sales, and higher average portfolio balance. For the year, retail originations were 11.4 billion and the managed portfolio including JVs at the end of the period was 26.7 billion. Delinquencies were again down sequentially year over year to 1.7% and remain at historically low levels. As a reminder, financial services was separated with the merger and the portfolio remaining in C&H industrial financial services is 17.4 billion, excluding JVs. Next on slide seven, We have the net financial position and frequent show performance for our industrial activities pre the merger. CNH Industrial started the year with $786 million in net industrial cash and closed its operation as we have known them prior to the merger with $288 million in cash after having acquired Raven and Sant'Irana, as well as other smaller investments throughout the year. Free cash flow of industrial activities was positive $1.8 billion due to the strong operating performance and stable working capital in the year. With finished goods, inventories remain at low levels, but a higher amount of factory inventories and a higher trade payable spending due to the elevated production volumes and constrained supply chain. Capital expenditure went in excess of $700 million in the year, a 47% increase versus 2020. Despite the usual seasonal fluctuation of free cash flow in our business, industrial activities remain cash positive throughout the year, as you can see in the bottom right corner of the slide. Now, from this slide forward, we'll present a summary of the pro forma financial for CNH Industrial after the merger of the VECO Group activities. The following slides are consistent with the pro forma pages that we posted on the website back in December. I will not cover them in detail today, but these pages on page 34 to 41 in the appendix have been designed to assist you in modeling process going forward. What I would like to highlight on page nine is that even though we have split the company, CNH Industrial is an almost 20 billion revenue entity with industrial net sales of 17.8 billion globally in 2021, growing almost 30% from 2019. We perform adjusted EBIT of almost $1.8 billion for 2021. The adjusted EBIT margin of the new CNH Industrial was just shy of 10% for the year. Adjusted net income doubled from the performance of 2019, so did adjusted only per share at $1.28 in 2021. As anticipated, with the merger, net industrial debt at the beginning of 2022 was $1.1 billion after having funded the largest acquisition in company history. Let me now go more in detail on the performance of our industrial segments for the year and for the quarter with a usual look at industrial activities adjusted EBIT by driver and segment. Agriculture achieved adjusted EBIT of $1.8 billion and adjusted EBIT margin of 12.3%. Construction reported adjusted EBIT of $90 million, an increase of $274 million from 2020. Volumes and net pricing drove profitability growth for the full year. Increased production costs, including raw material price increases, expedited freight of components and additional works at the end of the out-production lines were more than offset by price realization also in the fourth quarter of 2021. The G&A variances reflect increased activity levels and higher variable compensation, while R&D expenses grew around 30% in the year as we invested more in developing our technology. Looking at the individual segments, agriculture's full year 2021 adjusted EBIT increased $930 million due to the positive price realization and favorable volume and mix, partially offset by higher product costs related to raw material and freight costs, and higher variable compensation. Adjusted EBIT margin for the segment was 12.3%, and adjusted gross margin was 22.4%. Construction adjusted EBIT reached $90 million for the full year 2021, with essentially the identical causes affecting the ag segments, and had an adjusted EBIT margin of 2.9%, a strong recovery from a difficult 2020, but also 110 basis points increases in margin from 2019. For the quarter, adjusted EBIT of industrial activity was 378 million, and the margin was 7.6%. As we anticipated, the quarter was affected by numerous interruptions to our production cycle due to missing components, mainly semiconductors. Price realization in both segments was once again higher than increasing overall product cost, a bit on a reduced manner compared to the previous quarters. Product mix played unfavorable on our ag lines as we were able to ship less medium and heavy tractors than needed due to semiconductor shortages. Raw materials and freight costs continue to weight on our production expenses, and we expect this to continue in the first part of 2022. On SG&A, the impact of valuable compensation was stronger in the fourth quarter than in previous periods. On a performer basis, the CNH industrial business started 2021 with $900 million net debt position. On the back of a strong operating performance, free cash flow for industry activity was positive $1.9 billion for the year, with working capital further improving despite higher manufacturing inventories. Net debt ended at $1.1 billion, primarily due to the cash out for the acquisition of 100% in Raven Industry and 90% interest in Piranha, as discussed when talking about the reported figures. You will see in the appendix, on slide 40, the total third-party debt for the company after the merger was $20.9 billion on December 31, 2021, and was $22.9 billion on December 31, 2020. with $15.6 billion and $15.7 billion respectively belonging to our financial services operations. With the spin-off, CNH Industries is retaining the entirety of the former CNH Industries third-party debt and the entirety of the under-owned revolving credit facility, leaving an available liquidity position above $10 billion at the end of 2021. We will give you a better idea of the long-term trajectory of these figures in two weeks at our capital market day, but let's just say for now that we feel we are well positioned with strong liquidity and visible path to a net industrial cash position in the near term. Last but not least, on January 4th, 2022, Fitch Ratings raised its long-term issues default rating on CNH Industrial and V to BBB+, from BBB-. Fitch also upgraded CNH Industrial Finance Europe SA Senior and Secure Rating to BBB Plus from BBB Minus and Stable Outlook. The upgrade follows the merger of IVECO Group and Fitch. With this, I will turn back to Scott who will take us through the remainder of the prepared advice.