CNH Industrial

Hello and welcome to the CNH industrial second quarter earnings conference call. I would now like to hand the call over to Jason Omarza, head of investor relations. Please go ahead.

Thank you, Kevin. Good morning and good afternoon to everyone. We would like to welcome you to the webcast and conference call for CNH industrial second quarter results for the period ending June 30th, 2023. 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 this broadcast without the express written consent of C&H Industrial is strictly prohibited. Hosting today's call are C&H Industrial's CEO, Scott Line, and CFO, Adone Nchiza. They will use the material available for download from the C&H Industrial website. Please note that any forward-looking statements that 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 annual report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission and the equivalent reports and filings with authorities in the Netherlands and Italy. The company presentation includes certain non-GAAP financial measures, Additional information, including reconciliation to the most directly comparable U.S. GAAP financial measures, is included in the presentation material. I will now turn the call over to Scott.

Thank you, Jason, and thanks, everyone, for joining our call. In the second quarter, we delivered a solid set of results with record margins in both agriculture and construction. The impact of our CNH business system is accelerating, and we recorded our highest-ever level of price-over-cost both in dollar and percentage terms. Profitability was particularly strong in the second quarter, with results exceeding our 2024 margin targets. Our ability to deliver record margins with moderate revenue growth is indicative of the earnings power we are building. In June, our EMEA team delivered record retail sales, providing helpful momentum as we enter the second half. We also achieved our highest production of North American high horsepower tractors since 2015, but are still aggressively working to reduce backlog and restock our dealers in this fundamental product category. Across the business, strong execution and focus on serving customers drove our success. Our lean manufacturing programs are developing more efficient processes across the company. These initiatives are rooted in expanding productivity, improving quality, and eliminating waste and have become a tenet of our culture. Make It Simple is one of my favorite cultural beliefs, and it is helping us streamline our business, and you can see the early results in our earnings strength. Consolidated revenue for the company was $6.6 billion, up 8% over last year's second quarter. Industrial net sales were up 6% year over year, reflecting a 19% increase in construction sales and improved shipments of high horsepower tractors in North America. Agriculture saw less robust sales growth in Q2, but we still see solid overall ag fundamentals. Our lighter ag sales in the second quarter were primarily driven by two factors. First, while our team in South America delivered strong retail share performance in the quarter and year to date, much like earlier in the year, the demand environment in the second quarter was shaky. With short-term demand in Brazil slightly lower than expected, we reduced shipments to maintain lean dealer inventories. Second, shipments of our new Patriot sprayer were delayed due to production ramp-up issues and quality considerations. We will get those products to our customers in the second half. In North America, first half combine demand was exceptionally strong. We are proactively working with our dealers to spur retail sales of both new and used combines in the coming quarters to mitigate potential inventory growth. We remain confident in our full year sales guidance, even with targeted production cuts. Industrial EBIT was up 26% on strong price over cost as we finished the quarter with an EBIT margin of almost 14%. Earnings per share was 52 cents for the quarter and 87 cents for the first half, marking our best ever start to the year. Derek Nielsen and his agriculture team set new quarterly records for gross and EBIT margins. This is not just a record second quarter, but a record for any quarter. Their impressive execution across products, brands, and distribution, coupled with a determined elimination of waste from our production processes, enabled us to better serve our dealers and customers. Our construction segment also recorded record results in the second quarter, for the first time generating net sales over $1 billion. Stefano Pompiloni and his team introduced a plethora of new products at ConExpo, and they are increasing manufacturing throughput to improve customer delivery. We continue to see solid benefits from our Semperiana acquisition. We started taking orders in North America for model year 24 products, in June and production slots for 2023 are full for most products in most markets. High horsepower tractor production is now fully booked and assigned to retail customers throughout 2023 and global demand for this segment remains high. We're taking orders into 2024 now and we see order backlog like pricing normalizing above pre-pandemic levels. Our customers are increasingly asking for our suite of precision technologies. Precision components net sales contribution increased 21% year over year in the second quarter, with a steady growth of factory fit elements. We continue to accelerate development and delivery of improved technical solutions for our customers. We launched the New Holland straddle tractors, specifically designed for narrow vineyards that require extreme maneuverability and compact dimensions. These new tractors will bolster our commanding presence in the orchard and vineyard segments when they ship later this year. We also published our 2022 sustainability report during the quarter. The multiple initiatives illustrated there provide proof that our commitment to world-class environmental and stewardship for our company, our communities, and our end customers. The construction team is making impressive progress in their pursuit of profitable growth. Our 2024 construction EBIT margin target of 5.5% to 6.5% was a significant stretch from our previous low baseline. But we surpassed that at 6.8% in the second quarter, and we will likely be in that target range for the full year. Superiana is proving to be the right investment for us. It gives us both mini excavator IP and enhanced electrification capabilities that we are already integrating into other products. We recently opened a new assembly facility in central Italy, expanding our production capacity for many excavators and the new many track loaders, both of which we will soon export to North America. Construction continued to benefit from strengthening the North American market, especially for light equipment. We are leaning into the customer synergies we have with our ag distribution network to create incremental construction sales opportunities with our New Holland brand. All this plus much more value we're working to unlock to take margins still higher in years to come, demonstrates why our construction business is an important part of our portfolio. Our company strategy is centered around five key pillars. Customer inspired innovation, technology leadership, brand and dealer strength, operational excellence, and sustainability stewardship. Today, I want to focus on our advances in operational excellence, especially our CNH business system or CBS, which is a key contributor to our $550 million plus cost reduction target by 2024. CBS's set of tools and an aspiration to leverage lean to constantly improve the way we run our business and serve our customers and a commitment to using Kaizen to engage our employees and drive sustainable improvements. Whenever I travel to our plants around the world, I see consistent use of our daily management system to prioritize and solve systemic issues. Our leadership team uses strategy deployment to ensure rigorous execution of our most important priorities to achieve breakthrough results. The overriding goals of CVS are margin expansion through operational excellence and revenue growth through constantly improving execution and innovation. What does this mean in practical terms? As an example for revenue growth, we are accelerating our time to market by eliminating waste and rework in our new product development processes. For margins, we are improving our modular design concepts and Fritz Eichler, our new Chief Technology Officer, brings a wealth of experience to help drive that effort. Across our manufacturing plants, we are empowering our teams to refine processes to improve throughput and quality. I would like to highlight a recent example at our Cantagem plant in Brazil, where the team held a Kaizen to improve their production throughput. They addressed logistics bottlenecks and implemented a standard inspection checklist, making the process significantly more efficient. The result was a 58% decrease in fleet inventory buildup, a 14% increase in the daily line rate, and a total annual cost benefit of $2.3 million. This is only one example of the many kaizens we're doing across the company at more than twice the rate of 2022, and we are starting to see the impact in our results. As CBS continue to expand, our results will as well. I will now turn the call over to Adonay to take us through the financial results. Thank you, Scott, and good morning, good afternoon to everyone on the call.