Good morning and afternoon, ladies and gentlemen, and welcome to today's CNH Industrial 2020 First Quarter Results Conference Call. At this time, I would like to turn the call over to Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, Priscilla, and good morning and afternoon, everyone. First of all, apologies for this few minutes' delay; it was just to permit everybody to be connected. We would like to welcome you to the webcast and conference call for CNH Industrial First Quarter 2020 Results for the period ending March 31. 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 CNH Industrial is strictly forbidden. We are pleased to have here with us today our Chair and acting CEO Suzanne Heywood, and our CFO Oddone Rocchetta who will be hosting today's call. They will use the material available for download from the CNH Industrial website. After their presentation, we will be holding a Q&A session. As a final comment, 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 Form 20-F and 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 in the presentation may include certain non-GAAP financial measures. Additional information, including reconciliation to the most directly comparable GAAP financial measures, is included in the presentation material. One final remark: as you can imagine, our team is connecting from different countries. So please forgive us if there are moments of silence during the call while we manage the transition between the speakers. I will now turn the call over to Suzanne.

Thank you, Federico, and good morning, good afternoon to everyone. I want to begin today with a short update on how we're responding to the current pandemic, and our focus as we prepare to emerge from it. After that, I'll go into the Q1 results, where I'll give you as complete a picture as I possibly can in these difficult and very unpredictable times. Most importantly, I wanted to say upfront that our business is in relatively good shape to navigate this crisis with adequate liquidity to withstand the most pessimistic scenarios for our business that we have modeled. This financial resilience is important in enabling us to weather this crisis. But so will be our ability to respond quickly to the changing market, government and social conditions in each of the countries in which we operate. To do this, I have been holding a daily meeting with the global executive committee members of CNH Industrial in which we've been focusing on four issues. First and most importantly, the health and well-being of all our employees, particularly as we now begin to open back up our production facilities. Secondly, the continuity of our business from a liquidity, cost management and market presence perspective. Thirdly, ensuring the strength of our dealer network and our supplier base. And lastly, making sure that our customers and the communities in which we operate also emerge strongly from this crisis. In doing all of this work, we've been very conscious of the role that CNH Industrial plays in providing equipment that is essential to industries like transportation and agriculture on which our society depends. In addition to responding to the crisis in this way, we've also been continuing to work on the Transform to Win strategy that we presented at the Capital Markets Day in September 2019. And we've accelerated our work, in particular, on the performance and simplify initiatives that we described then, as it is now more important than ever for us to have a flexible and lean cost structure for our organization. We have also reconfirmed our commitment to spinning off our on-highway activities. However, we are extending the timetable for that due to the market conditions into next year or beyond, and will confirm the revised timetable when we have more clarity. Before going into our results, I would like to just take a moment to thank all our employees for their work so far in getting us through this crisis, with many of them continuing to work throughout the pandemic. I'm incredibly proud of our global team, and I know how committed they are to making sure we effectively support our customers, dealers and our wider communities as we navigate our way through this very difficult period. I will now move on to slide four, which summarizes our Q1 results. Net sales of industrial activities for the period were $5 billion, down $800 million or 14% on a constant currency basis due to the COVID-19 impact on the many markets in which our customers operate, coupled with previously announced actions to reduce dealer inventory levels. Industrial activities adjusted EBIT was a loss of $148 million, sharply impacted by demand disruptions in March, negative absorption caused by plant shutdowns and actions to reduce inventory levels that we started in the previous quarter. Industrial activities net debt at March 31, 2020, was $2.3 billion. This was an increase of $1.5 billion from December 31, 2019, as a result of seasonal working capital absorption and the adverse impact of COVID-19, partially offset by actions to reduce company inventory and by other cash preservation measures. Adjusted diluted EPS was a loss of $0.06, primarily driven by the adjusted EBIT loss of €38 million. Our available liquidity position was $9.9 billion at March 31, 2020. This is the second highest level in our company's history at the end of the first quarter. On February 28, before the COVID-19 outbreak affected the global financial markets, we extended our €4 billion committed revolving credit facility for one year with all lenders by exercising the first one-year extension option. The facility will now mature in March 2025. Oddone will provide more details on our actions to maintain strong liquidity later in this presentation. Turning to Slide 5, I would like to share with you some of the Q1 industry volumes as they will help put these results into context. First, let's look at the agriculture segment. Worldwide demand for tractors was down 15% during the first quarter of 2020, as you can see on the slide, and demand for combines was down by 11%. The impact of the COVID virus was, however, particularly acute in March, and you'll see that we have a separate column for March on the far right-hand side of this page. As shown in this column, the demand slowdown for tractors in March alone was 36%. In North America, tractor demand was down by 9% in the quarter, primarily in the lower horsepower segment under 140 horsepower, while combines were down 22%. In Europe, tractor and combine markets were down by 10% and 20%, respectively; we tracked us down 24% in March alone, again looking at that column. In South America, the tractor and combine markets decreased by 6% and 30%, respectively. And in rest of the world, demand decreased by 17% for tractors and 2% for combines with the tractor market slowing down by 43% in March alone. So you can see across those different segments how much the pandemic affected us, particularly in March at the end of the quarter. Moving to the construction segment: all subsegments experienced double-digit declines in all geographies. The one exception was South America, where compact and service equipment was down by only 1%, while general construction equipment and road building and site preparation equipment were up by 12% and 13%, respectively. However, as you can see again in the right-hand column, this downturn was severe in March with construction activity stopping or significantly slowing down in most geographies. Lastly, I want to turn to the truck and bus markets. The European truck market was down by 19% year-over-year in the first quarter, with light-duty trucks down 14% and medium and heavy trucks down 27%, and again, if we focus on March, industry sales of light-duty trucks and medium and heavy-duty trucks in Europe declined by 34% and 38%, respectively. The South American truck market was down by 17% in light-duty trucks and 6% in medium and heavy trucks in the first quarter, with the light-duty truck market down by 26% in March alone. For buses, the European market decreased 9% in the quarter with a 30% decrease in March alone. The South American market for buses decreased by 14% in this quarter with a 34% decrease in March. While the heightened industry uncertainty means that we cannot give precise forecasts, I would like to share with you for each of our major segments our sense of how the industry might play out this year. As I've just described, the COVID crisis has impacted all of our end markets in this quarter, particularly at the end of the quarter. However, across all of our segments, we expect the most severe impact will be seen in the second quarter of this year. For agriculture, we expect the industry in North America, South America and Europe to be down in the second quarter by a minimum of 20%, with some regions and product lines reaching 40%. Europe will be the most heavily impacted region, we believe, with demand for both tractors and combines down 30%. In North America, we expect demand for high-horsepower tractors and combines, where, as you know, we are well positioned, to be less impacted, with the cash crop segments down less than the livestock and dairy segments. Although we, of course, have even less visibility on the second half of the year, we currently expect the agriculture industry to begin to recover through the third and fourth quarters. I'll now do the same in construction, where we expect the market to be down at least 50% across all regions and subsegments in the second quarter of this year, with the exception of rest of the world, where it looks like demand will be slightly up year-over-year in the second quarter, but of course, our presence is more limited. We again expect some recovery in construction in the second half of the year, although we expect this to be less marked than it will be for agriculture. The second quarter will also be tough for commercial vehicles, with demand expected to be down by almost 60% in Europe and around 70% in South America. In the second half, we again expect some recovery in commercial vehicles, although like for construction, our expectation is that this will be more muted than it will be for agriculture. I will now move on to Slide 6, which shows CNH Industrial-specific unit statistics for retail delivery and production data sets in the first quarter of this year compared with the same period last year and also shows channel inventory levels. Before going into these details, let me remind you that beginning on March 11th, we closed our Italian production facilities to protect our workforce and from March 20th, we suspended the majority of our European assembly operations. In North and South America, where production was already slowed down before the pandemic, we suspended the majority of our manufacturing operations from March 30th. We closed our plants in India on March 23rd. Despite these closures, we have managed to keep most of our parts depots, service facilities and dealerships operational through the whole of this quarter so that we could help our customers keep their machinery running through the crisis. In doing this, we fully complied with all the safety measures mandated by law in each country, together with many additional measures agreed with our workforce. As we announced yesterday, we are now bringing our manufacturing operations gradually back online, while ensuring that we remain in full compliance with all emergency regulations. In doing this, we have agreed and implemented a wide range of new safety protocols with our workforce to reduce the risk of virus transmission. You'll be glad to know that now more than 70% of our 67 plants around the world are operational, although most are not operating at full capacity. On a regional basis, more than 80% of production sites in Europe and some 60% of sites in North America, in South America and the rest of the world are already operational. In the case of the rest of the world, this proportion approaches 90% if you include joint ventures. In bringing our plants back online, we have deliberately prioritized agriculture and powertrain manufacturing as they both serve essential industries in which the market demand for our products is greatest. These are being followed by commercial and specialty vehicle manufacturing given the importance of transportation and civil protection sectors and afterward by construction equipment manufacturing plants. We plan to return to full operation at most sites by the end of the month, but we'll modify this if local or regional situations deteriorate or if we need to respond to changes in end market conditions or to changes in our supply chain. As I noted before, end customers, together with our dealer network, have been fully supported through this quarter by CNH Industrial aftermarket solutions, and today almost all of our 45 logistics hubs are operational, the majority of which are running at full capacity. Today, we also have 24,000 of our employees who are able to work from home, and about half of them are doing so. In agreement with our trade unions, we've also accessed government-backed employee salary support measures where they are available. I now want to move to the quarterly performances that are shown on this slide, Slide 6. For agriculture, worldwide tractor and combine production was down 40% and 26%, respectively, for the month of March, and North American row-crop production was down 16% in the full quarter. Our worldwide channel inventory for tractors was up 3%, predominantly low-horsepower tractors, but down 3% for combines versus quarter one 2019. North American row-crop channel inventory was down 11% versus last year. The slight increase in inventory would have been greater had we not already put in place plans to reduce inventory in this quarter in anticipation of weakening market demand. There's also an increase in retail deliveries of combines in the quarter. For construction as a whole, the company's worldwide production was down 23%, and channel inventory was up 1%. If we focus on the EU portion of IVECO truck specifically, since it accounts for approximately 80% of the subsegment's revenues, production for light trucks was down 28%, and medium heavy trucks was down 21%, and EU channel inventory for trucks was down 9%. Our share of the EU truck market is 10.8%, up 40 basis points, with medium and heavy up 250 basis points to 8.5% on the back of strong retail deliveries of our newly launched S-WAY heavy-duty truck. Truck book-to-bill in the EU was 1.44, and South America ended the quarter at 1.04. I will now turn the call over to Oddone to take you through some of the key financial details.

Thank you, Suzanne, and good morning or afternoon to everyone on the call. Before I take you through the quarterly figures, I would like to again thank all of our employees, dealers, customers and other stakeholders who have been so supportive and dedicated during this very difficult period, including the office colleagues who have now been working from home for more than seven weeks. Their passion and support has been critical to our operations. Moving now on the key figures for the first quarter. Net sales in our industrial segments were down 14% in constant currency. Adjusted EBITDA in industrial activity was a loss of $148 million in the first quarter of 2020 compared to an adjusted EBIT of $278 million in the first quarter of 2019, mainly due to unfavorable volume and mix, which more than offset positive pricing and cost management actions. Our adjusted effective tax rate for the quarter was 31%, resulting in an income tax benefit of $23 million. For the first quarter, adjusted net loss was $66 million and adjusted diluted earnings per share was a loss of $0.06. As mentioned earlier, we finished the quarter with net debt of industrial activities of $2.3 billion, representing an increase of $1.5 billion compared to the beginning of the year, and available liquidity stands at $9.9 billion at the end of the first quarter. I will go into more detail later in my presentation. On Slide 8, we focus now on our industrial activity net sales. Foreign exchange translations had a negative impact of 2.8% in Q1. The net sales split by region was almost unchanged versus the previous year, with Europe accounting for more than half of our total net sales and almost 50% when looking at a steady-by-currency basis. CASA net sales totaled $2.2 billion in the first quarter of 2020, down 7% on a constant currency basis. The decrease was driven by lower industry volumes across all geographies given the COVID-19 outbreak, coupled with actions to reduce channel inventories in North and South America. Positive price stabilization across all regions only partially offset this decrease. Construction net sales totaled €422 million in the first quarter of 2020, down 32% on a constant currency basis, as a result of deteriorating market conditions across all regions, which were particularly severe in the month of March in most markets, combined with actions to reduce dealer inventory levels. Commercial and specialty vehicles net sales totaled $2 billion in the first quarter of 2020, down 15% on a constant currency basis, given the market slowdown in Europe due to the pandemic with key markets for trucks significantly impacted in the month of March. Finally, Powertrain net sales totaled $753 million in the first quarter of 2020, down 25% on a constant currency basis, due to lower sales volumes in Europe and in China in the first part of the quarter. Sales to captive customers accounted for 44% of total net sales, with a 27% reduction in captive volume and a 33% reduction in non-captive volume. Turning to Slide 9 now, with a look at the adjusted EBIT by segment and driver. Adjusted EBIT for the first quarter at the consolidated level was a loss of €38 million with a negative margin of 0.7%. At a high level, the majority of the delta quarter-over-quarter was due to negative volume and mix, which includes negative fixed cost absorption. Higher product cost due to many of our plants being in various periods of shutdown as well as negative foreign exchange were partially or totally offset by positive pricing and cost containment actions. If we drill down to the segment-specific level, adjusted EBIT for agriculture was €24 million. Positive price realization, disciplined cost management and favorable purchasing performance were more than offset by lower wholesale volumes, market and product mix, negative fixed cost absorption, primarily in Europe, and higher product costs due to plant shutdowns and costs associated with product quality actions. Foreign exchange impact was negative, primarily from South America. For construction equipment, adjusted EBIT loss was €83 million; net pricing was impacted by retail program enhancements in response to deteriorated market conditions and the need to reduce dealer inventory. Product cost increased due to plant shutdowns and costs associated with the continued quality improvement initiatives also affected quarterly performance. Commercial and Specialty Vehicles adjusted EBIT loss of €56 million was negatively impacted by the critical market conditions, particularly in Europe in the month of March, generating lower volumes and higher product costs due to the plant shutdown, as well as by unfavorable foreign exchange impacts, partially offset by positive price realization. Lastly, Powertrain first quarter adjusted EBIT of €31 million, down from €96 million prior year, was mainly impacted by unfavorable volume and mix, partially offset by product cost efficiencies. Moving on to Slide 10 and our Financial Services business. Net income was $80 million, impacted by higher risk cost in view of the expected deterioration of credit conditions and the negative impact of currency translation, partially offset by lower income taxes. In the quarter, retail originations were $2.1 billion, and the managed portfolio at the end of the period was $24.7 billion. Delinquencies were relatively flat to previous quarters with an increase of 10 basis points and remained well below the historical norm for the first quarter. Next, on Slide 11, I'd like to discuss the net debt and free cash flow performance of our industrial activities and provide an update on the balance sheet. Net debt of industrial activities at March end was $2.3 billion as a result of seasonal working capital absorption and the adverse impact of COVID-19, partially offset by actions to reduce company inventory and by other cash preservation measures. The seasonal inventory growth in the first quarter was lower than in the previous year despite the abrupt worsening of our end market across regions. This was due to deliberate actions that were already planned to reduce inventory levels. The slowdown of production in many facilities determined a reduction of trade payables in the quarter, with a resulting negative change in net working capital of $1.3 billion compared with negative $1.1 billion in the same period of 2019. Going to the next slide on consolidated available liquidity and debt maturities. We ended the first quarter of 2020 with available liquidity of $9.9 billion, inclusive of the €4 billion committed revolving credit facility that was extended prior to the COVID outbreak for one more year through March 2025 and this remains undrawn. This is the second highest March-end available liquidity level in the group's history, with a solid liquidity to last 12 months revenue ratio of 37%. During the quarter, we negotiated additional funding transactions for a total of €1.1 billion equivalent that we drew in March for $800 million with the remaining part in April. Additionally, just last week, we issued a new CAD466 million retail ABS and GBP600 million in the commercial paper market through the joint treasury and Bank of England COVID corporate financing facility. The access to this facility demonstrates CNH Industrial's continuous effort to preserve a sound level of liquidity throughout this period of uncertainty. Looking out at the remainder of 2020 and 2021, we believe we will be able to maintain a strong liquidity position with no significant near-term maturities of capital market debt. On Page 13, we show the split of maturity between industrial activities and financial services. As you can see, of the $3.9 billion maturing in 2020, the clear majority, $3.7 billion, relates to financial services and is matched to its receivable portfolio. We have one bond maturing in November 2020, and the rest is all bank debt, which we have historically been able to manage on a rolling basis. We have started working on the various renewals of the upcoming months and at this stage, we do not envisage any issue with our banking partners. On the bond market, we continue to have access to the capital markets, both in euro and USD, and we'll keep monitoring them opportunistically. As a reminder, both the liquidity shown on Page 12 and the maturity shown on this slide do not include the additional funding transactions completed in April and indicated on the previous slide. The company will continue working to preserve its liquidity and ensure good access to funding. We are currently evaluating and implementing all possible and prudent actions to reduce costs and protect our financial position, our liquidity and capital structure and our corporate ratings. This concludes my presentation, and I will now turn the line back to Suzanne, and we'll be back for the Q&A session.

Thank you, Oddone. At this point, I would like to share some more details with you of the emergency actions that we've put in place to keep our people safe during this period and to ensure that we are in full compliance with all the applicable national and state mandates. First of all, as a manufacturer of essential trucks, we know that it is important for us to keep our facilities open, but we are also very concerned to do this in a safe and prudent way. We have therefore decided to apply globally across all our facilities the protocol mandated in March by the Italian authorities, which outlined safety procedures for returning to work and techniques designed to prevent the spread of COVID-19. In addition, to ensure that we can access a good supply of personal protective equipment for our workforce without depleting the global stocks needed for healthcare workers, we have decided to start our own production of personal protective equipment in facilities in both China and Italy. Although we had to close many of our facilities from mid-March, we continue to support our customers and dealers through our aftermarket network. To protect the health of our business, we've also been working hard during this quarter, as Oddone mentioned, both to reduce our costs and to conserve cash. This has included a wide range of measures, including decreasing our CapEx, reducing our use of consultants and agency staff, renegotiating supply contracts, putting in place a hiring freeze and accelerating work on corporate rightsizing. We are also looking at our footprint globally for offices, R&D centers and production facilities to make sure that we maximize the efficiency and effectiveness of our operations while accelerating the digitalization of our processes. As I mentioned before, most of our dealers have remained open through this period, and we have been working with them to help them access available government funding, to help them find PPE for their employees and to help them support their customers. Many of our suppliers have also, of course, been affected by COVID-19. So we are similarly in very close contact with them both to understand the potential supply restrictions to each of our production plants and where required again to help them get through this difficult period. We've also been mindful of the impact that this crisis has had on the many communities in which we operate. We have, therefore, put in place more than 80 initiatives globally to help support local healthcare or other efforts. And we've donated $2 million to charitable foundations that will work on COVID-related initiatives. I will now move on to Slide 16. In the first quarter of 2020, our organic CapEx was $63 million, down 18% year-on-year and accounting for 1.3% of our net sales. However, CapEx in new products and technology was up 9% versus last year. R&D spend in the quarter was also down 12% to $214 million, which is 4.3% of our net sales. In both of these areas, we've conducted detailed internal reviews involving all of our industry and functional leads to ensure that we are prioritizing our spend appropriately in this critical time. Total spending on new products was $117 million, up 6%, however, with the majority of this going toward our sustainable investments. While it's important for us to adjust our investments during this critical period, we remain dedicated to investing in future growth initiatives that will enable us to emerge from this crisis ready to offer our customers a highly competitive and compelling range of products across all our end markets. I'll turn now to Slide 17, which illustrates the continuing strength of our product innovation, which we're determined to maintain. During this quarter, Case IH launched a new line of articulated four-wheel drive tractors with the new ProTrak and Stage AFS Connect series tractor. The range will include 14 models in total, covering the 420 to 620 horsepower range, with several upgrades such as a completely redesigned cab that offers greater comfort and connectivity. New Holland has also launched the WORKMASTER tractors. These will be available in three horsepower ranges and have been designed to provide unmatched comfort and a low cost of ownership. Turning to construction: at CONEXPO in Las Vegas during March, the segment presented a project concept. This backhaul loader prototype is fully electric with zero emissions, lower operating costs and reduced maintenance. IVECO also won the prestigious Red Dot Design Award 2020 this quarter in recognition of the design excellence of the IVECO S-WAY heavy-duty truck. FPT was awarded diesel engine of the year for its F28 engine, which is Stage 4 and Tier 4 final compliant. Next, on Slide 18, I would like to highlight a few of the inorganic growth initiatives from the past few months. You have heard in the past about our relationship with Nikola Motor Company, which continues to be an important part of the future product innovation pipeline for both IVECO and FPT. In this quarter, we announced that the production of the Nikola Tre would be in the IVECO manufacturing facility in Ulm, Germany. As part of the initial stages of the European joint venture with Nikola, €40 million will be invested to upgrade this plant. The Nikola Tre, currently in development, is based on the new IVECO S-WAY platform into which we are integrating Nikola truck technology controls and infotainment system. This Nikola collaboration, which is underpinned by an industry-disrupting business model, will enable us to begin production in 2021 of battery-electric 4x2 and 6x2 articulated trucks. These trucks will have modular and scalable batteries with a capacity of up to 720 kilowatt-hours and an electric powertrain that will deliver up to 480 kilowatts of continuous power output. Recent industry announcements confirm that fuel cells are increasingly seen as the future technology of choice for alternative propulsion in heavy-duty trucks. In this quarter, FPT also announced the acquisition of Potenza Technology, a company specializing in the design and development of electric and hybrid powertrain systems. FPT also signed a memorandum of understanding with Yanmar Marine to develop and advance our marine engine capabilities. All of these initiatives will further the company's commitment to be the leading provider across a wide array of powertrain solutions for both internal and external customers. In conclusion, I would like to thank each and every member of our workforce for the huge efforts they have made to help us, together with our dealers, customers, suppliers and the communities we work with, to get through this crisis. We have, as Oddone has described, a strong liquidity position and have demonstrated our ability to access both government funding programs and to work with our banking partners to access additional capital. We have reduced our discretionary expenses, including purchased services, travel and entertainment; and our senior management, including the entire Board of Directors and almost 900 members of our broader management team have agreed to temporary reductions in their compensation. Looking to the future, we are confident that we are well prepared to respond to the market as it evolves through 2020 and into 2021. While we cannot, of course, be sure of the future, we are determined to ensure that we are well placed to thrive and deliver profitable growth in the new normal that emerges. The continuing end market uncertainties, combined with possible further disruptions in our supply chain, did not allow us to provide helpful guidance on the second quarter or full year results at this time. However, we will continue to communicate with the financial markets and with all of our other stakeholders as the implications of the evolving business environment for our operations and performance become clearer. And finally, before concluding my remarks, I wanted to say something briefly about the recent management changes at CNH Industrial. As you know, six weeks ago I stepped in as acting CEO of CNH Industrial alongside my role as Chair. The search for our new CEO is now well under way. Headhunters have been appointed, and the work is being led by our Governance Committee. We will make this appointment as soon as we can and do not expect it to be unduly delayed by the COVID crisis. This concludes my prepared remarks, and I will now hand back to Federico.

Thank you very much, Suzanne. This concludes our prepared remarks, and we can now open up for questions. Operator, over to you.

We will now take our first question from Ann Duignan from JPM.

My first question is around Q2. You ended the quarter with 151 days of inventory or $7.3 billion. And with the comments on Q2, can you talk a little bit about how much cash you expect to burn through in Q2? Q2 would normally be a positive working capital quarter with shipments up, but it doesn't seem like that this year. So can you talk a little bit about how much cash you expect to burn versus the inventories at quarter end? And how are you going to reconcile excess inventory in an environment where market demand is going to remain weaker for longer?

So let me say something on inventory, and then Oddone will say something on cash. On inventories, I think hopefully it was clear in the prepared remarks that we've actually been very deliberately trying to take action on inventory. We're conscious that we needed to do this coming into this quarter. On agriculture, we'd actually already started to take actions on inventory, which is one of the reasons why, although we've ended the quarter slightly up on company inventory, we're nowhere near as far up as we would otherwise have been given the slowdown. We are, however, more up within construction and less so within commercial vehicles. So we actually have made quite a lot of progress in this quarter on inventory. But you're right: the second quarter will still be tough across all segments, as I said in my prepared remarks. Oddone, do you want to say something on cash in the second quarter?

Yes. I think when we talk about the market expectation for the second quarter, that's going to be the toughest for us. This probably is not going to be a cash generation quarter. But as we've shown on our liquidity, we are well prepared to withstand whatever cash consumption we may have. And we expect the following quarters then to be definitely better.

But based on the at least qualitative guidance you gave us for Q2, do you have any idea of the magnitude of the cash required or cash burn?

I would say it will be in the range that we had for the first quarter.

Okay. That's helpful. And then just a follow-up on FX. Can you talk a little bit about if the Brazilian real stays where it is today? I think you said in your prepared remarks that was the biggest portion of the FX headwind. Is that the case? And if the real stays as it is, should we take the Q1 impact as the go-forward?

Well, in Q1 we also had something coming from the comparison with last year. I would say we will adapt our pricing in Q2 in South America to respond to the devaluation of the currencies. There will be headwinds, yes, but probably not of the same magnitude as Q1.

Yes. We had a one-off effect in this quarter, quarter-on-quarter. So I don't think it would be as large, but we would have to adjust pricing if we continue to get the currency weakness there.

Okay. Can you quantify the one-off amount, just so we know for our modeling?

I will take it in a range of $20 plus million.

Yeah. Okay, that's very helpful. Thank you. I'll get back in queue and leave it to others.

Thank you. We will now take our next question from Rob Wertheimer from Melius Research. Please go ahead.

Thank you, and hello to everyone. I wanted to ask two questions on agriculture. First, can you tease out how much of the Q2 outlook or demand you're seeing is related to your dealers being more conservative and destocking versus farmer pull? The reason I'm asking is one of your competitors yesterday noted that orders are down although up in Western Europe, and I don't know if you're seeing the same kind of positivity. Is there a distinction between dealer behavior and farmer demand? Second, do you have an estimate of your livestock exposure in the U.S., given the dislocations in the protein market there? Crops versus livestock? Thank you.

So in North America, overall dealer inventory went slightly down in this quarter, and that's partly because of the actions that we were taking in support of our dealers. I think we're relatively well positioned in North America. As you probably know, we're very strong in the high-horsepower segment in North America and in four-wheel drives. So that's all fairly positive. When I first came in, we were modeling a number of different scenarios for the COVID impact. We actually took the most negative, and we've been working to that, which is one of the reasons why, as you will have heard in my prepared statement, we've taken quite a lot of actions in this quarter to make sure that we're well prepared for the rest of the year. Against that worst forecast, we've come slightly back up in the second quarter. So it's still going to be a tough quarter, but I think what I'm hearing from the segment is that through the dealers things are looking slightly more positive than they had thought a week or 10 days ago. But it's very difficult to give precise numbers where that's going to go. There's so many moving parts. As you probably also know, we're strong on the row-crop side.

Indeed. I don't know your exposure to livestock in North America. I didn't expect half the pork production to be shut two or three weeks ago. It's obviously very variable. I don't expect that's the biggest impact for you, but do you have any quantification?

I don't think we would normally give quantification at that level, but I can say that we are reasonably well positioned in that market and some of the indications coming out are a little bit more positive than we did have a week or 10 days ago, but it's still going to be a difficult quarter. I don't want to mislead anybody on that.

Thank you. We will now take our next question from Steven Fisher from UBS. Please go ahead.

Thanks, good afternoon. I wanted to ask what extent you're starting to see any stabilization operationally. From the demand side, it sounds like some elements of agriculture are stabilizing. More broadly, any areas of stabilization?

I think it's worth saying that on the manufacturing side, as we announced yesterday, we've been making significant progress. The team has been putting in a lot of work to get the plants up and running, and up and running in a safe way so that everybody feels secure coming to work. We now have over 70% of our plants open globally, and over 80% of our plants open in the EU. We aim to get almost all, bar one or two, open on the agriculture side in North America by next week. We are prioritizing agriculture and powertrain because they serve essential industries and because the end market there is stronger. As I indicated, things are beginning to strengthen a little bit on the agriculture side, certainly above our worst-case scenario. We expect to see it start to recover in the second half of the year, although it's difficult to give precise predictions. One of the variables we need to manage is our supply chain, which we're working very closely with. We are talking regularly to our suppliers so that if we're bringing our plants back up, we're doing so with adequate supplies coming in. Overall, I would say we're seeing a fair amount of stabilization, but we are working in very uncertain times.

Fair enough. Did I hear you say in your prepared remarks that the spin-off as part of Transform to Win could be extended beyond 2021? And even if it's around mid-2021, what would be the process for determining that timing and what hurdles would need to be overcome?

Yes, you're correct. In my prepared statement I said we've recommitted to the spin, which we absolutely have. The rationale we presented at Capital Markets Day still holds. Given market developments and the impact on our business, we want to make sure we do that at a point where we can spin two strong companies. We want the agriculture side to be investment grade and the spun side also to be very strong. So it depends on the performance of the businesses and the state of the markets. I deliberately said next year or beyond. We're interested in doing it as soon as it makes sense in the market, but we don't want to do it at a point where we're not able to spin two strong companies.

Thank you. Our next question comes from Martino De Ambroggi from Equita. Please go ahead.

The first question is on prices because in the press release you report price pressure on both new and used vehicles could be among the risks. What do you expect in such a difficult environment? Is agricultural contracted equipment at risk for the first time after many years in a row of positive price effect? Second question on the cost-cutting initiatives: maybe I'm wrong, but you didn't quantify the sum of your actions, knowing that the plan had 600 million savings. What should we expect in terms of cost-cutting actions due to the crisis this year?

So as I think—

Probably I should take this. You should read that comment more on the construction and on the truck side of the business, more in Europe for the truck side for new and used equipment. We have been launching, as you know, a new heavy truck, the S-WAY, and we've been positive in pricing there, and we've been gaining market share as well. Our own performance is positive, but we need to see how the market reacts to this drop in demand.

Okay. Why is agriculture able to achieve a positive price effect?

Correct. Agriculture has been able to maintain price realization.

And the next question comes from Ross Gilardi from Bank of America.

Suzanne, you obviously are delaying spend and you're very candid on that. It's clear that CNH is going to have to make some pretty difficult decisions in the next several years. I wanted to ask specifically about construction and the heavy-duty truck business. Are any thoughts being given to simply exiting these businesses? These losses in the first quarter are steep and will get worse in the second quarter. The multiyear outlook seems very challenging. Aside from the relationship with Nikola, why not exit these businesses rather than devoting significant time and financial resources to turn them around when the company has been trying to do that for years? What are the barriers to exit rather than focusing on turning everything around and splitting the company up?

The answer is a little different for the two segments. In construction, the performance has not been adequate. We have changed the leadership in construction, and we have a thorough process going on to look at that business from the ground up to work out our positioning and what we want to do in the future. We won't hesitate to make decisions to bring that business back to profitable growth; that will be one of my priorities in the coming weeks. The situation on commercial vehicles is different. We have the relationship with Nikola, which is very much based on the S-WAY, and since the launch of the S-WAY we've gained market share across European markets on the heavy side. We feel positively about that and see a clear path forward. We remain excited about the joint venture with Nikola because it is based on the S-WAY frame, which will be the platform for electric and fuel-cell developments. We will keep all situations under review, but the Construction Equipment segment under its new leadership is actively reviewing the business and looking at how to take it back to profitable growth.

Is there a time frame you have in mind where management has to decide whether to be in these businesses or not? It seems like an easy way back to profitability is to exit positions that never make money.

I think on construction we need to have a thorough look and not delay making decisions. On commercial vehicles, it's a different situation: we are gaining share with the S-WAY and it plays into the Nikola joint venture. We will review and act where necessary, but we feel quite differently about the two segments.

And our next question comes from the line of David Raso from Evercore. Please go ahead.

Hi, thank you for the time. Just to clarify on the spin decision: we used to speak to both businesses being investment-grade ideally to be spun. Is that still a prerequisite for the spin to take place?

Yes. I think it is one of the key considerations as we look at circumstances for the spin. What we don't want to do is spin companies that are not going to be strong as they go into the market. One of the things we'll be looking at is investment-grade for both companies. That is one of the reasons why we're reconsidering timing and delaying the timetable.

Okay. So it's not a set-in-stone parameter, but it's a key consideration. Did I hear correctly that the second quarter cash flow comment means similar to Q1? The industrial company in the first quarter had negative operating cash flow of over $1.3 billion. While I appreciate it won't be a profitable quarter, you would think working capital could do a little better selling out of inventory. Did I hear correctly that you expect operating cash flow to be as negative in Q2 as in Q1? Can you clarify?

I think we were talking about the entire company numbers and not just the agriculture segment. If you take all together, and you consider the scenarios we have highlighted for Q2, then you can reconcile a negative cash flow number for the second quarter. A lot will depend on how much production we set up in Q2 and also on payables for working capital.

That dovetails into my question about agriculture. You mentioned you expect a recovery in agriculture in the second half. The magnitude of working capital later this quarter to get ready for the second half is interesting. Do you expect enough recovery in the second half that you won't be selling out of inventory for a while? I'm trying to understand the cash flow implication in Q2 relative to ramping into Q3 and how confident you are about that ramp.

We are modeling multiple scenarios and are cautious. We prioritized liquidity and actions to take depending on how the year evolves. The way it's looking at the moment is we have a small buildup in company inventory in Q1. As we ramp up production coming into Q2, we will mainly be building to retail need and we think we have a reasonable order book. I don't think we'll be building up inventory in Q2; in fact, I don't think we'll be building up inventory through most of the rest of the year. I think we'll be building to customer need. We see some recovery in Q2 in agriculture, less so in commercial vehicles and construction, which is why we've prioritized bringing up plants on the agriculture side first.

Do you have any quantification of the order book, even an order-of-magnitude where it stands year-over-year, so we can model what incremental orders you need to justify the level of ramp?

We would be cautious giving that sort of data at this point. It's very hard to interpret the data because it's impacted by multiple elements given the downturn we've gone through. We prefer to avoid providing specific backlog figures at the moment.

That does conclude the question-and-answer session. I will now turn the call back over to Federico Donati for any additional or closing remarks.

Thank you, Priscilla. I would like to thank everybody for participating on today's call. Thank you, and have a good afternoon. Bye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.