Good morning, and welcome to the Deere & Company Fourth Quarter Earnings Conference Call. Your lines have been placed on a listen-only until the question-and-answer session of today’s conference. I would now like to turn the call over to Josh Jepsen, Director of Investor Relations. Thank you. You may begin.

Thanks, Robin. Hello. Also on the call today are Ryan Campbell, our CFO; Jahmy Hindman, our Chief Technology Officer; and Brent Norwood, Manager, Investor Communications. Today we’ll take a closer look at Deere’s fourth quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2021. After that, we’ll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder. This call is being broadcast live on the internet and recorded for future transmission and use by Deere & Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks and all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the company’s plans and projections for the future that are subject to important risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the company’s most recent Form 8-K and periodic reports filed with the Securities and Exchange Commission. This call may also include financial measures that are not in conformance with accounting principles generally accepted with the United States of America, or GAAP. Additional information concerning these measures including reconciliations to comparable GAAP measures is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I’ll now turn the call over to Brent Norwood.

John Deere demonstrated strong execution in the fourth quarter resulting in a 12% margin for the Equipment Operations and net income exceeding our full year forecast. Despite significant uncertainty early in the year for large Ag markets, fundamentals improved throughout the fourth quarter driving growth prospects for 2021. Meanwhile, markets for our Construction & Forestry division also improved in the fourth quarter leading to a solid finish to the year and modest levels of recovery projected for fiscal year 2021. Now, let’s take a closer look at our year end results for 2020 beginning on slide 3. For the full year, net sales and revenue were down 9% to $35.54 billion while net sales for Equipment Operations were down 10% to $31.272 billion. Net income attributable to Deere & Company was $2.751 billion or $8.69 per diluted share. Net income for the year was negatively affected by impairment charges, losses on business disposals, and employee separation costs of $458 million after-tax. For the same period in 2019, the similar charges were $82 million. Slide 4 shows the results for the fourth quarter. Net sales and revenue were down 2% to $9.731 billion while net sales for the Equipment Operation were down 1% to $8.659 billion. Net income attributable to Deere & Company for the quarter was $757 million or $2.39 per diluted share. Fourth quarter net income was negatively affected by impairment charges and employee separation costs of $211 million after-tax compared to $74 million for the same period in 2019. Turning to a review of our individual businesses starting with Agriculture & Turf on slide 5, net sales were up 8% compared to the fourth quarter last year primarily due to price realization and higher shipment volumes partially offset by the unfavorable effects of currency translation. Price realization in…

Thanks, Brent. As noted, I recently assumed the newly-created Chief Technology Officer position and I spent the last few months finalizing our organizational design and refining our technology strategy to best enable the smart industrial operating model. I’ve been with Deere for over 20 years in a variety of engineering roles in both the Ag & Turf and Construction & Forestry divisions, and most recently led engineering for the global tractor product family. Most simply put, the Chief Technology Office is responsible for delivering Deere’s technology stack. Think of our tech stack as a full set of components required to deliver technology solutions to our customers. For nearly 25 years, Deere has invested in core technologies and capabilities that can be leveraged across the enterprise. These core competencies are primarily focused around machine guidance, digital connectivity, machine intelligence, and more recently, autonomy. Historically, Deere operated within multiple disparate business units that were spread out throughout the enterprise to pursue innovations in these core technologies. As part of our redesign, we’ve consolidated these units under the CTO organization. This drives a higher degree of focus and unlocks significant efficiencies for our R&D investments. Our approach to precision technology as shown on slide 13 is distinct within the industry, as we’ve maintained end-to-end development responsibility for our tech stack, developing unique solutions from the embedded hardware and software in our equipment, to the digital platforms our customers utilize. While we’ve pursued a vertically integrated path for our core capabilities, we have chosen to partner with others for noncore technologies, things like graphical processing units and cameras. Additionally, we’ve opened up our digital platform to include over 185 API partners. Over time, our philosophy has remained consistent, as depicted on slide 14. We seek to develop or acquire core technologies that add value…

Thanks, Jahmy. Slide 16 outlines our guidance for net income, our effective tax rate, and operating cash flow. For fiscal year 2021, our full year outlook for net income is forecast to be between $3.6 billion to $4 billion. It’s important to note that constraints in the supply base and labor force availability due to COVID-19 remain key risks to our fiscal year 2021 guide. The guidance incorporates an effective tax rate projected to be 26% to 28%. Lastly, cash flow from the Equipment Operations is expected to be in the range of $3.8 billion to $4.2 billion and contemplates a $700 million voluntary contribution to our OPEB plan. Before we respond to your questions, I’d like to offer some perspective on 2020, the prospects ahead of us, and a few thoughts on our portfolio and capital allocation strategy. As we look back on 2020, it’s important to acknowledge the exceptional efforts taken by our employees, suppliers, and dealer channel this year. Employees across our company logged extra hours and adapted to an ever-changing environment to create safe working conditions and ensure the supply of parts and equipment to our customers so that they could continue their essential work. Similarly, our dealers quickly adjusted to the pandemic and played a critical role keeping our customers’ businesses operating. This year served as a reminder of just how impressive our dealer group is, and we are grateful for the tremendous performance they put forth. And as a result of the effort put forth by employees, suppliers, and dealers, we posted one of the strongest fourth quarter performances in company history. Excluding costs associated with employee separations and impairments, our Construction & Forestry division achieved 11% margins, the highest fourth quarter since 2014. Similarly, Ag & Turf fourth quarter margins excluding special items…

Thanks, Ryan. Now we’re ready to begin the Q&A portion of the call. The operator will instruct you on the procedures. In consideration of others and our hope to allow more of you to participate, please limit yourself to one question. If you have additional questions, we’d ask that you please rejoin the queue. Robin?

Thank you. [Operator Instructions] And our first question is from Jerry Revich with Goldman Sachs.

I’m wondering if you can talk about Ag & Turf incremental margins from here? Obviously, you got to really strong margins much earlier in the cycle than most of us expected. How should we think about operating leverage from here assuming we do get a multiyear Ag & Turf recovery? Can you still, off of these higher-levels, deliver 30%-plus incremental margins as we think about what a multiyear recovery could look like?

Yeah, thanks, Jerry. As it relates to the margins and thinking about this next year, 2021, 15.5% to 16.5% absolute margins, we do expect that we can do the roughly 30% to 35% from an incremental basis in kind of the underlying operations. I think when you think about this year, a few things to consider as far as potential or not potential headwinds in the forecast would be incentive comp has moved up and is a bit higher in 2021 from a company-wide perspective, that’s about $160 million headwind. And then we are seeing a little bit higher overhead costs. Some of that’s related to volume, but certainly still have some of that related to just overall caution as it relates to COVID and the impacts as we’re seeing spread in contagion in a lot of our key geographies.

Yeah, Jerry, it’s Ryan. I think the way to think about it, we structurally improved the profitability of the Equipment Operations including Ag & Turf, but we intend over the long run to still operate with that flexibility that gives us the ability to perform on an incremental basis in the 30% to 35% range.

Thank you. Our next question is from Jamie Cook with Credit Suisse. Your line is open.

I guess my question if we just, if you assume the high end of your guide on the sales and on the margin front, it implies your margins are already almost hitting the 15% mid-cycle margin target that you guys have laid out. So I’m just, what’s embedded in your view of the cycle in your 2021 guidance? And I guess the longer-term question is are we further along than we thought we would be? Do we need to revisit that target? I’m just wondering if the market under appreciates the margin story for Deere longer-term. Thank you.

If you think about where we’re at in the cycle, Ag & Turf this year, we’re projecting to be pretty close to mid-cycle. That said, mix is still not normal. We think large Ag in North America is around 90% of mid-cycle, small Ag overall a little bit above mid-cycle, so relatively close but not there. That’s, I think what we’ve seen is significant progress on the margin front. As Ryan mentioned, feel like we’ve structurally improved our ability to perform and execute and drive that margin level, so we’re continuing to work on that, and as implied with our guidance this next year, expect being above that 15% target for Ag & Turf in 2021.

But in total for the company, is the 15% too low now, I guess I’m asking? Because we’re getting there on a combined basis and we’re not even at mid-cycle.

Yeah, Jamie, the goal was for 2022 kind of at mid-cycle. We’ll continue to execute and deliver on that, and then 2022, we’ll take a step back and reflect on what we want to drive into the future particularly focusing on making the investments that really can change the game for our customers and create value for them. So hang with us and wait until we execute and deliver in 2022, but we’ve got a long runway of things that we can do to make our customers better.

And thank you. Our next question is Steven Fisher with UBS.

Thanks. Good morning. Just curious to ask you about how you’re factoring in raw materials costs for fiscal 2021. We’re seeing some steel price increases, but I notice your COGS percent assumed is lower in the forecast, so just curious what you kind of – how you’ve thought about that in front half versus back half. Thanks.

Steve, when we look at material, we’ve had a tailwind in 2020 from a material point of view, in particular, on steel. That’s after we saw increases in 2018 and into 2019, so it has been favorable at this point. As we look forward into 2021, our contracts, we tend to cover a quarter, a little bit more in terms of the lag time between price movements and when we see those come through, so we have some coverage there. So to your point, to the extent you see some of that inflation, probably more impactful later in the year. That said, as we kind of step back and look at material overall, are seeing some of those trends in terms of prices moving up but we’re also pretty confident in some cost reduction projects and things we have going on that we think about material kind of coming in relatively stable year-over-year. Thanks, Steve.

Thank you. Our next question is from Stephen Volkmann with Jefferies. Your line is open.

Hi. Good morning, everybody. I’m wondering if we can spend a moment on the pricing question? You guys obviously had very good pricing especially in A&T in the fourth quarter, and I guess the outlook is pretty good as well. Can you just kind of describe what you’re seeing there and why it’s as positive as it?

Pricing, Steve, you’re right, was better than expected in the fourth quarter. I think maybe backing up, what hasn’t changed is our philosophy on pricing. You continue to focus on value and the upside that we can create for our customers. I think when you look specifically at what we saw in the fourth quarter for Ag & Turf, there were a few things that drove that level of pricing. One, and we noted, Brent kind of mentioned this in his comments, we had tighter inventory positions kind of across most of our geographies and models in particular on small tractors and turf that drove less spend as a result of tighter levels of inventory. That’s one component. The other piece, and we talked a little bit about this last quarter, we saw more of it this quarter, was the cost for low rate programs, so buying down interest rates to offer low rate programs to our customers, which are pretty prevalent in small tractors and turf. That cost was lower as a result of just lower interest rates in the market. So that was impactful. And then lastly, we saw pricing overseas. We had continued strength in a number of overseas markets that benefited price in the quarter. So we ended the year strong, obviously, and are forecasting about three points next year, so continue to manage that. And I think part of that too, you think about as we go into the year with tighter inventories, we think that lends itself to a little bit lighter incentive spending as we work to recover some of that inventory in 2021. Thanks, Steve. Go ahead and jump to our next question.

Thank you. Our next question is from Ann Duignan with JPMorgan. Your line is open.

Hi. I just wanted to ask you about your comment that you’re only up about 90% of mid-cycle in large Ag going into fiscal 2021. That seems a little inconceivable to me given that farmers are sitting there with $50 billion in excess government payments this year on top of $24 billion that they received last year, and so the notion that they’re not spending now given the fundamentals and given the extra money they have and with government payments expected to revert to normal going forward, why wouldn’t 2021 represent the new peak, not 90% of normal?

Yeah, so maybe as we think about that, a little bit of a journey. Last year, 2020 we were around 80% of mid-cycle for large Ag in North America, so we’re seeing that step up to about 90%, so we are seeing that. Maybe taking a few of those pieces of your comments there as it relates to what’s going on, government support obviously has been very strong. I think from a customer perspective, the preference would be access to markets over aid. I think that’s underlying and as we’ve seen some of the export markets open up, I think you’re seeing more sentiment improve. But the aid has in large part in our view been used to pay down debt and really manage and shore up our balance sheets, so I think that’s been a positive. And underlying that also, you’re seeing strong land values in the Midwest seeing some upward movement in land values, so I think underpinning there a really strong balance sheet for farmers, particularly as we exit the year. Fundamentals have moved and they’ve moved really over the last six weeks, so it’s been pretty recent on the back of kind of revisions down of ending inventories of commodities, China purchases, and then obviously the aid that you mentioned. All of those, we’ve seen impact sentiment, so those things have been positive. So I think as it relates to looking forward, we don’t expect aid to recur, but we do believe higher commodity prices are going to benefit cash receipts as we go forward, so we don’t expect a huge downward movement in cash receipts for principal crops in 2021. Saying all of that, I think we step back and say we are seeing demand pick up. We’re seeing that in early order programs and the large tractor order book that Brent mentioned, so I think we’re really kind of at an inflection point right now where we’re seeing demand move. We would say there’s still a long runway of replacement demand as you look at the age of the fleet and those sorts of things, so we think we’re a ways off mid-cycle let alone peak. Thanks, Ann. We’ll go ahead and jump to our next question.

Our next question is from Robert Wertheimer with Melius Research.

Hey, good morning, everyone, and thanks. Just, I mean, obviously, you’ve had a very dynamic year with a lot going on. I wonder if you have any updated thoughts on either the buckets of margin as you think the end of the year structural goal and there’s a mention you’re pretty far advanced on that path. And maybe if not that, I mean, do you see the same sort of long-term potential rising up in construction margins? There’s a little bit less strength there I guess versus Ag and then just maybe a little bit less potential on the tech side, I’m not sure. So just your thoughts on margin buckets and/or construction structural margin. Thank you.

Yeah, Rob, I think overall bucket-wise, not a lot of change as we think about the path to 15%. Certainly cost we’ve done a lot of work on the cost side as it relates to structure as well as we’ve begun work on footprint and those sorts of things, so we feel good about the progress there. Aftermarket continues to be something we’re focused on. That’s not something that changes immediately, but we like the organizational structure and the priorities that we’ve laid out there for the team and making good initial progress. And then Precision Ag as Jahmy outlined continues to be an opportunity for us and I think as we continue to develop technology, I think we see more and more opportunity to leverage and that’s really where Jahmy’s new org steps in. As it relates to construction, certainly I think continuing to operate efficiently there. We’ve tried to be really disciplined on price, and you’ve seen that over the course of 2020 which has aided margins. The road building side of the business we think is going to be a substantial contributor as we think about the overall delivering 15% margin. And this year, the road building side worked through a really choppy year and performed very, very well and proved out part of the hypothesis there that they are going to be less cyclical and that was certainly the case. They ended the year down about 8% compared to construction which was down much more significantly. Maybe the last thing on the construction side where we do think we have an opportunity to drive margin and differentiation is on technology, so maybe I’ll ask Jahmy to talk a little bit about how we think we can leverage technology in C&F and road building.

Yeah, thanks, Rob, for the question. I do think if you look at Precision generally, many of the technologies that we’re developing on the Ag side have applicability at the component level within our construction and road building products as well, and the benefits of Precision extend to that business also, this need to be more precise with equipment, reduce the amount of time the equipment spends on a job site to do the job, those sorts of things all factor into our ability to take technology that we’re developing within the enterprise and apply it to the construction and road building products as well.

Thank you. Our next question is from Chad Dillard with Bernstein. Your line is open.

Can you talk about your Precision Ag take rates and early order program, how are rates for ExactEmerge and Apply, how they compare versus last year, and have you started to offer spray as a part of the early order program and give some color on take rates there? And then just lastly, just maybe you could talk about the roadmap for Precision Ag beyond corn and soybean ecosystem and will it require new technology beyond the current offering? Just that. Thank you.

Yeah, I’ll start there. I mean, from an early order program, we saw take rates kind of in line with what we talked about a quarter ago. So in the low 40s on ExactEmerge, high 40s, near 50 on ExactApply, and then combines are actually in the 70s. So those specific solutions now, we’ve got a few years under our belt. We’re seeing continued strong adoption there which has been positive and I think just clearly demonstrating the value of what those can do when you think about executing the job those customers are performing. Maybe from a sprayer perspective, Jahmy, do you want to talk a little bit about just what we’re seeing from a technology perspective having it out in the field?

Yeah, so we’ve had machines with customers over the last prototype machines over the last 12 months and especially this summer learned a lot. We will have machines with customers next summer as well and the feedback has largely been outstanding. People gravitate to the value proposition. They get it, they understand it, and it’s easily demonstrable. And I’ll maybe take a different direction past see and spray and just talk on the question about how applicable is technology outside of corn and soy from a production system perspective. I’ll tell you what we’re really doing is we’re giving machines vision and intelligence, and that extends well past the sort of a multi-dimensional runway. It extends well past corn and soy into other Ag production systems. It also extends past the Ag production systems into several of our Construction & Forestry and roadbuilding segments, and so there’s a lot of opportunity out there just with making machines more capable from a vision and intelligence perspective, and then there’s another dimension of that that’s the data thread that that creates that links all of these steps within a production system together. So really exciting stuff to come and definitely applicable outside of corn and soy.

Maybe one last thing to add-on to that, Chad, is we’re also seeing opportunity on geographic growth from a Precision Ag perspective. We see really strong upward movement and engaged acres globally but in particular, in South America and in Europe. So as we think about you got this opportunity on a geographic basis across Ag & Turf and C&F and then essentially every job that customers are doing. Thanks, Chad. We’ll go ahead and go to our next question.

Thank you. Our next question is Joel Tiss with BMO.

Hey, guys. I just wondered if you can talk a little more deeply about C&F from like a structural standpoint and the ability to get the 15% operating margins? And maybe also just the touching on the ability to get paid for putting Precision software into the machines. Thank you.

Yeah, I think that on the margin side, we’re seeing, we’ve seen I think the division perform pretty resiliently through a year in which sales were down pretty significantly. And we North American Construction Equipment we took out about 30% of field inventory, so pretty significant action this year to put us in position to build in line with retail next year. So I think the actions we’re taking overall as a company as it relates to cost structure are beneficial here. Jahmy’s organization from a CTO perspective pulling the technology together to be able to leverage across we think that’s a big opportunity, and that he just mentioned a few examples of where we think we can do that. The roadbuilding side continues to be one where we see the opportunity to continue to grow there and grow margin as we execute both integration plans and everything else there. So I think we feel like we’ve got a runway there to improve and continuing to focus on markets and products where we can differentiate to deliver margin performance. Thanks, Joel. We’ll go ahead and jump to our next question.

Thank you. Our next question is from David Raso with Evercore.

Good morning. With the A&T sales midpoint guide, the 12.5%, but 4% of that you note is price and currency, that’s only about obviously 8.5% implied volume, so if my math is right, the way you destock small Ag this year in 2020, the small Ag business alone just returning back in line with retail with their production almost accounts for almost all that 8.5% volume growth. So I just want to make sure, if those numbers are correct, are you indeed implying large Ag sales in 2021 are really not growing much at all, and if so, given the order book commentary, the inventory commentary, why is that?

Yeah, so when you think about the kind of the sales and linking that up with the outlooks, I mean, the biggest components of that are from a large Ag perspective in North America we expect to build in line with retail. Small Ag roughly we expect to be flat in North America. To your point, we will produce above retail on small tractors, and we expect to build some inventory we’re coming off historic lows. Last year I think we ended at 55% inventory to sales. This year we ended at 20%, so we will see some recovery there. But again, we expect that market to be relatively flat but we will build some inventory there. In South America, Brazil in particular, we will probably recover. We expect to recover a little bit of inventory that got depleted in 4Q as the market turned pretty strongly in the fourth quarter. So you’re right. I mean, I think when you combine price and FX with kind of North America being up some, South America being up some, and then over production to recover, replenish inventory on small tractors, that’s kind of the math to get to those numbers.

A clarification, you said large Ag in North America in line with retail. Is that not up in an up retail forecast, meaning did you not destock at all in 2020 to where you’ll actually produce lower than retail is up? I don’t understand the flat coming off a year of some destock and you think retail is up.

Yeah, we produced in line with large Ag in 2020 and we intend to do the same in 2021.

So up a little bit. Okay.

Okay. Thanks, David. We’ll go ahead and jump to our next question.

Thank you. Your next question is from Nicole DeBlase with Deutsche Bank.

Hey there. Just wanted to make sure you could hear me. So I guess maybe looking at the October retail sales trends, I think in all the categories ex-four-wheel drive tractors, it looks like Deere came in a bit below the industry. Could you just maybe explain a bit about what’s going on there?

Yeah, I think either -- a few things at play there. Given our order fulfillment model, focus on inventory management, and obviously some of this demand is lumpy throughout the year, we will at times lose a little bit of short-term market share at inflection points, and I think that’s some of what we saw this year particularly as we got towards the end of the year where we were tighter on inventory. And as we work through 2020 with the uncertainty kind of broad ranged across agriculture and even on the small tractor and turf side, we were tried to pretty diligently manage those inventories and we were lighter at the end of the year when we saw the inflection. Historically what we’ve seen is we’ve been able to recover that as we build that back up, so I think that’s our expectation that you see us recover that as we go forward.

As Josh said, sometimes an inflection point given our order fulfillment strategy, we may, on the margin, miss a few tractor or combine shares, but history would tell us that we recover that back very quickly. And over the long run, we’re heads down focused on creating sustainable market share growth through creating differentiated value for our customers, so that’s really what we’re focused on.

Thank you. Our next question is Larry De Maria with William Blair.

Thanks. Good morning, everybody. Appreciate the tech stack discussion. We don’t see on there as obviously Deere prescribed agronomy, but obviously agronomy has been everywhere, but you bought a software company and you’re developing and have bought some AI capabilities. It seems logical with the roadmap that maybe being in a position to recommend seed since you have a data and are getting down to the individual plant level. So I’m just kind of curious as this roadmap plays out can you get into the prescription seed recommendation game, because it seems like it’s going that way? Or alternatively, maybe it’s more about making sure you can attribute value to Deere so you can gain greater pricing and greater wallet share from customers. So just trying to think and see how this plays out over the next few years and as you maybe come into more conflict with seed companies.

Yeah, thanks for the question, I’ll take it. I think the way to think about that right now is we’re really focused on creating the data and collecting the data that any individual grower needs in order to make decisions exactly like the one that you’re talking about, what seed hybrid they might plant in any given year. And at some point in the future, I think we’ll have the growers have enough information because of the data they’ve collected over the previous production system steps over the previous years to optimize that seed choice, but in the end, that’s their choice to make. They have a responsibility or they have a relationship with their trusted advisors whoever that might be and their agronomic community and they are the ones that end up making that decision as they see it as best for their farm in any given year, given their operations.

Thank you. Our next question is from Adam Uhlman with Cleveland Research.

Hi, guys. Good morning. Congrats on the quarter. Ryan, I was wondering if you could provide us a little bit more color on the guidance for the year in terms of how you see the cadence playing out maybe first half to second half in terms of sales and margin, any important moving pieces that we should keep in mind? And then can you confirm if there’s any material restructuring charges left in the guidance for this year? Thanks.

Yeah, this is Josh. I’ll start. As you think about cadence of the year, I don’t think we expect to see much abnormal from a seasonality perspective, so I think we’d expect both divisions to kind of play out relatively normally, nothing major kind of that would disrupt that. I think as it relates to one-time charges those sorts of things, the employee separation actions, we don’t have or expect anything in 2021 in the guide. We’ve got that all in 2020. To the extent we continue to work on portfolio optimization, those sorts of things, we could see charges there, but as we would execute on those, we will provide updates then.

Yeah, as Josh said, nothing unique in next year’s cadence and then we don’t have forecasted charges in the guide for next year. We are still assessing kind of operations and footprint globally. As we make those decisions, we’ll obviously identify any costs associated with those during our quarterly calls.

Thank you. Our next question is from Mig Dobre with Baird. Your line is open.

Thank you. Good morning, everyone. I wanted to go back to Construction & Forestry, the margin discussion there, and recognizing that you had a lot of sort of discrete costs that impacted you in fiscal 2020 that now are clearly going away. It seems as if I’m doing the math right here, that the incremental margin that you’re guiding to is somewhere in the low- to mid-20s here, so I guess my question is this. First, where are we in terms of roadbuilding’s margin and is the path to 13%, 14% operating margin for that business still there, and how do you see that? And sort of what’s being embedded here in terms of incremental margin longer-term?

Yeah, I think for incrementals on the business in 2021, we’re in that range of 20% to 25% which is traditionally where we’d expect to be. As you think about roadbuilding, we had a really, really strong quarter in roadbuilding in 4Q, and as we look forward, we think that continues to improve, even ex-items where we were this year, we expect next year with top line moving up call it roughly 10%, we think that margin steps up again. So I think we feel really good about the performance there. And maybe just to reiterate a comment I made earlier, as we think about the 15% and how do we get there, we think the roadbuilding piece is a substantial contributor to that margin story as we go forward. Thanks, Mig. We’ll go ahead and go to the next question.

Thank you. Courtney Yakavonis with Morgan Stanley. Your line is open.

Hi. Good morning, guys. Just wondering maybe following on the roadbuilding discussion I think on C&F you gave us an outlook for North America construction and compact and forestry, but can you maybe just share with us what your thoughts on the outlook for roadbuilding was and was there substantial underproduction? How did those inventory levels kind of finish this year and what we should be thinking for next year? And also, as it relates to North America versus China.

Yeah, so, we expect it’s a little bit hard on the industry, so we tend to talk about roadbuilding more than just what we expect from our business there and we think that’s up about 10% next year after being down about 8% in 2020, so seeing some nice recovery there in that business. Inventory-wise, I think we feel like we’re in good shape. I think over the course of 2019 and a little bit of 2020, we took some more targeted actions on some of the different brands to adjust inventory as we integrated order fulfillment philosophies. But now I feel like we feel like going into 2021 we’re in good shape across those brands. Thanks, Courtney.

Our next question is from Ross Gilardi with Bank of America.

Thanks, guys. Good morning. Can you clarify that the 90% of mid-cycle for large Ag is projected 2021 where you’ll finish, or was that actual 2020? And then historically, how far above are you mid-cycle at the peak for Ag & Turf? Some of the concern out there seems to be that 2021 is somehow peak in Ag & Turf which seems very hard to contemplate when revenue growth hasn’t even turned positive yet and you only have 2021 Ag & Turf up 10% to 15%.

Yeah, so, the 90% is our forecast as we stand now for 2021, so we think we’ve moved from basically call it 80% to 90% as we look forward. Now, importantly, we’ve really seen kind of activity turn in the last four to six weeks, so obviously we’ve had early order programs going, but as you think about kind of underlying fundamentals for farmers, things have improved from a commodity price perspective, lower stock levels, and that’s all really happened very, very recently. So I think I wouldn’t overly interpret what’s happened in four weeks and that that’s everything that’s possible there. So we’re still managing it, working through with our dealers and customers where we’re at. We feel like we’re pretty well positioned having managed new inventories tightly. Maybe more importantly, used is in really good shape, used inventory levels are down in places we haven’t been since call it before 2014. Used prices on the large Ag side are seeing upward pressure, so I think the backdrop and all those things that we’ve thought would drive replacement demand and support replacement demand that have been stalled over the last year or two, we’ve seen some of those things turn and be more favorable for farmers.

And Josh on that, wouldn’t your normal peak be 20% to 25% above mid-cycle for Ag & Turf? If that’s the case, historically, the trough-to-peak move would be something like a 30%-type number, not a 10% to 15% number, that’s what I was trying to clarify in my question.

Yeah, sorry. I forgot that part of your question. Yeah, we would consider 120%, 20% above as peak, and that’s as we plan and certainly if you go back to 2013, large Ag in North America was 130%, so that was, so we’ve been much higher and higher than even 120%, but that’s the way we plan. So thanks, Ross. We’ll go ahead and try to get one more question.

Thank you. Our next question is from Seth Weber, RBC Capital Markets.

Great, guys. Thanks, and good morning. Happy thanksgiving. Just a question on the South American industry Ag outlook. Up 5% seems kind of conservative. It sounds like you’re messaging that your order book is up materially here at the end of the year. So can you just frame that? Are you expecting something to really sort of drop off in the back half of the year in South America? Is it just uncertainty around financing programs, or any color you’d talk to as to the 5% growth for South America. Thanks.

Yeah, so, I mean, up 5% for all South America, I think your question maybe a little more targeted on Brazil specifically. Fundamentals have been really strong. We saw fourth quarter demand was from a retail perspective was strong and strong enough that you actually saw the year swing from kind of a negative industry to positive, so that’s moved quickly. Brent mentioned our order books were ordered out through March, one thing that does, when you think about the comparison then, the strong fourth quarter is now intercom, so we’ll anniversary that strong industry in 2021, so I think that’s part of it. But I think overall, we’re seeing dynamics there have been favorable and maybe a little bit of caution as it relates to China buying more grains from the US and what exactly does that mean for them but overall, I think very, very positive outlook on Brazil.

Well, with that, I think we’re at the top of the hour, so we’ll wrap it up. But appreciate all of the interest. I hope everyone has a good Thanksgiving, and we’ll talk soon. Thank you.

And thank you. This does conclude today’s conference call. You may disconnect your lines, and thank you for your participation.