“In addition, Resource Industries will be expected to incur an additional headwind of about 25% of the net tariff quarters -- tariff costs in the second quarter.”

In context

“ong prior year margins make for a challenging comparison. The main driver of lower margins year-over-year is unfavorable price. While lower than the comparative quarter last year, we would have expected margins to be higher when compared to the first quarter of this year. Now taking tariffs into account, we would expect about 50% of the second quarter net tariff -- enterprise tariff impact of $250 million to $350 million to be incurred in Construction Industries. In Resource Industries, similar to Construction Industries, a strong prior year margin sets a challenging comparison in the second quarter. Excluding any tariff impacts, we would have expected lower margins versus the prior year, primarily due to unfavorable price, which I commented on a moment ago, and higher SG&A and R&D costs. In addition, Resource Industries will be expected to incur an additional headwind of about 25% of the net tariff quarters -- tariff costs in the second quarter. In Energy & Transportation, excluding any tariff impacts, we would have expected slightly higher margins compared to the prior year with favorable volume and price realization, partially offset by manufacturing costs and SG&A and R&D increases. For Energy & Transportation, we would be expected to incur an additional headwind of about 25% of the net tariff costs in the second quarter. So turning to slide 18, let me summarize. Despite the evolving environment, we would expect the range of sales will be flattish to slightly lower as we -- and we currently expect to be comfortably within our target ranges for adjusted operating profit margins and ME&T free cash flow. Business activity and customer financial health remains resilient, while our balance sheet and liquidity positions are strong.”