AGCO REPORTS THIRD-QUARTER RESULTS
Net sales of $2.6 billion, down 24.8% year-over-year
Reported earnings per share of $0.40 and adjusted earnings per share(1) of $0.68
Reaffirms full-year adjusted operating margin target of 9%
Revised 2024 sales and earnings per share outlook reflects the Grain and Protein divestiture
DULUTH, Ga., Nov. 5, 2024 /PRNewswire/ -- AGCO (NYSE:AGCO), a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology, reported net sales of $2.6 billion for the third quarter ended September 30, 2024, a decrease of 24.8% compared to the third quarter of 2023. Reported net income was $0.40 per share for the third quarter of 2024 and adjusted net income(1) was $0.68 per share. These results compare to reported net income of $3.74 per share and adjusted net income(1) of $3.97 per share, for the third quarter of 2023. Excluding unfavorable foreign currency translation of 0.6%, net sales in the third quarter of 2024 decreased 24.2% compared to the third quarter of 2023.
"We continue to execute against our Farmer-First strategy focused on enhancing profitability through the cycle with our three high-margin initiatives, recent portfolio moves and aggressive actions to control expenses including our ongoing restructuring program," said Eric Hansotia, AGCO's Chairman, President and Chief Executive Officer. "The reaffirmation of our full-year adjusted operating margin outlook of 9% underscores this transformation, especially considering the significant market downturn in the third quarter. Low commodity prices and high input costs led to increased conservatism from our dealers and farmers resulting in ongoing production cuts to help reduce AGCO and dealer inventories."
Hansotia continued, "A key pillar of our Farmer-First strategy is growing our precision ag business through our new PTx portfolio of brands. AGCO is making significant progress toward our long-term ambition of full autonomy across the crop cycle by 2030. In August, PTx Trimble introduced OutRun, the first commercially available autonomous retrofit grain cart solution in the market, and the latest offering that demonstrates our commitment to retrofit-first and mixed-fleets. We believe these types of innovations, along with the completed divestiture of the Grain & Protein business, will allow us to focus on delivering higher margin products and better position AGCO for an upturn in the cycle."
Net sales for the first nine months of 2024 were approximately $8.8 billion, which is a decrease of 17.3% compared to the same period in 2023. For the first nine months of 2024, reported net loss was $(2.27) per share, which includes the estimated loss on the Grain & Protein business held for sale, and adjusted net income(1) was $5.53 per share. These results compare to reported net income of $11.10 per share and adjusted net income(1) of $11.77 per share for the same period in 2023. Excluding unfavorable foreign currency translation of 0.2%, net sales in the first nine months of 2024 decreased 17.1% compared to the same period in 2023.
Third Quarter Highlights
Reported regional sales results(2): Europe/Middle East ("EME") (18.2)%, North America (21.8)%, South America (47.0)%, Asia/Pacific/Africa ("APA") (11.7)%
Constant currency regional sales results(1)(2)(3): EME (19.3)%, North America (21.3)%, South America (41.8)%, APA (13.4)%
Regional operating margin performance: EME 6.4%, North America 7.2%, South America 11.8%, APA 3.8%
(1)
See reconciliation of non-GAAP measures in appendix.
(2)
As compared to third quarter 2023.
(3)
Excludes currency translation impact.
Market Update
Industry Unit Retail Sales
Tractors
Combines
Nine Months Ended September 30, 2024
Change from
Prior Year Period
Change from
Prior Year Period
North America(4)
(11) %
(19) %
South America(5)
(9) %
(34) %
Western Europe(5)
(6) %
(35) %
(4)
Excludes compact tractors.
(5)
Based on Company estimates.
"Record harvests in the Northern Hemisphere are contributing to higher grain inventories and pressuring crop prices, which combined with elevated input costs, are delaying farmers' equipment purchasing decisions," said Hansotia. "Demand for new equipment has softened further in most global markets, particularly as lower farm income persists for crop producers. We continue to expect increased adoption of precision technology, but more challenging farm economics are resulting in weaker global industry demand across most equipment categories. In the first nine months of 2024, retail tractor industry demand fell by an average of 8% across the three major regions."
North American industry retail tractor sales decreased 11% during the first nine months of 2024 compared to the first nine months of 2023. Sales declines were relatively consistent across the horsepower categories with higher horsepower categories declining more in recent months. Combine unit sales were down 19% in the first nine months of 2024 compared to the same period in 2023. Lower projected farm income and a refreshed fleet are expected to continue to pressure industry demand for the remainder of 2024, resulting in weaker North American industry sales compared to 2023.
South American industry retail tractor sales decreased 9% during the first nine months of 2024 compared to the first nine months of 2023. Declines occurred across all South American markets with the most significant decreases in Argentina and the smaller markets. Demand in Brazil was negatively impacted by the floods in Rio Grande do Sul while a challenging first harvest in the Cerrado region continues to affect farmer buying behavior. Following three strong years, retail demand in South America has softened significantly in 2024 as a result of lower commodity prices and farm income.
In Western Europe, industry retail tractor sales decreased 6% during the first nine months of 2024 compared to the first nine months of 2023 with the weakest conditions in Italy, United Kingdom and France. Industry demand is expected to remain soft for the remainder of 2024 as lower income levels pressure demand from arable farmers, while healthy demand from dairy and livestock producers is expected to mitigate some of the decline.
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended September 30,
2024
2023
% changefrom 2023
% changefrom 2023due tocurrencytranslation(6)
% changefrom 2023due toacquisitionof abusiness(6)
% changeexcludingcurrencytranslation andacquisition ofa business
North America
$ 736.1
$ 941.1
(21.8) %
(0.5) %
0.3 %
(21.6) %
South America
381.6
719.8
(47.0) %
(5.2) %
2.1 %
(43.9) %
EME
1,298.2
1,586.9
(18.2) %
1.1 %
1.8 %
(21.1) %
APA
183.4
207.7
(11.7) %
1.7 %
2.0 %
(15.4) %
Total
$ 2,599.3
$ 3,455.5
(24.8) %
(0.6) %
1.5 %
(25.7) %
Nine Months Ended September 30,
2024
2023
% changefrom 2023
% changefrom 2023due tocurrency translation(6)
% changefrom 2023due toacquisitionof a business(6)
% changeexcludingcurrencytranslation andacquisition ofa business
North America
$ 2,303.5
$ 2,861.0
(19.5) %
(0.1) %
1.0 %
(20.4) %
South America
1,033.9
1,822.2
(43.3) %
(2.3) %
1.0 %
(42.0) %
EME
4,930.1
5,281.5
(6.7) %
0.5 %
1.2 %
(8.4) %
APA
507.1
647.0
(21.6) %
(0.5) %
1.5 %
(22.6) %
Total
$ 8,774.6
$ 10,611.7
(17.3) %
(0.2) %
1.1 %
(18.2) %
(6)
See footnotes for additional disclosures.
North America
Net sales in AGCO's North American region decreased 20.4% in the first nine months of 2024 compared to the same period in 2023, excluding the impact of unfavorable currency translation and favorable impact of an acquisition. Softer industry sales and lower end-market demand contributed to lower sales. The most significant sales declines occurred in the high-horsepower and mid-range tractor categories, as well as hay equipment. Income from operations for the first nine months of 2024 decreased $207.0 million compared to the same period in 2023 and operating margins were 7.5%. The decrease resulted from lower sales and production volumes, as well as higher warranty expenses.
South America
South American net sales decreased 42.0% in the first nine months of 2024 compared to the same period in 2023, excluding the impact of unfavorable currency translation and favorable impact of an acquisition. Softer industry retail sales and under-production of retail demand drove most of the decrease. Lower sales of high-horsepower tractors and combines accounted for most of the decline. Income from operations in the first nine months of 2024 decreased by $296.8 million compared to the same period in 2023. This decrease was primarily a result of lower sales and production volumes as well as negative pricing.
Europe/Middle East
Net sales in the Europe/Middle East region decreased 8.4% in the first nine months of 2024 compared to the same period in 2023, excluding the impact of favorable currency translation and favorable impact of an acquisition. Lower sales across most of the European markets were partially offset by growth in Germany and Turkey. Declines were largest in mid-range tractors and hay equipment. Income from operations decreased $79.5 million in the first nine months of 2024, compared to the same period in 2023. This decrease was primarily a result of lower sales and production volumes.
Asia/Pacific/Africa
Asia/Pacific/Africa net sales decreased 22.6%, excluding unfavorable currency translation impacts and favorable impact of an acquisition, in the first nine months of 2024 compared to the same period in 2023 due to weaker end market demand and lower production volumes. Lower sales in China, Australia and Africa drove most of the decline. Income from operations decreased by $30.8 million in the first nine months of 2024 compared to the same period in 2023 primarily due to lower sales volumes.
Outlook
On April 1, 2024, AGCO acquired an 85% stake in PTx Trimble, and Trimble retains a 15% stake. AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on April 1, 2024. On November 1, 2024, AGCO closed the previously announced divestiture of the Grain & Protein business.
AGCO's net sales for 2024 are expected to be approximately $12.0 billion, reflecting lower sales volumes. Adjusted operating margins are projected to be approximately 9%, reflecting the impacts of lower sales, lower production volumes, increased cost controls and modestly lower investments in engineering. Based on these assumptions, 2024 adjusted earnings per share are targeted at approximately $7.50.
* * * * *
AGCO will host a conference call with respect to this earnings announcement at 10 a.m. Eastern Time on Tuesday, November 5. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO's website at www.agcocorp.com under the "Investors" Section. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for 12 months following the call. A copy of this press release will be available on AGCO's website for at least 12 months following the call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the projections of earnings per share, production levels, sales, industry demand, market conditions, commodity prices, currency translation, farm income levels, margin levels, strategy, investments in product and technology development, new product introductions, restructuring and other cost reduction initiatives, production volumes, tax rates and general economic conditions, are forward-looking and subject to risks that could cause actual results to differ materially from those suggested by the statements. The following are among the factors that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements.
Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, adverse weather, tariffs, increases in farm input costs, lower commodity prices, lower farm income and changes in the availability of credit for our retail customers, will adversely affect us.
We maintain an independent dealer and distribution network in the markets where we sell products. The financial and operational capabilities of our dealers and distributors are critical to our ability to compete in these markets. Higher inventory levels at our dealers and high utilization of dealer credit limits as well as the financial health of our dealers could negatively impact future sales and adversely impact our performance.
On April 1, 2024, we completed the acquisition of the ag assets and technologies of Trimble through the formation of a joint venture, PTx Trimble, of which we own 85%. Financing the PTx Trimble transaction significantly increased our indebtedness and interest expense. We also have made various assumptions relating to the acquisition that may not prove to be correct and we may fail to realize all of the anticipated benefits of the acquisition. All acquisitions involve risk, and there is no certainty that the acquired business will operate as expected. Each of these items, as well as similar acquisition-related items, would adversely impact our performance.
A majority of our sales and manufacturing takes place outside the United States, and many of our sales involve products that are manufactured in one country and sold in a different country. As a result, we are exposed to risks related to foreign laws, taxes and tariffs, trade restrictions, economic conditions, labor supply and relations, political conditions and governmental policies. These risks may delay or reduce our realization of value from our international operations. Among these risks are the uncertain consequences of Brexit and tariffs imposed on exports to and imports from China.
We cannot predict or control the impact of the conflict in Ukraine on our business. Already it has resulted in reduced sales in Ukraine as farmers have experienced economic distress, difficulties in harvesting and delivering their products, as well as general uncertainty. There is a potential for natural gas shortages, as well as shortages in other energy sources, throughout Europe, which could negatively impact our production in Europe both directly and through interrupting the supply of parts and components that we use. It is unclear how long these conditions will continue, or whether they will worsen, and what the ultimate impact on our performance will be. In addition, AGCO sells products in, and purchases parts and components from, other regions where there could be hostilities. Any hostilities likely would adversely impact our performance.
Most retail sales of the products that we manufacture are financed, either by our joint ventures with Rabobank or by a bank or other private lender. Our joint ventures with Rabobank, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate. Any difficulty by Rabobank to continue to provide that financing, or any business decision by Rabobank as the controlling member not to fund the business or particular aspects of it (for example, a particular country or region), would require the joint ventures to find other sources of financing (which may be difficult to obtain), or us to find another source of retail financing for our customers, or our customers would be required to utilize other retail financing providers. As a result of the recent economic downturn, financing for capital equipment purchases generally has become more difficult in certain regions and in some cases, can be expensive to obtain. To the extent that financing is not available or available only at unattractive prices, our sales would be negatively impacted. In addition, Rabobank also is the lead lender in our revolving credit facility and term loans and for many years has been an important financing partner for us. Any interruption or other challenges in that relationship would require us to obtain alternative financing, which could be difficult.
Both AGCO and our finance joint ventures have substantial accounts receivable from dealers and end customers, and we would be adversely impacted if the collectability of these receivables was less than optimal; this collectability is dependent upon the financial strength of the farm industry, which in turn is dependent upon the general economy and commodity prices, as well as several of the other factors listed in this section.
We have experienced substantial and sustained volatility with respect to currency exchange rate and interest rate changes, which can adversely affect our reported results of operations and the competitiveness of our products.
Our success depends on the introduction of new products, particularly engines that comply with emission requirements and sustainable smart farming technology, which require substantial expenditures; there is no certainty that we can develop the necessary technology or that the technology that we develop will be attractive to farmers or available at competitive prices.
Our expansion plans in emerging markets, including establishing a greater manufacturing and marketing presence and growing our use of component suppliers, could entail significant risks.
Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations, or otherwise are the victim of a cyberattack, we could be subject to significant claims, penalties and damages.
Cybersecurity breaches including ransomware attacks and other means are rapidly increasing. We continue to review and improve our safeguards to minimize our exposure to future attacks. However, there always will be the potential of the risk that a cyberattack will be successful and will disrupt our business, either through shutting down our operations, destroying data, exfiltrating data or otherwise.
We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. In addition, the potential of future natural gas shortages in Europe, as well as predicted overall shortages in other energy sources, could also negatively impact our production and that of our supply chain in the future. There can be no assurance that there will not be future disruptions.
Any resurgence of COVID-19, or other future pandemics, could negatively impact our business through reduced sales, facilities closures, higher absentee rates, and reduced production at both our plants and the plants that supply us with parts and components. In addition, logistical and transportation-related issues and similar problems may also arise.
We recently have experienced significant inflation in a range of costs, including for parts and components, shipping, and energy. While we have been able to pass along most of those costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will adversely impact our performance.
We face significant competition, and if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose customers and our net sales and performance would decline.
We have a substantial amount of indebtedness (and have incurred additional indebtedness as part of the PTx Trimble joint venture transaction), and, as a result, we are subject to certain restrictive covenants and payment obligations, as well as increased leverage generally, that may adversely affect our ability to operate and expand our business.
Further information concerning these and other factors is included in AGCO's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2023, and subsequent Form 10-Qs. AGCO disclaims any obligation to update any forward-looking statements except as required by law.
* * * * *
About AGCO
AGCO (NYSE:AGCO) is a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology. AGCO delivers value to farmers and OEM customers through its differentiated brand portfolio including leading brands Fendt®, Massey Ferguson®, PTx and Valtra®. AGCO's full line of equipment, smart farming solutions and services helps farmers sustainably feed our world. Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales of approximately $14.4 billion in 2023. For more information, visit www.agcocorp.com.
Please visit our website at www.agcocorp.com
AGCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
September 30, 2024
December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents
$ 622.6
$ 595.5
Accounts and notes receivable, net
1,448.4
1,605.3
Inventories, net
3,443.2
3,440.7
Other current assets
607.7
699.3
Current assets held for sale
417.0
—
Total current assets
6,538.9
6,340.8
Property, plant and equipment, net
1,880.6
1,920.9
Right-of-use lease assets
171.8
176.2
Investments in affiliates
551.5
512.7
Deferred tax assets
507.3
481.6
Other assets
450.5
346.8
Noncurrent assets held for sale
459.0
—
Intangible assets, net
588.8
308.8
Goodwill
2,358.4
1,333.4
Total assets
$ 13,506.8
$ 11,421.2
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current Liabilities:
Borrowings due within one year
$ 412.3
$ 15.0
Accounts payable
961.1
1,207.3
Accrued expenses
2,508.8
2,903.8
Other current liabilities
138.3
217.5
Current liabilities held for sale
259.6
—
Total current liabilities
4,280.1
4,343.6
Long-term debt, less current portion and debt issuance costs
3,610.0
1,377.2
Operating lease liabilities
129.0
134.4
Pension and postretirement health care benefits
167.9
170.5
Deferred tax liabilities
120.4
122.6
Other noncurrent liabilities
686.2
616.1
Noncurrent liabilities held for sale
26.9
—
Total liabilities
9,020.5
6,764.4
Redeemable noncontrolling interests
