AGCO is an undisputed global leader in agricultural equipment and precision ag technology but has no answer to the current downward trend
AGCO is following the downward trend common in the agriculture manufacturing industry at present, reporting worldwide net sales of US$2.6 billion for the third quarter of 2024, a decrease of 24.8% compared to the third quarter of 2023.
When net sales are added across the first nine months of 2024 they tally close to US$8.8 billion, which is a decrease of 17.3% compared to the same period in 2023.
Some world regions fared better than others for AGCO, but all were down with sales in Asia/Pacific/Africa (APA) only dipping 11.7%, while Europe/Middle East (EME) was down 18.2%, but things were much more notable in North America down 21.8%, with South America showing a disastrous 47.0% discrepancy over the same time last year.
To settle shareholders nerves, AGCO has reaffirmed its full-year adjusted operating margin target of 9%. While a revised 2024 sales and earnings per share outlook reflects the Grain and Protein divestiture. See more about the sale process here.
The word from the top was relayed by Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer, “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.
“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.
Eric 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,” Eric Hansotia concluded.
How world regions fared across 9 months
Asia/Pacific/Africa
Asia/Pacific/Africa net sales decreased 22.6%, excluding unfavourable currency translation impacts and favourable 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 US$30.8 million in the first nine months of 2024 compared to the same period in 2023 primarily due to lower sales volumes.
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 favourable currency translation and the favourable 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 US$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.
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 unfavourable currency translation and favourable 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-power and mid-range tractor categories, as well as hay equipment. Income from operations for the first nine months of 2024 decreased US$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 unfavourable currency translation and the favourable impact of an acquisition. Softer industry retail sales and under-production of retail demand drove most of the decrease.
Lower sales of high-power tractors and combines accounted for most of the decline. Income from operations in the first nine months of 2024 decreased by US$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.
What AGCO bought and sold
AGCO acquired an 85% stake in PTx Trimble in April 2024, and Trimble retains a 15% stake. AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on 1 April 2024. See story link here. Then on 1 November 2024, AGCO closed the previously announced divestiture of the Grain & Protein business. See story link here.
AGCO’s net sales for 2024 are expected to be approximately US$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 US$7.50.
AGCO net sales by region US$
