In a May 29 interview with CNBC’s Jim Cramer, Martin Richenhagen, AGCO’s CEO, president and chairman, said the ag equipment manufacturer’s focus is to increase margins to 8% in 2019 and 10% in 2020 and not necessarily on what’s happening in the world right now.
He told Cramer, “We’re focused on improvement initiatives already starting last year because we wanted to be independent from everything that is going on in a more volatile political environment, and I think we are doing fine. “Our focus this year is on margin improvements and [it will be the] same for next year.”
In May, AGCO reported that its operating margin improved 190 basis points year-over-year to 4.6% in the first quarter. The company said this was the result of sales growth and material costs reduction, among other initiatives.
Richenhagen said being a global organization has significant benefits that are currently paying off. “When you spread your business all over the world you don’t depend so much on one single market,” he said.
In the first quarter of 2019, AGCO’s regional sales showed gains only in Europe and the Middle East (+4%). North American sales were down during the period 1.3% vs. the first quarter 2018. South American sales fell by 14.3% and Asia/Pacific/Africa sales declined by 16.3%. Overall, AGCO’s first quarter net sales were down less than 1% compared to the same period in 2018. Regionally, operating margins were +6.2% in North America, +10.5% in EME, –5.4% in South America and +2.6% in the APA region.
At that time, Richenhagen said, “Focused operational performance across our regional business units and supportive market conditions are driving sales and earnings growth,” said Martin Richenhagen, AGCO’s chairman, president and CEO. “AGCO’s first quarter results demonstrated solid progress toward our margin improvement goals for 2019. Led by our Europe/Middle East region, AGCO’s first quarter 2019 adjusted operating margins improved over 190 basis points compared to the first quarter of 2018.
“Our margin expansion resulted from organic sales growth, an improved pricing environment and initiatives aimed at lowering material costs and improving productivity. We have raised our outlook for the full year to reflect our confidence in our continued strong performance and in the market recovery.”
During his interview with Cramer, Richenhagen was asked about trade tensions between the U.S. and China. He said he is “optimistic that, finally, a deal is done.” While it will take time to rebuild relationships with China, which Richenhagen says is “pretty loyal” to maintaining contracts, American farmers are at an “advantage,” he added.