DULUTH, Ga. — (BUSINESS WIRE) — Oct. 29, 2019 — AGCO (NYSE: AGCO) reported net sales of approximately $2.1 billion for the third quarter of 2019, a decrease of approximately 4.8% compared to the third quarter of 2018. Excluding unfavorable currency translation impacts of approximately 3.1%, net sales in the third quarter of 2019 decreased approximately 1.7% compared to the third quarter of 2018.
Net sales for the first 9 months of 2019 were approximately $6.5 billion, a decrease of approximately 3.4% compared to the same period in 2018. Excluding unfavorable currency translation impacts of approximately 4.8%, net sales during the first 9 months of 2019 increased approximately 1.4% compared to the same period in 2018.
Third Quarter Highlights
- Reported regional sales results: North America (1.7%), Europe/Middle East (“EME”) (1.6%), South America (14.8)%, Asia/Pacific/Africa (“APA”) (15.9%)
- Constant currency regional sales results: North America (1.4%), EME 3.2%, South America (14.4%), APA (12.2%)
- Regional operating margin performance: North America 6.1%, EME 10.6%, South America (2.3%), APA 6.1%
- Full year outlook for net income per share maintained
- Repurchases reduced outstanding shares by approximately 1.3 million in the first 9 months of 2019
“AGCO achieved solid third quarter results considering a challenging environment of weakening industry conditions and negative currency impacts,” said Martin Richenhagen, AGCO’s chairman, president and chief executive officer. “Our continued focus on margins supported our third quarter performance, where we experienced sales declines. Price increases as well as cost control initiatives and productivity improvement efforts allowed us to offset the impact of lower sales and production volumes in the third quarter.
“We are also making significant progress on our growth initiatives through the development and global expansion of our smart farming and high technology product lineup. While the current market environment is uncertain, the long term outlook for our industry and for AGCO remains positive with our focus on both operational efficiency and innovative solutions that support productivity on the farm.”
“Farming conditions continue to be challenging in many of our key markets,” continued Richenhagen. “A late harvest and early winter weather are pressuring corn and soybean harvests in North America. In Europe, wheat production is improved from last year despite a second consecutive year of dry conditions. Varied forecasts for crop production and ending inventories of grain have created uncertainty in the short term but have recently moved commodity prices higher.
“In addition to commodity price development, industry issues such as government trade and farm support policy are heavily influencing farmers’ confidence and equipment buying decisions. In North America, industry retail sales were flat in the first 9 months of 2019 compared to last year with higher sales of smaller equipment offset by lower sales of high horsepower tractors and combines. The prospect of lower yields and the uncertainty regarding the outcome of trade negotiations are both contributing to weak demand in the large farm sector.
“We expect North American industry retail tractor sales to be approximately flat in 2019 as compared to last year. Healthy milk prices remain supportive of the dairy sector in Western Europe and industry retail sales increased modestly in the first 9 months of 2019. First half growth was partially offset by weakening market demand throughout the third quarter. Industry sales growth in France and Germany was partially offset by declines in the United Kingdom and Italy. For the full year of 2019, industry demand in Western Europe is expected to be flat compared to 2018.
“The benefits of improved grain production in Brazil and Argentina were offset by interruptions in the government subsidized finance program in Brazil and weak macro-economic conditions in Argentina. For the full year of 2019, industry demand in South America is expected to be down compared to 2018. Our long term view remains optimistic for demand in the agricultural equipment industry. We expect healthy grain demand driven by population growth and increased protein consumption to result in favorable conditions for farmers.”
AGCO’s North American net sales increased 0.7% in the first 9 months of 2019 compared to the same period of 2018, excluding the negative impact of currency translation. Increased sales of compact tractors, application equipment and parts were mostly offset by lower sales of utility tractors and protein production equipment. Income from operations for the first 9 months of 2019 improved approximately $17.6 million compared to the same period in 2018. The benefit of improved pricing and cost control initiatives contributed most of the increase.
Net sales in the South American region decreased 9.7% in the first 9 months of 2019 compared to the first 9 months of 2018, excluding the impact of unfavorable currency translation. Loss from operations increased approximately $0.5 million in the first 9 months of 2019 compared to the same period in 2018. The South America results reflect low levels of industry demand and company production, as well as cost impacts associated with the transition of newer product technology into our Brazilian factories.
AGCO’s Europe/Middle East net sales increased 5% in the first 9 months of 2019 compared to the same period in 2018, excluding unfavorable currency translation impacts. Sales growth was strongest in France, Central Europe and Spain and was partially offset by weaker sales in the United Kingdom and Eastern Europe. Income from operations improved approximately $42.4 million for the first 9 months of 2019, compared to the same period in 2018, due to the benefit of higher sales and production, pricing, improved factory productivity and a favorable sales mix.
Asia/Pacific/Africa net sales decreased 7.9%, excluding the negative impact of currency translation, in the first 9 months of 2019 compared to the same period in 2018. Lower sales in Asia and Australia were partially offset by sales growth in Africa. Income from operations dropped approximately $5 million in the first 9 months of 2019, compared to the same period in 2018, due to lower sales and production, partially offset by lower operating expenses.
AGCO’s net sales for 2019 are projected to decline modestly compared to 2018 to approximately $9.3 billion, reflecting the negative impact of currency translation and relatively flat sales volumes partially offset by positive pricing. Gross and operating margins are expected to improve from 2018 levels.