AGCO reported net sales of approximately $2.7 billion for the fourth quarter of 2020, an increase of approximately 8.1% compared to the fourth quarter of 2019. Excluding favorable currency translation impacts of approximately 1.4%, net sales in the fourth quarter of 2020 increased approximately 6.7% compared to the fourth quarter of 2019.
Net sales for the full year of 2020 were approximately $9.1 billion, which is an increase of approximately 1.2% compared to 2019. Excluding unfavorable currency translation impacts of approximately 1.8%, net sales for the full year of 2020 increased approximately 3% compared to 2019.
Fourth Quarter Highlights
- Reported fourth quarter regional sales results: Europe/Middle East (“EME”) +13.7%, North America (10.2)%, South America +21.1%, Asia/Pacific/Africa (“APA”) +2.1%
- Constant currency fourth quarter regional sales results: EME +7.7%, North America (10.3)%, South America +52.7%, APA (3.8)%
- Fourth quarter regional operating margin performance: EME +11.9%, North America +2%, South America +5.9%, APA +10.6%
- Full-year adjusted operating margins improved to 7% in 2020 compared to 5.9% in 2019
- Generated approximately $896.5 million in cash flow from operations and approximately $626.6 million in free cash flow in 2020
“The AGCO team delivered strong operational results leveraging improving markets to produce sales and earnings growth in the fourth quarter,” stated Eric Hansotia, AGCO’s Chairman, president and CEO. “Our focused execution allowed us to overcome supply chain difficulties and maintain production levels, while reducing company and dealer inventories, which contributed to significant cash flow generation. Our improved results allowed us to maintain our investments in premium technology, sustainable smart farming solutions and enhanced digital capabilities. Looking forward to 2021, we are forecasting sales and earnings growth as industry conditions trend positively and we position AGCO for future success.”
“Increased grain consumption, driven by economic recovery and higher export demand, helped to offset a solid year of global crop production leaving year-end grain inventories lower than anticipated,” stated Hansotia. “Reduced grain stocks supported a rally in soft commodity prices, lifted farmer sentiment and supported higher demand for agricultural equipment during the fourth quarter.”
Net sales in the North American region were flat for the full year of 2020 compared to 2019, excluding the negative impact of currency translation. Increased sales of Precision Planting equipment, high horsepower tractors and parts were offset by lower sales of grain and protein production equipment as well as sprayers. Income from operations for the full year of 2020 improved approximately $72.1 million compared to 2019. The benefit of a richer sales mix and cost control initiatives contributed to operating margin improvement.
AGCO’s South American net sales increased 36.6% for the full year of 2020 compared to 2019, excluding the impact of unfavorable currency translation. Increased sales in Brazil and Argentina were responsible for the growth. Income from operations for the full year of 2020 was improved compared to 2019 by approximately $68.7 million. The improved South America results reflect the benefit of higher sales and production, a richer sales mix, as well as cost reduction initiatives, partially offset by negative currency impacts.
AGCO’s Europe/Middle East net sales were flat for the full year of 2020 compared to 2019, excluding favorable currency translation impacts. Sales improved significantly in the second half of the year compared to 2019, offsetting a weak second quarter which was impacted by COVID-19-related production interruptions. Declines in France, Scandinavia and Central Europe were mostly offset by growth in Germany and Eastern Europe. Income from operations decreased approximately $52.9 million for the full year of 2020 compared to 2019, due to lower net sales and production volumes as well as higher warranty costs.
Asia/Pacific/Africa net sales increased 0.9%, excluding the positive impact of currency translation, during the full year of 2020 compared to 2019. Higher sales in China and Australia were mostly offset by lower sales in Africa and the smaller Asian markets. Income from operations improved approximately $18.7 million for the full year of 2020 compared to 2019, due to higher sales and a richer product mix.
AGCO’s net sales for 2021 are expected to range from $10.2 billion to $10.4 billion, reflecting improved sales volumes, pricing and positive foreign currency translation. Gross and operating margins are projected to improve from 2020 levels, reflecting the impact of higher sales and production volumes as well as margin improvement initiatives. These improvements are planned to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives.