AGCO reported May 2 that for the first quarter ended March 31, 2023, net sales were approximately $3.3 billion, an increase of approximately 24.1% compared to the first quarter of 2022. Excluding unfavorable foreign currency translation of approximately 5.4%, net sales in the quarter increased approximately 29.6% compared to the first quarter of 2022.
“With continued execution of our strategy, AGCO delivered robust sales growth and margin expansion in the first quarter as healthy farm economics continued to support elevated global demand,” stated Eric Hansotia, AGCO’s chairman, president and chief executive officer. “Our solid operational performance, continued pricing actions and a stabilizing supply chain all contributed to the excellent first quarter results. The success of our farmer-first strategy, focused on growing our precision ag business, globalizing a full-line of our Fendt branded products and expanding our parts and service business, is generating strong growth in these margin-rich businesses. AGCO’s order board remains extended, increasing our confidence in the success of our products and the strength of large ag demand.”
Net sales in the North American region grew 32.4% in the first three months of 2023 compared to the same period of 2022, excluding the negative impact of currency translation. The growth resulted primarily from increased sales of high horsepower tractors, application equipment and combines along with the positive effects of pricing to mitigate inflationary cost pressures. Income from operations for the first quarter of 2023 was approximately $47.3 million higher and operating margins expanded over 320 basis points compared to the same period in 2022. Operating income benefited from higher sales and production, positive net pricing and favorable mix.
South American net sales increased 42.2% in the first three months of 2023 compared to the same period of 2022, excluding the impact of unfavorable currency translation. Strong sales growth in Brazil was partially offset by lower sales in Argentina. Increased sales of high horsepower, higher margin tractors, as well as increased sales of combines and application equipment and favorable pricing impacts drove most of the increase. Income from operations in the first three months of 2023 increased by approximately $53.4 million compared to the same period in 2022, and operating margins reached approximately 19.8%. The improved South America results reflect the benefit of higher sales and production and a favorable sales mix.
Europe/Middle East net sales increased 30.3% in the first three months of 2023 compared to the same period in 2022, excluding unfavorable currency translation. The improvement was driven by increased sales of high-horsepower tractors, utility tractors and Fuse precision ag products along with favorable pricing actions. Strong growth in Turkey, Germany and the United Kingdom accounted for most of the increase. Income from operations improved approximately $77.1 million and operating margins expanded 250 basis points in the first three months of 2023, compared to the same period in 2022. The improvement was the result of higher sales and production.
Net sales in Asia/Pacific/Africa decreased 3.6%, excluding the negative impact of currency translation, in the first three months of 2023 compared to the same period in 2022. Delayed shipments from European factories resulted in lower sales in most of the markets partially offset by sales growth in Australia and China. Income from operations declined by approximately $15.9 million in the first three months of 2023 compared to the same period in 2022 due primarily to lower sales and production.
AGCO’s net sales for 2023 are expected to be approximately $14.5 billion, reflecting improved sales volumes and pricing. Gross and operating margins are projected to improve from 2022 levels, reflecting the impact of higher sales and production volumes as well as pricing. These improvements are expected to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives.
In a May 2 note to investors, J.P. Morgan analysts said AGCO's earnings before interest and tax margin had between their expectations, as well as its sales (rose 24% vs. J.P. Morgan's expected 17%). North American sales exceed the analysts' expectations but South American sales did not.
Regarding AGCO raising its FY23 sales guidance by $500 million, the note said, "We believe higher volume underpins this revised outlook as pricing is expected to remain 8% as supply chain continues to improve and 2Q production hours are expected to be sequentially higher than 1Q’s 8%."
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