AGCO reports third-quarter results

A Gleaner combine on AGCO's Farm Progress Show stand, seen before the Boone, Iowa, show opened to the public in August 2024. (Photo: Chad Elmore)

AGCO, a global manufacturer and distributor of agricultural machinery and precision ag technology, reported net sales of $2.6 billion for the third quarter ended Sept. 30, a decrease of 24.8% compared to the third quarter of 2023. Reported net income was $0.40 per share for the third quarter of 2024 and adjusted net income was $0.68 per share. These results compare to reported net income of $3.74 per share and adjusted net income of $3.97 per share, for the third quarter of 2023. Excluding unfavorable foreign currency translation of 0.6%, net sales in the third quarter of 2024 decreased 24.2% compared to the third quarter of 2023.

“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,” said Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. “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.

“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.”

Net sales for the first nine months of 2024 were approximately $8.8 billion, which is a decrease of 17.3% compared to the same period in 2023. For the first nine months of 2024, reported net loss was $(2.27) per share, which includes the estimated loss on the Grain & Protein business held for sale, and adjusted net income was $5.53 per share. These results compare to reported net income of $11.10 per share and adjusted net income of $11.77 per share for the same period in 2023. Excluding unfavorable foreign currency translation of 0.2%, net sales in the first nine months of 2024 decreased 17.1% compared to the same period in 2023.

Market update

“Record harvests in the northern hemisphere are contributing to higher grain inventories and pressuring crop prices, which combined with elevated input costs, are delaying farmers’ equipment purchasing decisions,” said Hansotia. “Demand for new equipment has softened further in most global markets, particularly as lower farm income persists for crop producers. We continue to expect increased adoption of precision technology, but more challenging farm economics are resulting in weaker global industry demand across most equipment categories. In the first nine months of 2024, retail tractor industry demand fell by an average of 8% across the three major regions.”

The company said its North American industry retail tractor sales decreased 11% during the first nine months of 2024 compared to the first nine months of 2023. Sales declines were relatively consistent across the horsepower categories with higher horsepower categories declining more in recent months. Combine unit sales were down 19% in the first nine months of 2024 compared to the same period in 2023. Lower projected farm income and a refreshed fleet are expected to continue to pressure industry demand for the remainder of 2024, resulting in weaker North American industry sales compared to 2023.

South American industry retail tractor sales decreased 9% during the first nine months of 2024 compared to the first nine months of 2023. Declines occurred across all South American markets with the most significant decreases in Argentina and the smaller markets. Demand in Brazil was negatively impacted by the floods in Rio Grande do Sul while a challenging first harvest in the Cerrado region continues to affect farmer buying behavior. Following three strong years, retail demand in South America has softened significantly in 2024 as a result of lower commodity prices and farm income.

In Western Europe, industry retail tractor sales decreased 6% during the first nine months of 2024 compared to the first nine months of 2023 with the weakest conditions in Italy, United Kingdom and France. Industry demand is expected to remain soft for the remainder of 2024 as lower income levels pressure demand from arable farmers, while healthy demand from dairy and livestock producers is expected to mitigate some of the decline.

Regional results

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 unfavorable currency translation and favorable 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-horsepower and mid-range tractor categories, as well as hay equipment. Income from operations for the first nine months of 2024 decreased $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 unfavorable currency translation and favorable impact of an acquisition. Softer industry retail sales and under-production of retail demand drove most of the decrease. Lower sales of high-horsepower tractors and combines accounted for most of the decline. Income from operations in the first nine months of 2024 decreased by $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.

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 favorable currency translation and favorable 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 $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.

Asia/Pacific/Africa: Net sales in these regions decreased 22.6%, excluding unfavorable currency translation impacts and favorable 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 $30.8 million in the first nine months of 2024 compared to the same period in 2023 primarily due to lower sales volumes.

Outlook

On April 1, 2024, AGCO acquired an 85% stake in PTx Trimble, and Trimble retained a 15% stake. AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on that same date. On November 1, 2024, AGCO closed the previously announced divestiture of its Grain & Protein business.

AGCO’s net sales for 2024 are expected to be approximately $12 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 $7.50.