AGCO - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO Corporation 2017 third quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank of may Director your Relations, Investor Peterson, begin you conference. Greg

Greg Peterson

call. Welcome Emily, third of conference and you, to quarter good earnings AGCO's Thank for morning. those us you XXXX joining

this We morning website will www.agcocorp.com. a refer slide at that posted on to we've our presentation

will which reconciled measures non-GAAP to Appendix portion measures, in that presentation the using of be GAAP We are in those slides.

will statements. materially the available periodic contained Exchange Commission, you today. documents factors from and cause from the XX-K call XX-Qs. results company's any to Form actual differ and on plans; acquisition, statements this respect subsequent to any XXXX, costs development later our We'll expenditure the time also statements the plans product expansion year in Form with We morning, are you and that and Securities benefits. flow, and earnings, reports that for our that plans; timing those share modernization our website obligation demand; statements to repurchases, as important predictions forward-looking cash differ may the be actual those replay required including and file this make A of to forward-looking of other will wish future and and to except those We tax refer the expectations rates disclaim corporate forward-looking update benefits of those and timing financial materially. plans caution These December capital production price the the including XX, to with other We levels, that of discuss discuss we these revenue and and events by levels, We law. ended could time metrics.

Martin, me Beck, Senior that, Richenhagen, with morning Officer. call go Andy President Chief and Chairman, our ahead. Executive the And Vice and with our Officer; please Financial and Martin Chief President are On this

Martin H. Richenhagen

call on today. and and third or results all slide We on around quarter expansion My growth everyone find We challenging X, margin morning. year-to-date joining Halloween will comments market where our the solid everybody. Happy AGCO appreciate Thank of you, despite and sales to regions. you delivered start quarter across results. good Greg, us summary continued conditions. a the in produced

in development quarter third increase earnings compared AGCO's our we efficiency be of our efforts to to over working sales margins. grew basis to also and XX%, Our continues expand improve recently more for the in in are hay Planting, division growth of XXX Long-term XXXX, Dutch reduce expenses our product climbed factories. XXXX. operating point leader operating two acquisitions. well appetite the focus, and reflects our completed enhances key through of industry offerings acquired portfolio. third In by is innovative which our results expanding X broaden October months supplies. significantly which globally. of unit acquisitions Precision for the global sales product September region by the pressuring grain world's completed of and Lely planting protein population details retail internal by almost the and and a first The purchase forage financial XX% benefit a technology. to as we And driven we a product of Slide product lines nine the bolt-on its We the forage performance as Group, quarter efforts

on improvements. growing the commodity and enabling The grain. Another is world's improved this farm to maintaining global conditions are for keep positive the farmers very prices. grain farmers' pace during demand with contributing inventories productivity XXXX, will strong only USDA to Both core production decline year estimating is modestly technology growing pressure

have North row fleet be to of industry XXXX. of Europe stimulated compared has the expected declined America, levels weak. Italy, soft up the in tax most Industry has dairy market. retail first and holding nine France sales segment to from first mixed incentives. year, French The Western have Full-year by in segment. the Growth remain the last of Commodity equipment producers. age the sales in retail experienced stabilized XXXX. down months slide, market this and of benefiting Kingdom, been prices compared while XXXX, and are North in the on significantly are modestly equipment North farming half high months shown decline in crop at are of to in we softer United America industry in America tractors nine and demand were farm in Small industry arable Industry demand XXXX. begun in low sales As sales from improved sales been to the levels Europe the in profitability offset and the have most first in which kept Spain in

Brazil of sales months shown remain challenged. in is South in year fourth XXXX, to in nine increased production schedule production the relatively the North first increased full slide in expected factory Industry Brazil but XXXX, demand industry America Production demand nine regions versus last XXXX. expected retail quarter as in increased the in in level months in America to months South in order demand For XXXX is dealer flat up, nine is reduce first grew to first year's America levels in robust, compared demand of on of to We X. South first Western XXXX. during last continued in of and for production response during Europe XXXX inventories. Europe hours America the to be those expected lowered to is more government market growth. The Argentine supportive industry as depressed to remained experienced be demand strongly policies stimulate from half year. Full-year XXXX

up September XXXX. about up will results. expect Andy? the of total now Andy over order end last our by to relatively September will at about who year is production Europe South be end for Orders were board year. the to information company higher to We versus the turn our the of quarter and X% call in compared for tractors Beck and full in third more you North I flat America. provide Globally,

Andrew H. Beck

compared on will X, quarter excluding third at performance increased first the approximately excluding AGCO morning start of of quarter XXXX. Thank approximately third the The sales of which the sales X%, regional the positive everyone. an well benefited XXXX. in XXXX Europe/Middle quarter positive compared growth AGCO impact currency of XX% XXXX. of you, and net translation, all third looks the the East Martin, of sales third quarter of impact third in increase segment slide by and the acquisitions, to XX%, of increased compared nine as achieved net from as quarter to sales for the months XXXX translation. good I reported which regions to to in of AGCO's currency impact

of X%, compared quarter American and approximately United quarter third approximately impact in the experienced and currency parts X% were tractors, XXXX. of to high sales sales the compared in AGCO's acquisition-related Sales third mid-range of in net approximately Scandinavia. South horsepower EME by $XX XXXX of were and Strong in as strongest about sales combines. increased the partially during America X%. sales declines Kingdom, up growth sprayers was quarter North Excluding excluding million, France, growth quarter increased the levels the in third offset to XXXX. well as translation the the XXXX third the

X% in approximately by much about sales lower currency were the quarter $XXX Asia/Pacific was million mostly Asia/Pacific/Africa in Robust Argentina the accounted third excluding XXXX, Australia increase. sales to Part segment compared the offset demand segment compared period in the of of currency Excluding translation impacts. sales up XXXX same for our Net third negative impacts about positive in XXXX XX% Brazil. of translation. quarter the in of Sales – were increased in for XXXX. and to

translation. margin impact performance. positive currency AGCO's Slide the examines and of X Excluding sales

quarter XXXX. by in in to sales XXXX. with sales the first up contributed the offset margins Our Sales performance and of months also XXXX all North excluding to period strong Asia/Pacific/Africa benefit the improved expenses ongoing point third results as The Higher on production quarter sales same America but the Operating in period were benefit new East XXX material region in continued productivity region costs sales of of the all our XXXX. XXXX our X continue compared inflation and and including as in to of and the growth. both of third third emissions be produced basis year. details GSI technology. same quarter expansion quarter from acquisitions to margin increase the improved our impacts operating of of an third by cost nine and efforts Europe/Middle Operating mix, sales transitioning margin Tier Slide American about reported to sales X and material highlighted GSI targeted the improved sales points labor basis SG&A to increase. same to and compared for the by compared across contributed focus South due well cost higher the associated XXXX. of in production, higher regions at were about to growth benefits The product. XX%, cost currency improvement. in the of to of last approximately period margins addition The margins initiatives region XXX reduction richer operating most of segment of margin

production basis. to through were a up research the being is and expected investments equipment billion positive currency offset sales. and lower and the on looks Slide XXXX. and protein GSI Excluding $X development. acquisitions, X Organic grain sales impact feed reach of expenditures are of sales growth GSI about equipment capital in sales at X% by constant

the intend to improve investment environment, our continuing productivity. development and make refresh and our system are our increase resulting strategic increased we lines, in CapEx the product We execute factory of plans demand Despite to challenging capabilities and spend product XXXX. in to investments engineering to upgrade our level expand

flow capital activities is our XXXX or to long-term maintain in and business. XX which needed plan expenditures. our Slide spending AGCO's addresses growth cash operating the cash generated Our support used of to less free in represents competitiveness

in requirements greater flow of are first nine in thereby first in months half the of the Our free for cash XXXX capital seasonal and and both working year the XXXX. resulted negative

we We inventory X are the At XXXX. strategic spending strong products cash South we during during investments, remainder a the second covering new year. number Tier targeting decrease free company combines and as of emissions year our month versus month-and-a-half of was a tractors combines the all lower for dealer for North trailing America on flow one year by ago. in another America end tractors, a our of an release expect half of year After the supply The ago. September about a basis a for were than equipment and lower dealer the XXXX, XX-month and hay inventories month for on year

important component allocation an for our focus on returns our to long-term expect we capital make of distributions our we As shareholders, cash plan.

the in $XXX also the share program executed Over three $X have XX%. repurchases years which approved share of count we December million reducing that by a expires our billion past of We've had XXXX. effect approximately

We are XXXX in recent this assimilating leaving our year, share XXXX. repurchase acquisitions capacity and

dividend first our also years. As we committed to we in the growing demonstrated the responsibly coming in are quarter,

We expect programs with flow. to cash fund operating these

XXXX for captured markets regional three XX. major Our is slide the outlook on

Our and to XXXX continues environment Brazil, farmer healthy South modestly farmer-friendly stimulated In improvement production more macroeconomic Further instability decreased America. demand. for as XXXX have government has the is levels the policies expected sentiment. weigh Argentina forecast from market on crop in of the

be equipment XXXX. down industry XX% increase the forecast to of sales South be United X% estimates that The year, to be income and the is volume challenging industry the industry compared the to will USDA approximately the approximately compared of agricultural year, fourth be last an In to source quarter expected Our sector decline. we lower in another to resulting XXXX year, this down full farm in year. America XX% will the North again with large States, America expect in XX% to for assumes

assumptions offset Lastly, Western sector in to under to market cereal we flat, dairy outlook. weakness remains our livestock expect underlying farm is be as be producers. continued by Slide XXXX. the the the pressure highlights XXXX expected and European XX from Improving income relatively from demand

Asia, softer by demand offset Our South XXXX North across growth forecast America industry partially and assumes in America. industry

by and improve progress exchange Our increase expected points expected price influence XXXX, $XX with by productivity rates, XXXX. efforts, cost about currency current plan as increase translation million about to increased margins X%. to At benefit to includes In to continued the positively compared our increases sales production, engineering Acquisitions market purchasing initiatives. Operating to and of expected our consolidated due basis XXX share fixed by on approximately we approximately X.X% of sales on sales about is expect improvement, as are to are X.X%. well expense a basis. reduction

selected of our approximately tax range. goals. $X.X We view the an lists XXXX XXXX. We're be Slide sales XX billion financial effective targeting projecting in of XX% for to are rate XXXX

margins and assumptions, also higher adjusted we the to from of on earnings these cost We our positive reflecting volumes expect share gross share. and improved are Based $X.XX per impact operating of XXXX approximately reduction targeting be XXXX, per efforts.

We million with to $XXX to that, million and to are expect $XXX million. capital range of million cash from And expenditures $XXX questions. operator, ready to take flow $XXX we free

Operator

And comes Shlisky Mike our of Seaport from first question the line Global. from

open. is Your line

Michael David Shlisky

Good guys. morning,

Martin H. Richenhagen

Mike. morning, Good

Michael David Shlisky

quarter, into could Hey, bleeding I for doubt are first. QX, you too XXXX. or QX soybeans the go you're just want looking XXXX? margin Brazil be single The about at But hearing the in about I in of in erosion I to keep wanted some on that there some area. ask challenges challenges a into temporary much possibly forecast

of kind appreciated. any the you on duration weakness color would of provide Brazil So in can the be

Greg Peterson

feeling as farmers. farmers We So, the And up some of really benefit prices, quite we've some through we've market tougher stabilizing back also came economy. the exchange this to very part a strengthened and good. of been know, come gone with And period the through a through weak more saw then in and the the margins for then we've year. uncertainty. year, also a period of pullback saw first economic comps favorable you as year, the from commodity of benefit Mike, the were as into rate the We last a macro we end haven't at caught

more So of now seen in we've a demand. stabilization

don't look fourth major forward, market. for We're at this that growth the So see in we pullbacks into looking or as point looking we conditions expect to to stable major quarter. continue

Michael David Shlisky

first – of parts more there certain of U.S.? to the be early thinking you it. here, the as are me for in the then region any like for sorry, And programs what world And give Challenger is books here of the by some delivery? that got globally are order might sense you XXXX Okay, could the XXXX sense part the order broadly, any with or in outperforming year

Andrew H. Beck

Sure.

our In orders America North in terms said, of orders, as flat are South America up our relatively are and we healthily and segment. European

about our feel situation. order we're overall, good So pretty

much are quarter yet. covering products North those are XXXX in and order I for some do demand still will orders In there. quite of XXXX, – getting terms of well of most America, boards we say really that getting the have in and fourth extending not terms doing into orders those seasonal we're already

So is expectations so far. our with in line everything

Michael David Shlisky

that accretion with thinking deal? that officially now you've Lely that now. one we in I the initially quite of kind now did one what you what the could from of If Okay. your the and concerned think seeing squeeze a you right I the you're forage might at third acquisition mention new and here. hear deal not hay right be that be weak were just should market Is closed competitors

Martin H. Richenhagen

see that as years done this as prices has very ago. all in don't Europe, almost milk stabilized. at Butter so has business it We well twice expensive two been is because

So I think Europe business the recovered. in dairy

Greg Peterson

Mike. Thanks,

Michael David Shlisky

Super. so Thank you much.

Operator

Our of question from from Nicole Deutsche next Bank. comes line DeBlase the

Your line is open.

Nicole DeBlase

Thanks. guys. Good morning,

Martin H. Richenhagen

Nicole. morning, Good

Andrew H. Beck

morning. Good

Nicole DeBlase

talked about for Europe. I a surprising quarters little order bit have know guys a of up double-digit you in So is the just being think, my bit lot around two more range I first to was the detail question people. a which, activity past

had is the similar if magnitude what of of the year. So half you in the seen I'm first to strength curious

Martin H. Richenhagen

is. it Yes,

Nicole DeBlase

just Brazil, the there about is caution for in risk recovery of and temporary all like maybe prospects guess issue I in region, the at profitability? or comps totally at when change so And that around the think XQ. then this understand medium-term an you Thanks. on weakness Is passive for any farmer the Okay. tough a Brazil? basically is

Martin H. Richenhagen

fundamentals we the temporary in in just a Plus, a our need yet. but not it I year replacement next about still putting because don't I'm process all slowdown talk that plan Brazil, for so more We're as pretty good. together. look of certain see there's pessimistic

Nicole DeBlase

quick, understood. in more were since Martin. pretty Okay, sneak okay. just And I'll Thanks, those that's one if

progress So today think you what you're that thinking North and about retail do XXXX? in you based quarter, in in demand production for inventory on are talked more America, fourth you in produce where you can about with line the

Martin H. Richenhagen

Yes.

Nicole DeBlase

Okay.

Andrew H. Beck

Yeah. Nicole, fourth quarter for is quarter a big us. retail

of at hard assume. here the achieve end And the So to doing what working year, is take year. the we'll end we'll at targets a be I obviously that look of our

shape, to I that said, year. again going Martin the be we're end a we'll of lot of the good in think cases but check at As in

Nicole DeBlase

I'll it Thanks. pass on.

Greg Peterson

Thanks. and one follow-up. the questions let's Thank operator, to limit And, you. one question

Operator

course. And from question Blair. William Of next from of the Larry Maria De line your comes

Your is open. line

Lawrence De Maria

question, Hi, to for I bit don't there out to combines. specific thanks. maybe expected a expense Good call know the morning. up out is engineering A combine more And than and new if call for you the like that around anything dribble there year. expense out should engineering that Is now the down peak going anything kind that start through of can us? now we're there launch?

Martin H. Richenhagen

should going normal think and pretty expect the No, numbers down. I it's you a level not

So X% to in we and of revenues that's invest are what we we that maybe that should means X% engineering, about think doing.

Lawrence De Maria

Okay.

Andrew H. Beck

is increase Larry, Yeah, the of acquisition. new some currency reflective that of and

to So relates $X about that that. million of

Operator

the Casey line our question Andy from from And Fargo. Wells next of comes

Your is line open.

Unknown Speaker

going rate right? good rate on quarter. Hi. a you from and the like reading slower year. looks for into seems like it of that it question regard Andy. very production I Am lower in with QX, you're the A This deck, Pika the (XX:XX) end previous quick is Thank production much the implying George to

Andrew H. Beck

America, in but to made few in production have adjustments South Europe. increase in also we production a levels, Well, mainly

for changed; year changes of bit our and the there. here production So really full a overall, hasn't little

Martin H. Richenhagen

Very normal we on do adjustments that.

Andrew H. Beck

too big But change. of a nothing

Operator

line from Suisse. And our from next Jamie the Credit question comes Cook of

is open. line Your

Unknown Speaker

actually is (XX:XX) Femis on This Hi. for Jamie.

you costs also Just to Maybe on material a how through relative pricing. assumptions prior question talk regions, pricing could guidance? you. address and your dynamics changed on have by Thank

Andrew H. Beck

Sure.

in Our X.X%. it's get. prices, the anything And costs. We those pricing, to offset quarter in to did to don't on still cases, is that's And is get. try to increase offset overall challenging there. challenging say The inflationary overall as we Still to from just from that's haven't some pricing I some in changed would increases continue to so think South been about quarter normal. again, of assumptions, to and are place. from pressures side changed. pricing fairly during I steel year markets weak Europe They're in the in in put America, general inflationary exchange as rates well pricing there

of of the for quite inflation, terms our forecast knows, we're change to less net is XX of of lot material terms prices, would be pricing, we challenged increasing for positive by and full And as prices cost, the what our those year. commodity well. we're other in year. look everyone cost either material a to In there being for the been hasn't is basis the which the there say X.X% but managing I point our hard balance steel in XX

Operator

from the from comes America. of question Michael of next Bank Our line Feniger

Your line is open.

Michael Feniger

for guys. Hey, my Thanks taking question.

puts for material was you're I South reasons. talk margin regards transition. and Tier you I pressure on about what this next America, the year with the guiding X been for takes and of not few XXXX, margin pricing, year you're hoping seeing Just know but the a the cost, to with has under could

Martin H. Richenhagen

do XXXX, talk sorry. We not about

Michael Feniger

you're just order then mentioning Europe, double-digit on And growth. Okay.

that weak hoping month that could square color strong last some how You're by we data was two. about away seeing you how give Thanks. region, some is or registration the us with sales. via should just I

Greg Peterson

Yes, Mike.

quarter Some emissions in for the of third year X we've went was seen that inflated requirements Tier the that the last and numbers registration weakness due through. September the over especially interim to around

orders UK close those stronger be getting year. if seen have and back really the softer. been through I last there first the flat the closer the orders Orders you in in slightly to France much have picked saying and other We've actually some for out, we're think in down. of so over Germany few the And slowed have the year, market part up we're that to big full months, the

forecast So I towards it's But for we're full mixed bag. we year. that been think have a flat the trending that

Michael Feniger

guys. Thanks, Great.

Operator

And comes from question line Duignan sorry? the from Again, Ann last JPMorgan. our of

Your line is open.

Thomas Simonitsch

morning, Good this behalf Ann. of on Tom Simonitsch is

Could pretty for you bit? You optimistic that us expand a seem about the dairy little sector. on European

Martin H. Richenhagen

than I With in the been, of Ireland, prices see are stable course. that of signs think recovery the No, we so and have exception they therefore more of sector.

that's I you. thing So the only share with can

Thomas Simonitsch

on you closing. on Weber of impact perhaps could also you recent Kepler that acquisitions And most your of And and the update two also, deal expand guidance. on Okay. if XXXX could, the likelihood us

Andrew H. Beck

Sure.

quarter In a have terms we Precision Lely, the businesses. in we and two Planting that those for not it's seasonally them of slow will Timing-wise, results. fourth period are acquisitions, acquiring our fortuitous during in both

will turn products seasonal of and the because half So to around will to of fourth the year. quarter seasons one those in those those in in are targets. seasons part next for the that best our when order things here be dilutive have in first first we'll full-year for the somewhat the – are, be year the offset us But of maintain it

tender of and We're we time. initiated forward company's In monitoring at still about with offer any the performance Kepler made not moving haven't terms yet. the situation this the Weber, have decisions

Martin H. Richenhagen

not say right they're let's very so doing underperformed, they well now. And

Greg Peterson

And just about then wanted our of in to fourth last thing was terms tax Tom, the the lastly, we say quarter rate.

will it a our noticed, previously and didn't we effective we had was fourth the higher quarter. change than be rate, we tax planned in little than it third quarter, a full-year in you lower anticipated the little If and

want is make that. we we taken that of note so aware everybody didn't and to sure has and net-net, of So change, make just any

Thomas Simonitsch

Thank you.

Greg Peterson

Operator, do any we have queue? more the in questions

Operator

UBS. next our question Yes, the we of from Fisher comes Steven from And line do.

open. is line Your

Cleveland Rueckert

Cleve Rueckert on This for is actually Hi, thanks the for taking question. Steve.

market can your expectations update give what think Can us other market quick some on maybe an China? share of is production just you the QX, ones. update then in us is regions? And question trending yet. where commented Just for share global of the that your you don't on ramp-up kind I are in on and my you

Andrew H. Beck

Sure.

of In markets, are market terms all performing our shares, in so of shares improving. our market we're well really

see that sales can in the You what increases our organic that and results within sales industries. happening is above our are

So positive how we're we're very about performing.

out of products introduced, facility and China our our customers large new Some sales our which is order Series and we've coverage the of activity. that Global offerings, it's from tractor are new good whether or feedback good some of our producing good both

So we're very performing a basis. positive how we're on globally sales

of number segment, see that as there. facility. of the the models the And are the that to there improving can out in of to within product range Asia/Pacific/Africa that's the the terms we're you continue production the levels facility, producing in and we product margins continue and improvement and tell we production In that advance of our China because

products facility are very performing received and, that market in So is well the quite being well again, the

Cleveland Rueckert

Thanks, guys.

Operator

comes Our of the question last Jerry line Goldman Sachs. from Revich from

open. line Your is

Corinne Jenkins

for Corinne Jenkins Hi. This is Jerry. on

that touched was was and hoping I on supply also compares how us month color is in on basis. basis Europe? you've could North on absolute give hoping a an on in you So America I then that what dealer – of inventory little a

Andrew H. Beck

Sure.

of there. across quite the we'll inventory better. ago, we're year, targeting a And what between so we've XX% that's the America seen the our We're of dealer over the XX% our of versus somewhere little down better inventory In is hopefully in hit for at than year. almost and South progressing year little and end terms most well a to year levels about the inventory ago, industry. full XX%, Dealer XX% targets dealer bit versus is a

And is being point, higher little we've France. already as recovery I well. that's think our a dealer in Europe, So anticipation at managed then it's some in market the particularly this lastly of in in described, but inventory

Corinne Jenkins

thank Great, you.

Operator

Mr. back further call over will there Peterson. at this I turn And time. to the are no questions

Greg Peterson

around great to listeners, just please like have I'd Thank our of encourage have additional We'll your Emily. later. you with here take a questions, Thanks, all follow if and questions. to be us you, up to Halloween.

Operator

concludes today's conference call. This

disconnect. may You now

AGCO (AGCO) 31 Oct 172017 Q3 Earnings call transcript