AGCO - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2018 Fourth 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. now to is over the It Mr. to Instructions] my hand pleasure call [Operator of Investor Head Peterson, Greg Relations. ahead, go Please sir.

Greg Peterson

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

to measures We'll and a product expectations GAAP to measures those reconciled forward-looking those find this we’ve those timing you refer the will also the our The slide slide statements plans, that including non-GAAP capital modernization of our timing demand, benefits. acquisition We website and development, costs www.agcocorp.com. this to with and expansion of appendix. make of plans in morning in and presentation plans, that the posted expenditure morning, used at are to will and presentation plans, benefits respect

obligation A discusses dividend by you our about year update cause our from actual and materially statements required be available tax Commission, including Form Company's this XX-K This for to on the file rates that any the contained time in that as the talk production those from later forward-looking of Investor except and Relations refer you law. we price Exchange We earnings, We repurchases, factors to December in any XX, statements. call Securities periodic XXXX. metrics. that the differ results caution document disclaim actual website. results the financial to differ reports statements important could ended may replay share to will forward-looking our levels, wish cash that rates levels, with will to time these and and flow, materially. revenue, We future predictions We are other

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

Martin Richenhagen

the for us XXXX Thank We year everyone call achievement significant and AGCO. on you, good morning. of joining appreciate a today. Greg, was

important new farming products, investments targets, our we and to made support our meeting launched to capabilities, smart expanded addition In financial our growth. future

while in comments cost will our three quarter We also of well where efforts progress results. marketplace. on My reduction year summary a full to fourth continuing perform our find made and start on you slide the

across and our are growth. constructive Solid and market operational developments business driving regional units earnings performance sales

quarter fourth on Our regions. a currency higher sales of about all with the sales compared fourth constant grew to X% XXXX basis across quarter

and of In $XXX generated of addition, increase per We full fourth free was earnings XXXX. XX% cash was XXXX. $X.XX quarter million flow adjusted $X.XX, nearly and cash for of million share over over $XXX from operations the in EPS flow an year

by is tractors Industry government declines slide were for positive first in America AGCO's where X% Brazil region compared Global terms most most and grain Equipment helped harvests full Western in and while across to finally, the demand about increased for harvest. demand Kingdom. down to Conditions the remained And offset stock Europe from where harvest results in Despite Record Our from maintaining those Union, up more response built our strong for in strong was weak results. growth sales ahead sales North in sales in economic higher transition fourth South five. due Industry conditions. improved information were Production after moderately turn will our of were in in I of poor now production Replacement positive most improving farmers Brazil XXXX. repurchases was making and North in the consumption, details a sales emission growth. about you many into over XXXX. increased of will modestly in significantly improved our of caused was growth grain our Industry Argentina resulting offset on production Australia of retail cash industry year. healthy and the levels. balance global Europe, generation retail was in over for flat second across increasing areas. changes mostly Europe grain those equipment four the by offset the year and a investments to unit compared in quarter the European allowed by Company XXXX Western ultimately $XXX of after were South much prices. business only XXXX America half financing Andy XXXX. retail to regulation to book we dry America order flat the for were dairy XXXX who tractor in to hot stable Beck, business million announced. the combine XXXX. programs segment European year American America factory of offset levels while December and ago. the demand summer XXXX compared continue prior the share weak tractor farm in Slide XXXX. pressure year North United provide sales the in more in markets us versus substantially demand the relatively to industry Argentina conditions maintaining XXXX more general weaker modestly markets in the local South demand call complete sheet. shown the was America in the demand Market important by dry inventories hours on was XXXX, Total production commodity in lower during decreased region and schedule to of by and

Andy Beck

tools regional sales growth on the increased impact X% fourth strongest and of and the XX% XXXX. the most currency storage was quarter Global to fourth sales to accounted Thank hay excluding impact of of XXXX, quarter compared Sales currency to of lower American XXXX Europe/Middle $XXX start sales translation sprayers in translation. in The in performance quarter the for fourth Central East the fourth of North six, in and X% to lower part for constant compared currency AGCO's translation to increase period the quarter in the compared of sales AGCO's morning France, of negative compared was a the Asia excluding XXXX. fourth offset the America sales on by approximately XXXX, net excluding translation. fourth which and XXXX, fourth to tractor Finland. AGCO's quarter XXXX in reported slide were same excluding offset approximately net everyone. were net impact South of Europe sales. compared for Argentina. in negative approximately XXXX, and good about I'll quarter the sales negative in looks Growth full-year about in Asia/Pacific/Africa segment by of negative sales XXXX. impacts. of Brazil of compared currency equipment, Martin, grain segment mostly Growth increase. quarter our quarter approximately X% X% increased Net in fourth quarter sales the impact increased at XXXX to you, down currency approximately XX% was fourth increased growth excluding negative the currency. basis, Sales of million the an

warranty in in to approximately adjusted to in a improved basis, South cost performance. sales, period production and America Progress as XXXX the currency seven market grew XXXX. income, Operating benefited $XX the For AGCO's $X.X impacts. raw significant contributed impact the business, million weaker X% the to steel benefit reported decreased transactional up production compared and in the technology constant income period XXXX, movements lower demand compared material American an Margins million pricing, $X.X sales of the our increased last currency of margin the fourth steel of increased production. sold. compared in quarter of transition, higher and costs. margins of well material compared increased of GSI's of part on product Sales to fourth increases, the modestly mix, were storage due as increased income and a in operating material growth XXXX, the of by where cost increase these other quarter in XXXX, was year. Slide same on East from offset sales The to XXXX. examines the the resulting makes increases XXXX. quarter quarter Europe/Middle fourth goods North cost from full-year, higher higher percentage improved quarter segment fourth offset to same significant compared most and AGCO's to million sales grain operating fourth costs of the margins operating improvement. and

make upgrade lines, We system population and and investments our at product. growing our protein quarter flat investment investments to and XXXX grain year. XX%, XXXX, refresh seed excluding the rich meet productivity. details our X% margins all the North continuing segment, sales consumption execute in sales source While both research years exceeded currency AGCO factory about production America to protein to improve Globally, compared expand expenditures, Asia constant sales eight looks equipment an for Brazil East development Grain increased basis. on both of our in trends growth should a XXXX, product to in modestly development We're in fourth and last seed with capabilities and profitable decreased the Europe/Middle and emissions by of plan ahead. our currency growth and global AGCO's regions grew XXXX. intend regions. operating compared new GSI make The to requirements sales the region income quarter impact Slide GSI maintain Europe. fourth to and our across increased a approximately sales due sales Slide and business grew significant level Asia/Pacific/Africa mix most through of X%, GSI nine strategic except and in product Pacific approximately the to capital toward were in while and expense. operating attractive

and is Our maintain of to spending support needed our growth long-term the competitiveness to business. the plan

of beyond XXXX, totaled which look programs capital XX engineering, to operating we factory free cash new less AGCO's resulting both initiatives. funding expenditures. we Slide flow, CapEx product to X.X% efficiency from and cash after see sales. million our flow addresses from and activities cash for $XXX Free X% development As expect range XXXX represents our

continue and of generated few remained return has solid, shareholders. and result the flow years, cash strong we that free AGCO the a to to sheet position over As our cash balance liquidity last

XXXX, are XX, At covering For supply month and lower XXXX, strategic American combines. cash tractors, flow on trailing North a targeting dealer our was after on our hay we free equipments another basis investments, strong year. XX-month December for spending

$XX.X to North associated expense other same in demand be net, in during fourth XXXX, to receivable the in XXXX. XXXX. our million receivables million We on our are approximately Losses American were production with quarter with for of included sales compared which financing expect of line the of period retail facilities, $XX.X

for repurchases X.X Over continue focus we've distributions effect has we we an cash our of on those As shareholders, important allocation of over years, return the executed long-term XX%. share our past expect by component to plan. to count $X.X had approximately reducing share billion, which of capital be

completed repurchases flow. million we continue look share XXXX of strong XXXX, another of $XXX supported in by share cash During we repurchases year and to

XX. outlook the slide North compared on XXXX. down the major Our farm in be United USDA XXXX modestly for the three America regional is captured projecting income XXXX to markets States is to In

favorable America Brazil by Industry XXXX. XXXX outlook. to the South XXXX in the modestly production. XXXX demand sales highlights sales sales levels, sentiment in to to the priority across Western and be improve The historically are these economics and in for prices crop are our Farm be is assumptions Slide we demand improvement business be products equipment expected be XXXX expect and assumptions, and to to gradual to compared retail soften costs positive lower Europe continues by XX recovery. high primarily horsepower from across continue While expected equipment on are partially expected managing Argentina. invest underlying are our remain in driven European continuing low more XXXX, to Based markets. stable in wheat normal improved our opportunities. to their expected to in horsepower to expected sales Higher to offset high

Our all regions. forecast relatively demand market stable assumes industry across

in by range expected expansion expected on are about Our includes higher XXXX. X.X% relatively expected flat all throughout market basis. negatively impact to levels to Operating of consolidated by is XX to expenses our sales and benefit the share engineering by purchasing with about XXXX initiatives, Operating across America In regions investments projected XXXX. are basis we're plan price be rates, X.X%. At initiatives. South compared productivity Margin current translation be improve margins sales our in points to XXXX, due exchange long-term improvement increases expect are XXXX. partially to compared a currency and margins making we to in the the to improved X% to offset in

South first horsepower America and range. transition from margins half our lower Tier will to be the pressured impact production lower of XXXX for in X of our the technology

We $XX to XXXX and XX% XX our are view million tax XX% targeting Slide about an for goals. financial of expected lists other of effective expense interest rate and down to XXXX. selected be is for XXXX,

are XXXX in projecting be billion We to $X.X the sales range.

impact and margins earnings expect in cost-reduction of XXXX on $X.XX. from Based We XXXX, positive our efforts, we gross higher strategic targeting per improved offset initiatives. are and partially of share sales by these operating be volumes approximately reflecting to the investments assumptions,

in to $XX to flow be range, recovering new after introductions. XXXX. emissions approximately first quarter XXXX be quarter of and down of We improvement inventory to and in builds expected new due cash million million currency $XXX regulations Europe, the terms above we to expect an product expenditures project the to free And associated million with in increase results, finally, in levels earnings $XXX capital to per first pressures. is compared our share, be slightly support to sales Margin

remarks. expect With to these our per $X.XX our the range. quarter concludes mind, be we Operator, in take details in prepared share to ready questions. That are we earnings first

Operator

the first comes [Operator with Markets. question Instructions] of And Seth Capital Weber RBC the from line

Brendan Shea

is Seth. This on Brendan for

guide, is XXXX pretty good expecting there. was color As good any we wondering if down free look a you're another step it flow mentioned you but I your year, was there year-over-year. could cash to provide you

Andy Beck

look these volume some accrued sales items, you if up some which Well, have our at drove - accounts got of we payable in -related benefit of growth expense. like XXXX, and

even as be benefit a little XXXX. we will down cash flattish a that. expect Those to see perhaps flow so, much don't And of in from or

So, there working be XXXX. will capital some usage in

performed that's ‘XX. in between difference main we how think So, the I ‘XX versus

Brendan Shea

of I And what big but I quarter, this, this if the that? then, source jump the missed apologize in production was

Andy Beck

for We in Europe Yes. both in of to Brazil. increased the in building production transition and emissions advance changes, ahead units

to low we advance Tier we horsepower in year And for next Tier in So, Europe X we and tractors engines in of in X equipment Europe are built built moving and Brazil. that.

can supply of the on that the As year, we a have get meet throughout these hand, products throughout new so released year. inventory full we market demands

Operator

Dillard question Your with comes from the of Deutsche Bank. Chad next line

Chad Dillard

your year. hurt America So, transition share manufacturing market some clearly South in last

And or Now that you on are loss mostly through that, can right you just you recapturing into give some share? progress baking are color points now? guide many how actually the that

Andy Beck

what's of in Well, XXXX I but over product a in America South happening transition terms lineup XXXX. is our think, big also

in we mentioned transitioned to all our horsepower XXXX. So, before, lower X Tier as equipment I

big there Brazil yet. there we through changes, get technology higher We it are year accelerate So, we're demanding. and us behind into work not still to marketplace is to hard global designs are think of Brazilian bringing the the These the are technology, farmers that another products that are new products our have of in production. those basically

as a in lot a products rapid will what's was manufacturing during So, products, And get in new that Brazil the created than as our targets on of base new facilities. in that happening had these XXXX well. well also, some to believe very we the we we cost getting supply disruption change weren’t ultimately which our change

of into that So, We’ve we've in that products been making will have products range already good progress the of some we’ve but we better XXXX XXXX. create in there, the a the America, still improvement that coming South market seen our there's with the we some another introduced our same results said we work And but do. be in comments, for in market. lot to in will progress believe challenges in of as us

our share, the In market terms of were to prior shares similar market year.

we think now. right help extremely with also products these that's a competitive new in will a market So, competitiveness us our

Martin Richenhagen

is into know is same western United direction as to What market is the basically Europe. or important Brazilian States that the heading

does and more modern. more product more become So, more professional and and

and have news be all good just have is, localized. products to the these they we So,

have good We that. to a plan do how very

do We And XXXX. high-tech do in continue the have started leader to to be that is South solutions also already to year, last to that vision when it in our America. comes

Chad Dillard

and weakness cover the back just the of also, you then, And talk can actually price bit order you GSI capture on going North there material to what And and to ability cost business, warranty little past America to a escalation? materials? quarter. mix, the was then, Can about margins impact rank your just like this just between just

Martin Richenhagen

Sure.

North full about definitely mentioned planning. so on America, have our product This part some quarter. first seasonality because our fourth to margins first a think lines. precision is year, in had we of is of seasonality is the remember impact quarter specific both we that precision in it is for you planning, the in stronger of fourth weaker had when segments GSI, their the those of as So, important year, margin, just an seasonally

only terms and have gross as our pricing was steel gross the our across we net pricing went especially the the But, in product especially cost -- did through of the impact, over In fourth fourth of that material was we our of year, of kind our about second year. improve We the the in increases, XX pricing line see quarter quarter, was half bps. because steel too.

our result margins as definitely we of a So, impact saw an that. on

more of in and year. our we half business that more have in pricing put the We the back

range. X.X% and the do for pricing be X% in XXXX have we to year XXXX, full in as more expect to have in We the we said

we in segment, other help caller. and Thank expect in America the businesses. And next for to do move GSI onto the which us will you, be the Chad. North will margins we So, better

Operator

comes Cook line from question Credit next of Suisse. the Your with Jamie

Jamie Cook

Andy, in do assuming the America? like America expect year? versus ‘XX in on margins to costs, supply you versus what And half half, you assumptions about lot in make South for you incremental you are talking question, just be some second comments the a money South ‘XX? but the are are going made us Can my then, And you half the understanding are color first quantify of Could continued on stuff costs first in your for of constraints, transition freight what peers what second just give broadly XXXX? to that.

Martin Richenhagen

here, position to with think and I suppliers our year because a do manage second logistics also year. were start will would position the in this in we to I that question including last a be

So, we in reflected our which this not don’t expect communication anything is morning. already

do margin. And think So, Andy? on our for substantial focus fine. will general improvement in we our of will be I XXXX a

Andy Beck

Okay. Thank you, Martin.

In loss projecting in how half, first half, about are quarter second the we of quarter. second first look breakeven we a and a terms

then So, -- what improved ultimately, second in in XXXX. the much to did still And we then, well. a but and in half as the loss expect over first improvement we half see

we above about XXXX, which in probably our was loss be basis we a what margins or achieved full net expect XXX obviously points to year. So, so for the

before, but suppliers, to some also our and and our the cost So, is does cost reducing have take new products only not through work as the pointed costs, it's to factory fund that I with the out in happening product we transition first products reducing to way the that time. these what's of

progress seeing we’re far. so said, I As

Operator

with question line Blair. of William comes De next Maria Your Larry from the

Larry De Maria

‘XX, in to know, that debt offshore are in moving peers. compared XX% the to right I get I you and move XX% direction, some the XX%, lower expected looking second from is half. your rate which guess the tax Andy,

to term move that tax process? mid-XX%, into So, maybe up in the Can where let's that And we right get the stand them what's rate? say? you long do

Andy Beck

Yes, Larry.

with all what virtually So, we've our jurisdictions, successfully out the balance debt, our have we other debt Europe. terms of of our and sheet into in and done particularly moved U.S.

interest really does benefit in So an overall that expense. the have of reduction

point. which XXXX. that in improvement America pointed profitability of But the legal losses million operating are out, at at this it in the North also, target our is $XX entities, improve line we items our As our helps below

we more drive and -- -- tax will so, overall be get to get And America position, North to that a profit rate. need continue to that drive to down

losses our tax losses. benefit don't our North we recall, for on provision you As America

reason, cost the And we well looking so, profitability our to interest move operating for U.S., U.S. much and out are trying drive to as of like in are up as continued for that improvement that expense the we

business So, we Larry, to in think as to we America get XX XX% or be the XX% this I levels, XXs. year. high said, can we If the profit North

Larry De Maria

your if would half can for -- Argentina margin, excluding of in rate the kind market? some run be, you the costs, and delineate a between normal first could And Brazil just the just normally expectations And friction ‘XX, margin what what going then, forward? the of calibrate of we

Andy Beck

Brazil, think, Argentina probably looking and we around Brazil, probably or in for So, year. this so, in XX% I increases similar low-double-digit are reduction

XX% maybe XX% to So, reduction in Argentina.

Your about was second you it, -- repeat please? question, Larry, can

Operator

moment. One

Andy Beck

the ahead move operator, to question. on, and go We’ll next

Operator

The Goldman next from Jerry question Sachs. line comes Revich of the with

Jerry Revich

you organic growth do how expect currency mentioned play than obviously talk Can you the cadence guide? to just can but You you the slower year? growth quarter, the first about organic you the the in really expect in over of out expect out? in quarter flush course are tough full-year cadence you that first the the do Andy, comps you organic

Andy Beck

around sales change, year’s at at progressing, numbers how look little how increases but and as those it’s QX. first of in growth But, In in how terms more that’s the the to at have of still bit. quarters below retail we progress, positive. subject the then middle this can sorts And we organic little our then, Those a we slightly softer growth, are year substantial quarter of all look point. it, the things move our

So, from out as you relating pressures. an to swings more on point organic big basis not It's currency really quarter-to-quarter.

Jerry Revich

year-over-year successfully the ahead that for drive Can expectations quarter planting you adoption your for of product? growth quarter Are end-market in first that business. really demand good precision is business? able for And folks your you just to seasonally about talk

Andy Beck

in that the some expect were of and growth to low majority their Jerry, of North has we relatively and well. see in been continue North development. you that in we know, look Europe new do are America, for and those as products, as business we end some to but product more opportunities, South Sure. markets to as with we continues actually America our develop particularly, to Penetration Europe as even significant then have you rates higher American distribution in

So next we more we more planting sales in are significant the the to year, expect do growth see to robust for business, guiding than precision business in total.

Operator

Your Duignan from of the next Morgan. comes question line Ann with JP

Ann Duignan

wanted the the on I for I are if about that back the And circle XX% harvest, right the should outlook to down fundamentals the be just at crop now, Argentinean sales they to to XX%. we look this in there to make get harvest money and QX year, And of farmers last should greater year. in crops. maybe they than something be sell post XX% XX% there once but not neighborhood those

given the am so significantly, you down to that I why fundamentals? market curious be expect So,

Martin Richenhagen

bit they and conservative should. like and Ann. somewhat conservative what have out you I in related more hear, people and there to too you a than I dealers, we little and coming our therefore maybe little bit we like of they say are depression here what Maybe are Argentina the

us. very So, like will to which if of right, be something would be you would it really good for then I course see,

Ann Duignan

indeed. Yes,

Okay.

So, you my second Europe is have I on Martin, around the line, and question, while UK.

Brexit. hearing kind expect on what all written particular? feet what's would you you impact the We see out been as in disruptions of post to closer strong are street? in about agriculture business the called You And UK But, very what in XXXX. your on being

Martin Richenhagen

very Well, we to and we prepared. we try basically that understand well are hope

UK main in we means produce that the don’t So, the anymore. -- disruption

Everybody customs. is at So, therefore is complications the disruption logistics. main predicting

sure important we there, product. inventory Fendt tractors, normal, make we enough well, basically little that And also buy you in on case. know go little then, our which have where our we than company very earlier we supplier there a rims on And maybe GKN, have have so, a tractors, so buffer

of carefully would disruption be like organized busy components which very very capacity. with be by very, something tight very some are is caused to that sense because So, any schedule rims simple And a has and in very bad. we course,

in therefore, because When of comes it. are maybe to market it manage lot to than that’s assume And a what the all stable than So, farmers stay whether like be that the hear. more will EU. such, true higher I'm approach Brexit core not we optimistic. as still but sure that’s try guys it we people of maybe the who of believe to farmers is the

Ann Duignan

are as we QX speak? will building that you that So, for is that mean, retail reason? above be impact a inventory you producing I

Martin Richenhagen

happen. will already It’s That Yes. happening now.

do in inventory to in our we trying in just now problem. are we’re make So, it to numbers order numbers. cash The and have sure a that don’t flow our

So, it’s nothing additional.

Operator

line comes next of with Your Joel the from question Tiss BMO.

Joel Tiss

out competitive there little Martin, bit what I seeing of the I landscape. in wonder, as a about talk terms acquisitions and long as hear, you're you wondered if could you

Martin Richenhagen

Yes.

consolidated see but didn’t we very acquisitions, As go about the additional our peers we we are to What last you it. has are all And is over for doing small many know time the opportunities. knew industry whether years. much are there the things some any some want of looking

are think too So, the owned, know of to smaller possible, because not and antitrust. serve. think, European big or not mainly And family are of many very most and overall, big feasible I willing are they issues. then, there be I owners three, them ones, The of deals combined probably antitrust interested well, because most I the cannot and

the precision basically smaller did planting. to the the with other the strategy huge don’t horizon. I therefore, We offering we deals or meaningful, as acquisition on one do have our So, see to product complete

the of where things we market think deal was into because a I something look similar startups us. that of great there. the might for you That find also future. And includes attractive course in sometimes

Joel Tiss

you you do whatever or like feel groundwork today? if be put strategic are the kind of out opportunities then, biggest that the it, you what timeframe kind years should five want And look for of on you laying you that for

Martin Richenhagen

in like -- groundwork the lay the leader would be echo We to profitability. I

above the company $XX us billion I And in so, be and I think in we margin. be a want will leader to sales,

Operator

comes Casey the Your from Fargo Securities. of Wells next line Andy with question

Andy Casey

about of bit For within were full a X%; coming thinking increased QX, it's production little the year, out X% beneath good, what but outlook. you that's growth

First, to modest it I a follow-up. North by compared was QX have And America else? outlook, driven then, was something that the or due shortfall to

Andy Beck

to I of we what within any adjustments were it’s weren’t expected. range in the that There think, just the QX. unplanned meaningful production

Andy Casey

on X% we expect XXXX, outlook a about production? the X% then, And for should to

Andy Beck

right. about That’s Yes.

Operator

of line And the from question next Joe with the comes O'Dea Vertical Research.

Joe O'Dea

with product I string to to here of on some I question particularly flattish, relative market the growth. characterize where guide After just some umbrella strong you stand. Fendt quarters in of But, in First that that’s an look Europe. doesn't post wanted to the implies you've past like out growth, continuing and rollout as a talked on a think driving you to meaningful check of continuation been the under It that. end

‘XX? in opportunity And of moving process? and opportunity Have so, Europe you to harvested are understand just just in you that growth there, in where basically set kind the

Martin Richenhagen

our In the Europe, our completed Route of have have with about we might you project reorganization basically network XX. distribution heard

to close getting get everything are we So, done.

exclusive. will starting forage be to of And market. of therefore dealers. all full hay acquisition in the And additional to be this in future, be full and offer last more we drive are the position started the line for will Europe Through that growth of our year. we equipment liner in efficient a more expect our -- We all Fella, now important because will in they some already already dealers

Joe O'Dea

only a I'm market America talking North on those but a getting gauge how if curious in just December, you reaction one then, complete? Bill, recently the flattish some getting of seeing facilitation backlog second any payments, Farm in and month what about kind following round things just order, program now sentiment you It’s positive are events? farmers’ those of in of there's just so January, removed And

Andy Beck

this at are the five, are consistent purchased where point. driving still America, what say a year that need prices you going what's ago. in lot factors would But, demand around the as Order a underlying North and there. for backlog no of equipment uncertainty maybe had farmers on a I their of update really still challenged we change ago want and with know, of years replacement front. still upgrade there's that a they trade conflicting remains -- to still six lot of There's to lot with commodity kind happening in margins

factors So, expect holding we improvement there are still farmers as we some some the overall, but said, back. that are

Operator

Gilardi [Operator Bank Instructions] Ross of comes the of The with next line Merrill from America Lynch. question

Ross Gilardi

much was more and you said North GSI talk onsite I I and business. mean, onsite a about Maybe about, storage? America mean, up the little that grain storage the trade XX%. think I despite that so would in grain think bit with in soybeans forth. you XXXX just war storage many just for so margin and was just pressures seed and talking How selling delaying booming the are business particular be I now could you right farmers would and

So, could little talk bit helpful. would if more a that you about, be

Andy Beck

XXXX, X% in was America, there at When grain increase Sure. look in increase. an you North GSI

the of store of sector So, A point on where relatively farmers the some grain there to farmer lot because out we see those to did again investments. of you more of than of also increases is But, large have lower business, mind some some were the the of and drivers increases. these been, issues. wanting are as in these profitability you of on-farm it trade has keep

as to short-term something still some them And of so, make are a for those of issue. investments longer more that they term hesitant see

surrounded business of a our storage commercial activities. around is Secondly, lot grain and

and big their last of because years. new and few and in their And back the selling of CapEx some on facilities pulled ADMs some things the processing of and Cargills to that. challenges, they’ve So, traders for logistics like to big co-ops

segment seen And opportunity as the so, in of have of growth that much we not business.

So, that's of that at we are for something that that opportunity point. looking to sign no this recover, but for

Ross Gilardi

the margins get Company Europe out, going to for aspirations to that steady have many And then, they now term, the this mentioned kind a several back the from been to in XX% overall. the for XX% to margins target European best years your mean, of where need margin be have I would industry time range now. Martin, longer target? XX% to maybe in years very you But, long to

Martin Richenhagen

Europe. Hansotia, and COO, and his one as margin initiatives an XXXX, of Europe, a has very we expect and but think Europe we on. we focus work in portfolio Eric less improvement brand new number overall, improvement supportive team are course, there. But, in more is the will we or some the XXXX issues outside have on opportunities priority the whole getting quite of Well, in that also also us

Ross Gilardi

Europe the in rest obviously objective the Americas kind of would of to low-double-digit and be and more that just So, sustain boost range, world? the

Martin Richenhagen

Yes.

opportunities we plenty in what do to the from also think of better Europe. learned we much process, I through have

Operator

final Fisher of the The line Steven UBS. comes question from with

Steven Fisher

would follow dealers just of no your did on buying? I outlook? wanted deal And, to your see And terms North yearend a affect in what trade American how retail North up America.

Andy Beck

year had terms a We in end of good retail. the of

of dealers and Our retail tractor of a our our number and throughout across was strong product performance for our number ranges ranges portfolio. the activity really in

with in how pleased products we’ve and are the again got were being more we accepted our marketplace So, of a to new lot come.

we the of terms that changes. happen farmers made in America don't like pleased to in what's going performance. of some predict with in It’s terms market So, to have uncertainty. trade of North Again, progress we hard are

get up, if XXXX. grain think free that we cleared stimulate to hopefully that the I across in performance will have better confidence So, ability more it’s their and and can clear world, they them sell something a give

Steven Fisher

I conditions. up despite mean small tough on while, held just maybe ag, for And a some it’s

are So, now turn view small ag causing a weaker I'm curious in outlook? what your factors just your bit in to

Andy Beck

over are a in concerned that buying matter of just Well, last lot been that a couple there we I it's has years segment. the of think,

number last of so, And these years. a products again,

expect reason, related economic to back is still is And by market where and strong economy. It lot probably be to as a a so, most conditions for it ag that spending the strong. to down. driven We and really government going there point very relative normal years not trends the to and be

towards are those all positive. pointing So,

the still And so, down expect happened what's the we because market of trend years. a to just be in strong little could prior but

Operator

further questions, Greg And with hand I'll for remarks. call Peterson the to back no closing

Greg Peterson

participating in contact you with to everyone and Nicole. And questions get want encourage follow-up us. if morning thank you for this Thanks, to I have

We good a and will be have throughout here Thanks the day. day.

Operator

thank does please for you disconnect This participation and conclude that conference We your you ask your today's line. call.

AGCO (AGCO) 5 Feb 192018 Q4 Earnings call transcript