AGCO - Earnings call transcript Q2 2020

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Operator

Good morning. My name is Thea and I will be the conference operator today. At this time, I would like to welcome everyone to the AGCO 2020 Second Quarter Earnings Release Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Greg Peterson, Head of Investor Relations. Please go ahead, sir.

Greg Peterson

morning. good and Thea Thanks, Welcome to quarter for second joining of earnings conference you XXXX us call. AGCO's those This morning, we posted will refer to a website www.agcocorp.com. on slide at our presentation that's to the The used of slide GAAP measures presentation the non-GAAP presentation. in in are measures appendix the reconciled

chain from not from demand. resulting COVID-XX, those factors limited and These the in commodity the cause and company's to results product XXXX plans and forward-looking and expenditure contained time are demand. share that and Form industry, in modernization to workforce our XX, differ prices, product with timing documents include will repurchases, factors plans, to time and the you ended make We the Form demand, the you including refer development those XX-Q dividend from plans, levels, those benefits. future the periodic materially. XX, rates for production weather, of materially December financial discuss including supply wish our rates include, do could our results respect quarter discuss Securities these the including benefits with timing plans tax this and These to, statements availability, cash for the ended that in that We and statements We March but disruption, of forward-looking of costs including metrics. those We'll year company's XX-K morning, product statements. may other we the the earnings, also changes capital file actual -- closings, Form and the expansion, to flow, are actual caution XXXX. those and price acquisition, Commission, expectations agricultural Exchange We'll reports predictions to revenue, that differ adverse also and developments levels, plant important and

available on obligation required replay today. later this our as be any by any corporate forward-looking to of disclaim call we A law. will website So, update statements, except

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

Martin Richenhagen

Thank Hey, everybody need be defend when everybody. the AGCO weather. to make the Weather I and to basically to it healthy. And hope is remark Greg. not one in comes is order you, safe used that to I variance budget. at in allowed

and today. XX,XXX farmer work So his AGCO that of resulted our and to jobs interest find our the different, which weather during efforts the that safe. facilities support means part when the in this workers been this your that team created want more by throughout our of for I thanking morning customers their world-class their AGCOs Eric for food be to my call time, proud while our participation couldn't keeping I and hard supply AGCO chain, of effort enabled pandemic. support do start global need to is We and to in -- about appreciate people to your the have XX,XXX be on of solutions. employees,

to who safety employees robust a we We first protocol our customers. operate communities our operating health our and safety As warehouses the our discussed for on support priority. introduced our is and and call, frontline quarter first the our which we in workers, plants parts of keep

Europe up did of ramp April. America teams an and job, factories quickly to for In outstanding addition, our in South being most closed after enabling our supply chain

our been they have Lastly, and sales marketing financial Slide along as strong our unique under activities challenging outstanding for generate sales conditions. products our provides dealers, AGCO teams, and with summary. X

and in overcame in Asia/Pacific/Africa our order regions to quarter. in COVID-XX-related South our execution profitable deliver results demonstrated Europe, and strong as improvement quarter American solid America Our we highlighted South Margin disruption production North quarter. second American,

Our retail last for industry shape. free of six very economic months, $XXX of quarter second feed XXXX. unit by cash was on exceeded the impacted six sales by million quarter nearly flow conservation Slide good. being and region first by fuel Consumption focus X of food, our the the by months second in sheet negatively very year is excellent for remains details our also caused why constraints livestock and the grain That's pandemic. cash our balance

tractors Consequently, for soft be weaker have equipment commodity pandemic. trended is the prices farm retail tractors expected economics to half XXXX sales horsepower global As and in were XXXX. uncertainty in sales due a demand first the softer XXXX. lower by tractors six same the by Growth offset and higher challenging caused result, in period compared North the months farm the first in of for of to lower partially industry increased to of combines. industry American demand of horsepower XXXX in

export Brazil In expected crop, providing are rates have first in during equipment lower six America fundamentals months prices Europe influencing due Industry earlier While livestock benefit is the The to production cautious constraints. largely weather strong the aid Europe fleet remains, stronger and of in decreased Market as of Industry outside the for Argentina. demand months decline and first France. a and With a after of economics. well farmers need of stabilized dry impact commodity Western U.S. European in favorable demand retail Spain, South to and much prices COVID-XX the offsets. retail sentiment relatively replace in weakest Western U.K. XXXX, some positive to grain some prices. relatively sales with livestock sector of exchange the as and the was decreased year. the farmer large offset could production, commodity impact weakening wheat negatively supportive package lower of supporting in six Brazil, a the of first in dairy special demand. a producers farms XXXX markets aged in sales wheat are and across

level hedge current regards increased to as retail Industry Argentina However, purchases in investments environment. political a cautious economic devaluation using we peso. farmers with are potential to in farmers of is as are Also, We retail markets. the quarter than remaining normal. the a the aggressively our higher continue during global to serve we the of and support in against and relatively the activity significantly sales due equipment markets resilient believe equipment uncertainty are

just One, want is again, Before also that something be to peers which to second, the all say, today. are industry, -- different, would talk call not I let's the conservative. And which means, to I turn over is Eric, our which give regarding communication one about we our, guidance doing. statement course, we also we of make

to a year. remainder approach at as guidance look need to you our So the conservative of the

Eric Hansotia

communicated morning guided quarter, our Thank actions XXXX our customers, outbreak. to good. And suppliers, Very for Martin. our address communities perspective, the stakeholders COVID dealers, our shareholders of crisis. needs good focus during and as has we since you, key all the and this employees, call. And our been the all our on last has of to This

First in we been and facilities, facilities safety. factor on our established foremost, have us of critical have a for all protocols These keeping served our and and operating. focusing activities well employee health

above are that digital we tools return and of customers positive to through Innovative are connecting circumstances. our proud been leverage the byproduct employees Second, with approaches, to as way we have a these operating Martin through going can dealers farmers beyond difficult and dealers on said, to normal. keep our and

South terms production Since by in and our safe business focusing has America in up of operations. to focus and conditions. Lastly, continuity, manufacturing on supply we've been Europe parts been our able our chain, component distribution and ramp on availability April. successfully working

for management evident important strengthen quarter expenses, projects Despite our cost we our our in as we look as operations four our second operating production for was continuing reductions, to are addition, shut down. we focus most on while reduced details X our regions. the term. the our Slide fund long to AGCO In were these status

teams leveraging well of internal and circumstances. our to under both these partners our as dealer Our unprecedented working customers unique suppliers hard, the support resources capabilities, and are as

America. crisis, been Europe discussed operations last manufacturing quarter, the we impacted As by in our and particularly have South significantly

due After supply returning chain. now have to operational. but Finland through our of to Suolahti, a In quarter, great we significantly in suspended and company's make most was or as the chain fire supplier great the to our April, securing a restart in early of June production all due our allow factories second to is supply closed teams casting extended in will for in keep production us running. to European and Our of it and month at May factories job reduced our largely being to effort done production of our Valtra plant shortages the planned. factory, operations in full most The South are them of facilities, parts shutdown a America

recovery Our has expected. been the faster COVID from than much shutdown

losses Most versus of anticipate quarter quarter our and to X. in were normal Our better as production quick in by quarter for higher board shows be and schedule recover anticipate AGCO's Europe this largest deliver period shown will slide in second ramp approximately We was production and the from factory our up the due second up the XXXX. quarter The the year third catch XXXX be that's board. shutdowns, and with first for that during stronger we the built as down current and XX% the will production order against same we with our results South the we decline order third quarters. second America. up following than Total were production slide second hours declines than anticipated than that on prior factory quarter company hours, our caused

Our and in production factor dealer levels reductions in both inventories. XXXX in also company targeted

lower progress and are made prior our the inventories year inventories in June all of fronts half have Company are XXXX year. first levels of good than in We their regions. on below the dealer both

year is and with our board, more compared order who Andy America, you and over America, North to higher turn South to call XXXX Turning June increases in quarter tractors information South provide Europe now to a America. Beck, the both second our will in for order strong ago board will about Europe I our results.

Andy Beck

grain sales everyone. impact good driven to of down Slide decrease to net in net decreased looks the sales horsepower by compared morning currency and of AGCO's quarter second approximately to start second XXXX. XX%, and for half by the I'll regional East excluding impacts of XXXX. quarter sales from high the translation were the of XXXX. primarily North the all negative The and of net Sales production equipment, which offset currency the approximately levels net compared XXXX, of excluding unfavorable COVID-XX XX% the of X%, and replacement quarter parts. South virtually tools negative were reported excluding of experienced quarter second the caused increased negative currency America the in were on hay impact quarter markets. the about higher in performance XXXX the Lower Eric, second were impacts. crisis and partially of compared second America protein sales Net of declines of a lost compared excluding and in impact tractors at to Europe/Middle AGCO's currency. second you, AGCO's sales sales X, in approximately Thank first segment sprayers experienced quarter by to sales XX%

Despite currency. Forage by tractors, increase. declined the Net and to Slide decreased and Australia. in and sales second of Africa, grain offset period replacement offset excluding and by in and part X% impacted delayed Sales million American in were of year. the impact XXXX sales Pacific costs, availability XXXX, factory sales discretionary the net merit quarter the travel basis the freezes, growth AGCO's segment about in negatively cost, as XXXX second impact by quarter margin and the second hiring compared XXXX approximately second XXX offset produced in helped compared negative mix, were South from quarter the X% protein second as quarter. last $XX.X decrease impacted reduced margins operating and favorable of AGCO's Consolidated production momentum of for closures segment net lower higher as primarily Brazil currency sales margins most sales to produced about income employee pre-order and by in lower performance. as X in to in increased partially million income impact Cost adjusted increases, expenses. resulting as approximately well also compared equipment control production. along spending, compared XXXX sales initiatives, with to were a were XXXX, of quarter and to other partially second mix. of period sales sales, East operating markets. points Growth eliminated Europe/Middle China examines quarter in with in North lower Margins well translation. planters about material operating program same the including by of of lower the XX.X%. reached operating a operating lower in the sales the smaller the million by some partially Argentina our up XXXX, volumes, a product $XXX.X primarily positive sales engineering of reported $XXX lower excluding the of strong compared experienced weaker offset same second was quarter and A the the parts of Asia furloughs, American

expansion. the protein improved addition, grain margins in In the to contributed margin and business

Asia million operating lower details and sales to strong improved the improvement points over segment South by sales control and A an planter segment, grain seasonal reported margins richer second by and and Pacific a efforts including the mix, results reduced improvement. in America expenses, XXX XXXX. Higher profit all modestly sales our expense resulting protein improvement. quarter, product. the mix the despite the $XX.X sales contributed In by expanded period same operating and from Slide in contributed Our XX region sales. to in basis

China, conditions growth North in X% first the economic in been significantly the Our has weak have in showing sales and North currency Protein America, particularly with grain and to excluding in months the compared profitability of given a impacts stemming In a of elevators demand. XXXX. six been has rebuild from South to capacity regions fever due significant decline crop XXXX, Asian grain XX% deferred declined slow to pandemic. pandemic, started processing America. America invest, until regions partially the protein grain have The XXXX European decreased and by impacted and producers their low from Europe/Middle a Europe, about number beginning swine production in America are and to protein protein equipment and sales XX%, by approximately and Farmers Globally, a seed outlook capabilities. In where in first business East by North challenged. decreased months production of by the XXXX the due to caused segment protein in ethanol prices recover we've declines declines. six production America largest had approximately to the projects Asia/Pacific/Africa offset North been negative

used cash Asia/Pacific/Africa Our first cash order and which has cash region months. quarter in for flow production addresses last the AGCO's throughout XXXX. for six improved represents half XX the equipment free Starting Slide flow liquidity and of with second results free first always half flow, expenditures, capital in the -- in XXXX. first free the working less capital both for flow and the negative are seasonal of thereby activities of requirements the operating in cash six XXXX greater months year and for

cash in stabilized working more to XXXX nearly free quarter the cash in second XXXX. generate flow the of to usage million second us $XXX capital second allowed of compared quarter and and Our quarter the

maintain share returning relates shareholders, we completed suspended dividend. With quarterly plan the to second given cash of in to and during the share $XX we payment repurchases first quarter, repurchases to million repurchases, future the to it uncertainty. our regard quarter of As

We our will repurchase market evaluate to reinstate share program. the to proper time determine continue conditions to

and $XXX provided million funds term of was available million capacity the XXXX the June new cash approximately million. facility, quarter, of During of Including AGCO's total $XXX borrowing new AGCO of approximately of consisting second capacity. additional facility, available $X.X which loan XX, an a billion completed borrowing $XXX as

XXXX. we expense pandemic feel the of period $X.X operations receivable or on include provided severity for second estimate. of in facilities, details have million losses significant same the below debt quarter financing more the Other $XX is were XXXX on currently the funding in than we sufficient the the with $XXX which sales to levels. net Our receivables XXXX other are of our We not confident quarter associated in length June million approximately million was included during net, compared about

additional lower We XXXX outlook regions currently commodity North continued Slide all year. In industry sales is Our America, three primarily last payments. the North milk tractor regional of our in due to on by industry demand American prices compared is captured to income remain U.S. farm in low income challenged and expect by driven to markets for updated XX. offset USDA farm to to prices, XXXX. projecting retail down the conditions. XXXX major partly XXXX project subsidy soften major XX% approximately three to compared in dry the lower expected across We be XXXX E.U. is

half be the it XXXX. of of is provide than to in second an to Although offset experienced declines full significant is industry for expected expected Accordingly, half industry stable Europe more first not the demand Western to be XXXX, the will the year demand the in of year. in XXXX lower

two levels in The Following and total, income to is South are and of sales our in years XX expected demand to highlights levels. of America industry considerably supportive Argentina demand, industry assumptions markets be underlying we South weaker. Brazil industry to in expected outlook. modestly America Slide smaller decline lower stabilize. In XXXX XXXX from the expect farm

be to to support continue dealers. employees XXXX our providing customers maintaining for our and priorities and environment safe proactive for a working Our

investments in also manage will digital smart farming cost, development. preserving our We to continue technology while our product and

softening Our recover as industry the XXXX of markets demand regions across forecast this global from all assumes pandemic.

XXXX back below to expected and net be XXXX currency Operating share production targeted relatively of by of price by X.X%, basis sales we the at impact is net on negative the negatively expected a currency of about volumes, expense the reduction. pricing, current improvement, Our impact expect translation flat margins dealer At to about to year. levels X% Engineering to increases a material sales of includes X.X%. costs. constant inventory and sales sales, improved market compared half in slightly to rates, of product and be with plan year-over-year implying mix an favorable offset X.X% growth are lower exchange

XXXX. XX% effective Slide selected targeting view approximately expected are between and an levels. goals. of be for Interest compared lists We financial our XX XXXX flat XX% expense tax rate to is XXXX other and to

does to business continue by conditions caused this pandemic. in consider uncertain We disruptions further outlook any and the COVID-XX operate not

billion $X.X per We billion are earnings in with of targeted projecting be to $X.XX. sales $X.XX range in to to XXXX $X.X the range the share

$XXX and the cash to be free We million to to expect approximately range. be million million expenditures flow $XXX capital in $XXX

In terms third of a we be order to quarter modestly strong levels third board. due our project results, third and quarter fourth quarter to above results XXXX

We softer modestly and fourth targeted to inventory market engineering of in quarter expect below reductions as fourth of the levels, our accelerated experience XXXX That the dealer expenses. impact results be we quarter conditions, remarks. concludes

So, questions. take operator, to we're ready

Operator

Cook [Operator with go Instructions] question will Please Suisse. The Credit Jamie from first ahead. come

Jamie Cook

my we forward? second to Thank the And about you year was profit do exit that thought. see to morning looks can sounds up in think is how and just to the color good Hi, on how deliver because of I we is guess, up and the turned just you. tractors quarter. going ahead America South question, of -- Could order just as you how the then it actual much which much first And guess quarter, pretty business margins trying provide just that question, and nice it orders? nice like in I good. book you versus where

Martin Richenhagen

America. Jamie. and about order your South on question Good book rate Greg will on Andy giving will talk some morning, answer then color on

Greg Peterson

said, I America. especially we'll it Jamie. today, significantly, for So our And as in we is order significantly leave up South think and at Europe board

Jamie Cook

you color any do But [indiscernible]. have on

Martin Richenhagen

for. asking just was Jamie Color,

Greg Peterson

the quarter. have have through -- third we let say me good visibility We just

Jamie Cook

I'm trying or Okay. couldn't fundamentals Like to it just just And you new deliver is understand the better. orders tractors?

Eric Hansotia

Yes.

strong So in got we've in regions. -- got as order both -- we've activity

and -- And down so couldn't entire all there weren't make up. able is we it to of month for part shut we produce a that of that back the and were

of but it's both, strong So is there's mixture a activity. of some retail -- it

Jamie Cook

thank on color South just Okay, please? you. then America, And the

Andy Beck

Jamie. Hey,

which had business. in had a good for sales a products year, some first strong had much had that stronger quarter mix our in planter sales we we of expected half in as particularly second helped well. stronger We second than the very Argentina we the mix has America, where quarter, our South sold of we seasonal the

second So helped quarter. those certainly the us in

better be compared into breakeven, to our we out back the profitability. going mix of than exchange for be to we'll year, taking last As a pretty -- we're Overall, second profits losses half, our to half of exchange and significantly the terms in to in expect ago. are revenues looking excluding sizable look roughly year the higher be

things cost. America. localizing order we're material doing So in a number making We're products of cutting the cost. of terms We're of in in progress our to South more reduce

the One up. challenges and that equipment go to real cost imported our facing is on of the we're so our causing content all of weakening the is the

some we've So added second additional half. pricing in the

are also of our to localize products. doubling the more the content We of efforts

profitability working business business, also growing grain hard up we're planter is I well up is Precision Planting and South in complementary our So in America. we well quite and well and that's the very down do selling as mentioned products, and there. protein

lot in America. of a are results our improve that helping good So things South

Jamie Cook

the appreciate Thank I color. Okay. you.

Operator

go ahead. from come Volkmann Jefferies. Please will with question Stephen next The

Stephen Volkmann

everybody. morning good Hi,

Martin Richenhagen

Good morning, Stephen.

Stephen Volkmann

much products are share that's kind a about wondering little launched. being and you you market bit outlook half? I various new we programs second you're in kind I'm have update working can the your of expecting of talk of and just market mean, if how on can on share, how that us

Eric Hansotia

horsepower tractor first sales. primary we're so half. in gaining investment and the markets, showing So our it's very sales, high we're Already, of our planters in up combines areas, pleased new sales, market most product share with

the our -- as the the getting. the those areas are full on as experience we story, they're where in product gains distribution So that strengthening marketplace as biggest it's as more focus network more total line agriculture, confidence a of a we well making has we're offering, the of become both as the and the precision

of and year. far with we're share to the that the very pleased expect rest for we market continue so So,

Stephen Volkmann

And how Fendt North about rollout the America? in

Eric Hansotia

well. Going

Martin Richenhagen

expectation. Above

Eric Hansotia

Yes.

Going well.

Martin Richenhagen

to too we [indiscernible] too to be But attention. We don't also want much don't it. about create want we talk successful, much but

Eric Hansotia

Our Precision grow. -- doing It continues Precision Planting is well. and Planting to

in updated or And story, half either to think new share market we that's business a about the although if of it terms not market so, fantastic retrofit, through of a year. you share of grow continue being traditional strongly planters and had first it that

In fact, it beat expectations.

Operator

next come Yakavonis question will The ahead. go Courtney Stanley. from Please Morgan with

Courtney Yakavonis

guys. Hi,

on Just remind by quarter on the low in how of you low growth horsepower us for combines And third horsepower this offset versus those into high quarter comments one North a through big or horsepower? America. the the just quarter? continue was trends Can you seen is horsepower have kind [indiscernible] and you low

Eric Hansotia

so the producers' right in largely. of moving bit buy America. professional now and -- low up and the and tractors. high a directions horsepower is still horsepower very a a opposite Then large North actually market. horsepower horsepower segment Big large XXX small we are horsepower mix. horsepower low in that's consider It's Yes, large is what farms

horse So other small people city farmers, on, going so there who are hobby the but the the goes but a landscapers, operation job low that additionally, that that that. farms, to there some is things horsepower large like a have have side, segment lots segments buy they farmers, of in of

a got It's an expected what or demand. that, so so we're actually uptick COVID, stronger an during we've in seeing something a lot I've is, project are idea of these that, or idea than and from producers. non-professional And getting like originally we seen people the

been that's pleasant so And a surprise.

time, they expect the everybody it the is We may more over based that perhaps home past. situation were where more it's on at seasonal that moderate than a thing in

short uptick. believe a we So more it's term of

Courtney Yakavonis

margins more a approach you earlier, seems a but Brazil some I equipment farmers purchases. commented exhibiting difficulty] it is to for cautious your for are outlook more much [Technical or like much think

quarters surprise you you maybe half? And and about, strength think a back can first framework So drop-off you on basis? kind upside relative the to in bit a saw Brazil for just little sales in the can the organic in to add how of that seeing are rates a in in order about second of you do talk the the case margin to

Andy Beck

Just or in first is to America, clear X%. make X% in of what's activity look It's Brazil year, half it's in you South up industry the the retail retail activity actually, happening at if up. for sure the about the

first -- getting comments think throughout being and the the it's you cautious bit and of of that and So the making be levels, because are year activity if look we that still relative now. fairly little to half that better actually farmers we're are I are little Brazil. a there their should right significant much a investment But seeing turn more more in income valid

-- of out on modestly are about the programs and relatively rate that that we ago. look happening about year what on front other good. June point down to financing those are modest interest a would X the we July improved I and subsidized at financing financing June The XX factor had programs is the pretty year -- availability what's looks say, is and over The the now always runs the for X talk and FINAME financing by BNDES the

So Farm relatively a standpoint, positive. is income financing from it's going well.

see moderately trend first as tried think things the turn expecting And talked their significant about, half I assets. we So up we're we there. hard Argentina, cash into farmers to sales as to saw in

then saw we in And real think devaluation We they're ahead of markets of in investment was Paraguay, about all that and Argentina don't is Peru, of so it's markets -- it a markets what trying the could a that so Brazil, occur. decline significant peso any those year are Chile, the continue. to market ago. there. We outside And to get like half half down expect about

expect So -- we second half. recovery in much don't and the

the South South be, year. the other are the rest the stabilizing year about probably see we So in better to markets, as most little for to Brazilian total decline market you than numbers continuing see last with these American of of think, America regard and the and I a

Operator

with America. come next from Ross The Gilardi will Please Bank of ahead. question go

Ross Gilardi

and how is expectations late are contributing sorry last the GSI seeing is couple hit margin about not on hard you forward? that I'm America, this, margin if pretty got of sorry, years. you Because, that in your going could improvement for talk obviously, or North but and what GSI the you're jumped I covered to they

Martin Richenhagen

Andy?

Ross Gilardi

wondering seeing there helping if that be And I'm out. might you're reversion some mean just

Andy Beck

What is, in down in grain we're second It's first business. we seeing quarter we're as revenue the on down our about mentioned the well. down seeing quarter protein the comments, be XX%, in and as our

margins our that, are with even So, up.

We second had protein. year margins grain Our ago. quarter were a weak and up in in a significantly margin admittedly quarter the

So recovery more expect this to normal to of we was a kind what back levels. be

by work there good that our So turn back around. to teams

For we weak are the a revenue. seeing of the rest really year,

down, improve So our margins. still revenue to but will be on continue we'll

So that ongoing with done number has reduction. grain business cost We've the on our business and been areas footprint and really business. our the that focusing a and right rationalizations are of focus protein of most profitable we're sizing

we profitability and in next to year expect year. So continue business to and improve the this protein grain

Ross Gilardi

-- they -- somewhere what I that in think you of something for changed a or level from dropped years the think I you margins grain you American to back the least North the Do when hinder or remember correctly, get back under market storage normalized the bought would reason over when get like that? you well any doing were margins next you is single-digits all in at few sort the dramatically and low-double-digit years. are and So then about I if to has the it in like last there GSI, several feels that of were mid-teens you piece, can't where

Andy Beck

that targeting pointed we're of do, margins as up. what margins, did very original that's think, purchase to had -- high I We GSI to out. those those back get Yes, you

other the that in we business. that have, protein and put we in of sector Some the like businesses grain ag

European margins bought sector our but the of didn't margins, Some business that we of relatively all same they're that above average. level in AGCO's have grain good

margins business. the America. in the market That's we the above has that significantly of tractors grain America. particularly same margin business, and been really where declined and so high of in North high that the that the most and in side be should believe grain of horsepower in kind combines What's North profitability the an really was, the average of protein line margins, And with has reduction part hurt and

significant that margins back get reduction recover. So there's and and a I level that recovers, we're the think, that, in demand seeing mix we'll will as

So...

Martin Richenhagen

what will in future. will You you see the like

Andy Beck

structurally Yes, that margins and we're a get those business market think we'll with and things lot doing back some of strategically up. recovery, with I

Ross Gilardi

this and quarter Okay, the South it's all America like -- then somewhere you for you it. at breakeven Obviously, in margins be of how curious this you're just sounding be year comment margins lot about you've rather there. -- around you of or the throwing through think you'll on in a year. and than got Where seen a Just saw there? should those half what out can just you'd the think when improvement cycle? longer normalized And term? you a back But number get

Andy Beck

progressive going the year-over-year toward. got the I looking We continuing not It's, capabilities we've are of have in one would think we America back period. move a come those what we're to say, closer up for But we margins South margin to average. improvements, margin that to for. It's company working outlook improvement

Ross Gilardi

it get trying how as is of get sense higher or much having to a more issue issue a a is that I'm new under your it density and to just product it Is cost feel in really control. execution order margin and there? you or products like product to just

Andy Beck

currency think, new and we of of was think in higher America in product brought our much the technology, content. is been imported I the there costs. products into the new a as terms I -- I challenged a Yes, challenge we've And by the and we lot South have weakening when the of mentioned,

been the we've being -- somewhat improve as structure, the the impacts currency a content. taking we back cost So we've imported been as step

our thing why of focus content. that's focused line on So is of full And the that the we're on of broader sales. more localization a other is portfolio

we're year. and our and South we're business important progress planters, is our business, much So good combines extremely in better doing making Planting selling this Precision growth non-tractor in in America

all profile overall of to the contribute of in American improvement So will business. the those margin South

Operator

go next come Tiss Joel will ahead. with The question Please BMO. from

Joel Tiss

my you appreciate I taking question. guys

and largely horsepower the that the there a over is higher are -- and sorts have focus able going product all things, next us sense years? more the about those like to better or of you years, five lot questions Precision to do give Planting of you're margins of want I can be place So kinds take -- what feel a next ask like the to in more steps to company the high three the of over transition, to to sort the same three structural you the drive

Martin Richenhagen

question for This is a Eric.

Eric Hansotia

good. All right. Very

we've IDEAL got on we've The Planting Precision foundational foundational hay create a got strong business We've business. sprayer done work. commercial work business, in So, strong of elements a the combine, place. lot

lot we've are top lot there's So to platform that. things on a good build a but that of elements, got of

so strategy the whole more terms in got side. to more bring machines to continue on And smart we've products portfolio and product a out of

investments customers interaction able in dealers we're that parallel, analog one versus biggest And the our information consume to In think in with future. to addition on customers extensively, investments that's to interaction a working be with of way to digital format. in our digital and that, our a want we more is the the of the provide

that. How our machine you investing we're you of that connected an in serviced our research select you interaction kind how supported, product, all so works, get get that. And you That's the how company, heavily how product, by of experience. how

interaction a approaches we strengthen uncovered still a element, some still that strong got And new so of and ongoing digital and have bit extending In element, a product we're or each some of We've at then dealers there uncovered is element. provide regions, to in also trying territory. territory those growth distribution in territories. fair work is then there and there's a our will fill our existing looking open dealers

So we've those. our got focused on and we've opportunities further several growth organization for got

Joel Tiss

then the of for in that to of of maybe company to parts anything go de-emphasized sort Line through about? significant sort Simplification, there terms of Anything stressful forward? need that very as talk as Product we these everybody, comes PLS, up times we go be enough And is or don't fit

Eric Hansotia

stage. Nothing about talk at really to this

portfolio. last several We are happy with We've the over made acquisitions years. some our

the So of happy we support we've it. we're and is have with now in and portfolio that partners it of portfolio improving feel product performance both that right and gaps and our filled some then element like we the digital the and focus key in to our distribution

Operator

next Tom Please with will from Morgan. J.P. The go ahead. question come Simonitsch

Unidentified Analyst

is good Thanks, on morning. Ann for Duignan. This Tom

expecting... you're So

Andy Beck

Good morning, Tom.

Unidentified Analyst

Morning.

the your You shutdowns Can levels plan that half? of you would some lost globally. X% regional production productions. any just noted impact XXXX expecting QX back QX summer for catch-up variation have any You're comment on made to in that also, in if you but down production curious changes

Greg Peterson

going the we yes, terms most we the look changes, South not the -- we're of mid you the down significant in the and quarter down the Tom, had, were was second in surprisingly and So, are where percent at if roughly where shutdowns in America in biggest XX Europe with XX%s.

down quarter up back the similarly into the third then, in be flat, half to in fourth. Europe it's going then year but the be So and expect of about the to going we

to is have year, we we terms some through more we going the our have dealer do that on, get inventories. this things as the of in closer, as of back we half work get of One

about out that to take We the quarter. a and expect, happen inventories million year, full of going fourth $XXX for in our to lot the is of dealer

of in the be will third in our be of production South terms be So and it'll quarter significantly if the you earnings, America then -- it'll we'll fact up Europe our fourth in reflect South and will look quarter kind of at and the in down be that the flattish. in shape America Europe

but kind a pattern, of at. looking that's it's we're So, what unusual

Unidentified Analyst

pretty in an maybe direct E.U. payments does up weigh sentiment that stable but just in Europe. against expected how the Greg. Thanks, in you discuss through That's helpful. farmer decline And XXXX? could The budget look fundamentals

Greg Peterson

you take Can that?

Eric Hansotia

sentiment. Yes. what and indicators one nicely. -- in it and through matches [SIM] of and April. look turned is It now ground forward clarity is there and in number on turned of like March more There's of our had we stable. watch look barometers -- -- on more dealers Interestingly, around you we It's positive one hearing going at region we're more the significantly farm the to each nicely that what and will customers was in that look dropped index looks it package aid the a be that if Europe around and the in barometers the

And a so I relatively the up. sentiment that coming think the more farmers book. we're order that and good our is like So harvest feel in seeing road got They've their is clear.

Operator

ahead. with The William from Please next Maria question come Larry go De will Blair.

Larry De Maria

maybe about has obviously but helped general. first double-digit cost we obviously the in North structurally America the I'm least reached half. of ramped and your know an and just at to at basis they around basis annual America annual little new in anomaly toward was a operating Hey, or an the etc., new we've move half the first talked is tractor bit if plateau just understand if offerings with at an double-digits very Precision North a guys. on trying Sticking assumption or changed in trying if in bit this the understand the you're or of with on bit you to products the this business -- forward a least -- can because Planting strong little anomaly Fendt production margins moving control margins, a of were and mix the like new in

Andy Beck

that say, grain half. stronger first horsepower is also first the and much the with I'd we've business sales North for and Larry, in business stronger the is in So, with half the Precision America what protein Planting seen mix high

of half, And our between I'll the the as we're in comment clearly on overall about revenues improvement change in let lowering margin terms half. is some focusing America. of what then a we're dealer about, and North seasonal inventory we've the first and in -- Eric there half second reduction. talked So and But doing second

I there. think, we we're making progress still think,

Eric Hansotia

is is North -- there structural seasonal is America. in there happening but certainly there aspect, Yes, a changes the sustainable

more to continues has focus Our dealer on product a organization, mix get there stronger, and our that it balanced. lot of is then been getting

heavily invested business. And combine we've our so in

sales planter now -- launching, we've business large had heavily strong always in America America. sales to and launched planter strong seen business. we've that it South hay We in in be going and in North planters sprayer just commercial have recently great we're And invested

issue that proactively. machines We've was moving there it's and prevent it a able were able more and feel we like -- had occurred machines the that strong of platform with something our remote the with where dealer Ag. like being interventions before proactive issue customer plus distribution knew those so an precision our products identified before even interact a centers. getting XXX forward to on problem or we monitoring by remotely solidly of We're And connected, more is to we focus

So focus And I track. well on for it's region. think that's the the

Larry De Maria

at down, you. Thank we reductions. I'm obviously retail now more then down great. wasn't still to and curious produce And secondly, in production but has a the of given dealer you plan sellout production been the That's was need XQ. level, why kind that there

are where maybe but issues So confident how flesh where the little XXXX. that know, up you out for don't obviously just I are production just issues? cleared North America, bit, you these in inventory mentioned normal they're and inventory a are

Andy Beck

we terms terms we're dealer where in of more are lower in pretty think to that feel still in like standpoint, standpoint. we're production now. them inventory inventories as mean, our opportunity target a us pricing we wouldn't we call an I issues. -- to good really and be it's in future, the of -- get dealer helps But shape Larry, I we right efficient Yes, more inventory, profitable from effective, I there's think, more

these so efficiency -- standpoint. of And driver as the more that's a really inventory of reductions from dealer an

second compared the regions of ago. our year-over-year dealer year you all inventory If lower in our a is look in to quarter,

to market the well. second but we our down, dealer down issues. product did as as European lot Europe, over availability inventory a was have was any quarter wouldn't you again, XX% that come due of So I In in the saw say that and

and was retail down market and down our production as well. the activities So levels were wholesale

Larry De Maria

Okay.

a like this year. Thank bit good part. luck sounds more you guys' and your it So little strategic on

Eric Hansotia

the not so tools focus of is got demand, to about. a building lot wholesale, get and Yes, of retail, a Andy on those we talking are all focus got to that of lot on efficiency the

Operator

go The next question Jerry come ahead. with Please will Revich Goldman from Sachs.

Jerry Revich

you morning full gaining see it Precision the to like so before everyone. of Planting South and you're out I us base sales year update think, in a good well. if on off could on the for a sounds business. of bought America of hi, the your you wondering I'm Yes, playing lot progress expectations Nice traction zero,

So base, And wouldn't at on has set proportion touch on just us up mind, update you Precision installed at this what that just of Planting point. portion point, specifically. your if also, you this estimate do

Andy Beck

a increases South off XX% our consistent very a America. about America for North Europe. and then in of have across Planting improvement looking We're in And pretty Precision we That's revenues a low high percentage year-over-year. very base

getting there. Europe, we're just So started

installed you And a is can increase then, base. there big the about talk Eric, there. So

Eric Hansotia

Yes.

that strategy continuing crop a So, especially of it Number couple We Ag the elements the things. focus just to of on to with cover and other three-pronged on growth expand from crop planting the but cycle, precision planting a beyond cycle. got expand to innovation got one business. is we've

a we So world is that's planting. We there had business beginning. from -- geography very is expanding Number want in coverage North have two rest business crop America number is strengthening professional strong where the and producers expanding one, innovation. the of row strong the to equally doing

primary our is Europe So target.

that some in our want field of very somewhat our We've passionate, expertise. combination that lot of individuals trained people to and the got that the is South America of retrofit well retrofit some we're well is on like something the parts -- channel. third and then in leveraging Now opportunity And as our we've in channel a takes do, to highly dimension Europe, we big we We've Asia. is difficult growth feel dealers of make as -- most track channel. and in that is

still less those believe base, So we upside something it's terms with you consider regions, a high-single-digits this our think than you of installed we penetration. which that all business lot when base when the that installed is in consider of -- especially there growth is

Jerry Revich

product Analyst you about wondering some cost point. key could a any at spoke to the helpful. of America, in there your Okay, milestones the really a you out South you -- volume timelines making And line lower transition, you. then on field thank need would folks, if and on simplified on the of what at models get Day, I'm us the form are higher update be that the up

Eric Hansotia

Our there the market. it high-quality big a issue full tractor was X Tier with didn't out very high-performing, and but and we model address on, came it's so new

a And That's we our marketplace into we When content point the wanted quality in has base. higher We focus so we little Andy to activities to production secondly, One our our higher it imported at that the and to had And about done was. lower And the our line, call talked a well. volume-oriented market a back of product, is two-pronged. the it launched we've component get start than our performance, is due base models, price for first and to got activity right little now. back cost more came ultimate heritage doing our been localizing a off bring down. more cost foot, on price the intention on customer.

feel now comfortable product our -- of performance, working componentry. out we've that with we're So been the this cost we

last We've the of other shift activities. over the growing got the but couple are the major two those activities other quarters. of So that's products, big

Jerry Revich

the point local work you paying to historically you can opposed there chunk of toward Does you're will magnitude way that require you've or anticipate margin get margins that your more of -- getting cost like the X%, now? Eric, talk the about you what improvement get X% as there? the had from to And

Eric Hansotia

to -- America. in South got going work front lot of a we've in It's of us

one company balance get sales high and market we in market combines, market other products. to our big got So thirdly, but Grosso seeing we growth to planters. as share There got higher continue in pockets to is happening have the is in to needs we it, need gain the the element certainly store the to sprayers but to we share in well. continue. continue need need dealers, localization share where... our In we area, continue then tractors, we've dealers, that to our region, need dealers performance We've to years, And strengthen of performance. strong Mato overall work portfolio. on many We're our own of That very

Jerry Revich

you. Thank

Eric Hansotia

have. -- have we customers don't to them the need confidence

that. to And work need so we on

Operator

from Elliott final Stanley with question The ahead. come go Stifel. will Please

Stanley Elliott

consider Thank down actually you're mean, about was guys that wanted experience the to one? you've for expand or I margins Brazil. And company in. there, experience just I in have you the for you to the that how out the guys Eric, is want Does me then results fitting two, -- given you your that what improved? down ask there more question that does to broadly seeing there, store something -- the had is would in

Martin Richenhagen

if used sense on are one systematic makes we the When one our or it all other it our chart all a continuous basis our one benchmarking, also compare country or from learnings comes brand all improvement globally regular to and sites, areas. brands guarantees in stock factories, and region processes that

So that's something the Brazil, answer Yes, second can so. if is outside we your And we into do question. we yes, there to meaningful that. look will use

-- our like question? I'm [indiscernible] we been I just to -- informed have Director Herman heard you passing tell that Cain. about closing, So first in would The of just the former

While and very our today. it been family, just would the very here I to make Southern he culture for just Atlanta we you Georgia in years Director constructive sure the published to mention he personally a that to are and has many understand culture in happened just because also helped me special. you with and wanted Thank understand was American general in sympathies it here and much. like the that

Operator

you. conference over any Greg closing to time, Thank Peterson comments. like for At turn would to the this I

Greg Peterson

you appreciate Thanks, in all Thea. Thanks. participants. today free in your us follow-up the questions. to have And interest We everyone get back be feel touch to And safe. thanks AGCO with if and

Operator

Ladies and in call. for conference today’s you gentlemen, thank participating

You may now disconnect.

AGCO (AGCO) 30 Jul 202020 Q2 Earnings call transcript