AGCO - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the AGCO 2020 Fourth Quarter Earnings Release Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. of Head AGCO Peterson, Investor Relations. Greg you. Thank go sir. Please ahead,

Greg Peterson

slide Welcome the of quarter that slides you Shelby, to earnings and measures us to in those we'll morning. good a refer www.agcocorp.com. we'll fourth Thanks, our joining website posted The used to for use This or morning, presentation and are at presentation we call. non-GAAP those XXXX that including are AGCO's that will appendix product GAAP reconciled in of we expenditure statements, of measures This and our capital timing make slides. and to expectations forward-looking the with of benefits those and of demand, those and plans those development timing morning and benefits. respect to plans costs plans the those

repurchases, share reports We differ dividend earnings, are We these levels, production predictions rates levels, our wish that documents for refer XX-K time XX-Q quarter that Commission, revenue, other XX, about Form may talk flow, you update Company's forward-looking to by demand the may actual commodity to prices the any statements weather, except will XXXX are replay workforce from changes discuss December on cash website. also materially. including financial COVID-XX, obligation industry, important but future margins, factors to, this law. in in plant including availability, the corporate limited and These and and ended that we statements will contained and those materially the of XX, A product rates, forward-looking price those tax disclaim the Securities supply required results with XXXX. Form product call and cause from metrics. you our and be our These caution year Exchange ended We events to including the for in time file the September disruption demand, differ chain that as from the influence. We include, not could any adverse to available to resulting statements. factors closings, actual agricultural developments and periodic

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

Eric Hansotia

in very ongoing co-workers you, support could And their with that for resulted want for your AGCO more We'll COVID our Thank our the and pandemic. quarter to to XXXX X of the throughout thanking world-class that an supply XXX on finished our this and your of on efforts by supply X% customers delays participation start global chain interest morning. farmer for good while financial a points I enabled These proud today. AGCO summary. the efforts morning call solid on part we in growth help their chain do the the factories safe. basis work challenges. overcoming keeping food I fourth sales XX,XXX and quarter basis. not appreciate Greg, start adjusted AGCO's that of while be Slide our fourth and employees hard provides expansion margin operating deliver and We

XXXX to and are was benefit technology. in benefiting in is us as The made great forecasting Positive to area progress strengthening investing keep flow this retail new plan lineup in in record a position reducing us demand our from for our market to well response put contributed we for our focus operations major Another product we the performance, as improved for year customer from to inventories. the XXXX. sales cash we've

demand prices, lifted for products for opportunities agricultural smart connected enabling maintain AGCO. Products is us in are created operations investments higher premium and for nozzle our smart sales and solutions The from we to soft flow margin-rich sentiment our cash productivity farming tractor planned recent like in capabilities. our rally and as planters, enhanced customers providing substantial equipment Our new finished commodity XXXX. digital options smart and sprayers, enhancement our farmer

conditions XXXX new in market supportive this expect to and We continue our financial reflects outlook optimism.

targeting in Slide for unit by XXXX. industry the details growth, earnings significantly year full XXXX. are expansion sales retail higher and X sales We of region margin

COVID As impacted last consumption global for of early unfolded constraints. economic pandemic livestock food, and was year, fuel grain negatively the by

the with to consumption activity grain end grain Towards consistent economic increased exports of recovering the began year, China. improving and

for Following industry tractors soft which improved in XXXX finished we increased the we horsepower The year replacement tractors the fleet strongest year. remains Western Growth with half extended, largely for in America prior during sales in year declines XXXX. demand for inventories, of improving equipment North market. sales half. a providing farm constraints. experienced mostly commodity strong and equipment compared second grows, XXXX is for large prices North global farmer in economics. in ending as American of finished demand COVID tractors sales Market over related reduced to Industry grain age the Europe positive forecast was for demand demand production first the offset the modestly due as the demand potential year. in the the significant increased for decreased industry to horsepower of Consequently in low retail higher

Kingdom tax Europe, were from weather they're across Dry implemented sales Germany, in some weakest For production. and of offset impacts the incentives in full negatively growth Scandinavia, XXXX. in in partially United wheat the and year, by much benefited which industry the Western

well fleet with demand during stabilized to Strong Brazil Brazil Farmers the European economic exchange and environment. economics. have grain dairy production in depressed provided America livestock by in the as favorable prices supporting partially South are aged growth Industry and and wheat challenging offset weaker demand export and the of crop some positive fundamentals supportive in sales weakening in markets. rates and American offsets. political due weakness replacing in earlier years Argentina are their demand smaller as following year. retail Argentina, after increased strong XXXX, Although South

address COVID crisis. guided for the during has key communicated perspective outbreak. actions quarter, of the since our This we the to our last of our As stakeholders XXXX all was focus needs

and and been foremost, our us production. First These established employee in critical have all factor on have safety. health protocols focused for and served we maintaining protocols of well facilities,

During teams, our and supply the component operations exceed to our we considerable COVID were efforts production secure COVID well fourth suppliers impact purchasing our both those quarter we The meet our output. manufacturing remain which availability with availability may of in supply and for from production workforce our our Due customer demand. of base. quarter, time ultimately fourth challenges as faced components to able projections and planned risks our as the operations, component to issues

mitigate issues to attempt possible. extent to We the will to these stay diligent

our hours We the employees beyond and going XXXX digital production dealers these proud our and of future. way approaches, been above the operating Innovative through X. are have tools and a Slide through connecting leverage factory farmers byproduct in AGCO's with are to circumstances. in that are positive can customers dealers difficult shown we keep

For year full the levels. compared production XXXX was X% about to down

manufacturing significantly quarter. As crisis, in previously South and the in Europe in discussed, by our particularly impacted were second operations America the

reductions Our company the recover Brazil second in flat quarter Growth production done the supply approximately the company in and as where dealer our teams in hours U.S. same great by inventory dealer Total reduced production We America versus inventory to North region. and the lower well allowing job us a South fourth met for in facilitate the was chain are production reductions. half. was in in EME the have Europe, production offset America period and and as to XXXX. production planned

to X% XXXX, hours increase compared currently XXXX levels. to approximately X% to project Turning production we to

Europe, In provide results. Beck, addition, our into you is order to more will about South I'm North fourth year over compared going to Andy XXXX call information America, to the our entering for tractors board a and in higher now ago. who quarter hand America significantly

Andy Beck

translation for were growth in partially sales approximately fourth fourth and offset experience precision Thank impact of you, year. morning sprayers the good regional America the which of UK, increased Net decreased dealer the due as positive in XXXX, growth positive of of impacts in Europe, Net America planting sales excluding South Eric, in currency quarter XXXX, the to of level and to negative compared net in at fourth segment of I'll X% Poland currency to the about Asia-Pacific, were excluding fourth positive year compared to our the currency Slide full the of sales in quarter AGCO's to largest markets Primarily decreased XXXX. American across currency everyone. translation. by in Italy. occurred up of tractors destocking XXXX, South significant XX% approximately excluding XXXX, net as Middle decreased fourth segment Sales equipment. Turkey, AGCO's with net of sales well in all quarter sales Africa sales favorable sales reported XXXX. the an the start increased to North X%, translation occurred excluding protein currency. and compared fourth East sales of quarter compared XX% compact impacts. most quarter of looks increase AGCO's translation compared quarter Brazil. to equipment, fourth approximately the impacts and net on X% last increases The and X, grain excluding about The our performance quarter efforts,

to and for the China. Continued of $XXX in weakness the we're by were currency. the was million part and replacement positive in growth Africa markets period same about quarter sales in Consolidate XX% excluding impact Asian up Australia and XXXX, compared of smaller offset approximately XXXX, fourth

operating operating examine performance. were Turning and in margin compared compared net business fourth points AGCO approximately basis same increased to XXXX. and adjusted fourth lower and million warranty fourth of by expenses. improve X, XXXX. in quarter. by Despite – lower engineering initiatives, XXXX helped as grain in warranty by sales. impacted as in offset fourth $XX.X favorable the margins Margins offset higher quarter Middle lower sales, the segment of to period and in positively the AGCO's mix, XXX East the Slide Europe, resulting pricing quarter sales increase $X.X cost sales from sales, in to margins million the North we operating quarter the a the sales, the positive an mix well to partially fourth in American higher expense compared quarter income protein a reported net approximately levels income of of the primarily control improved higher XXXX,

in X.X% mix offset fourth improved our with has to producers the Slide Asian European income contributed by we XX% in margins XX.X% production all approximately economic protein segment regions to processing region, from declined fever deferred improvement. China, and XXXX recover largest to reported our been million sales, EME in period impacts about Protein X margins the by and Globally X% conditions where and growth until decreased protein points, sales have The in and Our to due and capacity of decreased In partially by impacted to expanded and pandemic. has of segment the improve regions America by fourth quarter North reduced Europe, America contributed South their XXX due XXXX. and quarter. the improve particularly equipment declines swine Africa The same Higher $XX.X sales number had Higher been operating have cost as production and by in rebuild Asia-Pacific, a grain caused full from to details XXXX pandemic, In and basis XXXX. beginning the sales protein In capabilities. segment by excluding in Asia-Pacific, sales started the and operating control the North the the the expenses production showing product. operating America our America South grain significantly in mix sales of challenged. sales American, improvement. XXXX projects decline. in the are to year seed negative efforts XX% North Africa. compared the currency sales protein

for flow equipment cash improved Slide cash production has resulting less flow, expenditures. protein free that AGCO's which in throughout XX region from the order Our activities, represents capital year. addresses operating

which discipline performance was and a in flow capital the free record working sales to contributed for for significant $XXX cash XXXX, of company. million earnings strong generation to addition Our

new crisis. capital position, As of XXXX. development our business. improved also And at This in in our we $XXX expenditures we debt our result, XXXX additional allocation needed and invest about the and net the at debt We capital remain of support retire in loan shareholders plans, on of million our opportunistic lower in our took million working first $XXX to acquisitions term of cash to also for a with plan December capital outset XXXX as to the the is repay of our needs was XXXX. continue half liquidity factory Board, than end debt December this to and the to rest returning will With our approximately we're to we product in plans the respect as year. discussing

the the details dividend, further any repurchases payments With return quarterly our determined beginning we exception intend share suspended of shareholder haven't during to XXXX. we crisis, to COVID the at yet, of the while we

with which included $X.X net, the to losses on are associated approximately in receivable Lastly, compared of were sales financing receivable million same period the XXXX. other in expense quarter million $XX.X facilities, our during

sales. the is to Demand increasing XX. to expected higher in regional industry be after several increased XXXX be demand in demand for support be levels, commodity North economics for total Europe XXXX is flat prices equipment XXXX relatively improve stable industry Higher from but drive Europe. remain sales to unit healthy in at in the economics across aged challenge stable to XXXX. expected Slide our industry to sentiment underlying XXXX, XXXX of prices compared On commodity increase. with industry levels. prices XX% We Replacement levels. are support replace Our outlook and tractor the mixed to North America markets producers. American smaller as demand Slide currently the expect will expected the feed retail We to we project X% retail America X% in Elevated to exchange profitable most expected The prices costs years major demand farming captured improve milk and with to XXXX, is of demand is aged continue higher dairy XXXX equipment. approximately America to supportive three markets fleet XXXX. expected demand expected are and segment, in South higher outlook. have demand industry farm in across the in compared total In commodity larger EU of favorable farmer's is result America, to to equipment for during more highlight on Western is are variable rates expected expected North for additional Western XX, demand. South South to up growth In XXXX farmers assumptions stabilized

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

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

no forecast Our additional assumes improved the global demand impact from pandemic. when XXXX industry

At up production, expected plan offsetting we X.X% sales increases to about to $XX well share on fund as are $XX expected constant rollout improvement products, investments includes Our to pricing, be smart impact cost market price increased translation increase Operating currency initiatives as costs and points digital compared productivity are sales. during expect material higher precision to designs. of to our of be million driven exchange rates, X% net XXXX. margins increase to the by products at investments XXX and of partially about basis to farming offset currency higher inflation current and basis from and possibly in X% by in by ag to platform basis Engineering material and XXXX million X%. levels XX our of expenses sales The our a favorable to by smart and is continue sales points aimed XXXX, initiatives.

Slide rate, XX, We targeting financial are XX% for to list an XXXX from goals. XX% ranging effective tax selected XXXX. are

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

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

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

we in For projected the sales XXXX over first quarter, and improvement earnings levels.

I'll $X Our quarter to With estimate and that is back turn per that, component production. approximately from current per is highly for share earnings estimate on of dependent share. the resulting it the our first the timing will Greg. This be availability suppliers

Greg Peterson

Before Xrd. to is we remind Annual scheduled wanted Analyst March our you take Meeting we questions, that for your

XXth, find and to limit able one starting this a register go With you event on You'll be look very XX and folks ahead let's with as forward meeting question we to Slide questions. open And for it up, meeting. during for February details to we'd follow-up. that on engaging operator you'll reminder, with a on like and of the that to brief

and Let's go start ahead the Q&A.

Operator

Instructions] [Operator is from question of Your first Owen Kristen Oppenheimer.

Kristen Owen

accelerate you you Great. the additional was you cycle investments detail Good areas bit a for supporting highest I some the seeing And opportunity digitization. in questions. Thank taking certain investments stage? little you having can some the wondering on so morning talk you Are AGCO in where more provide crop backdrop and to see additional the if thank in ag about of the precision much. improved entitlement could this and in areas? at our you

Eric Hansotia

Yes, I off. can start us

Kristen. your for sentiment we're and stronger prices micro. already we'll farmer a the commodity macro that. the go market market and level more question, all going level At environment seeing we've starts thanks macro so So at to and Yes, the seen up with

So a really smart backdrop. existing machines. on provides to marries we ag with already and focus that intention strong our It call nicely in precision what up

awards of investment won we take four company. We a of record so of the most $XX the North really in a look measures, eight to of Year the from at the got good we three $XX of year adding few XX the When tune out believe more Tractor about portfolio pulling it. won awards. the you We last ag here a track in any recent we've investment million that. engineering planned of America, most for. accelerated our and of projects million And forward and We're had or to taken that our some we've

are an smart that that received and so the more is a delivering teams industry by think added It's industry of solutions our the good well value we by marketplace. received good, customers and to in to have So place the well area on. invest for ripe been

investments the the all the ourselves as actually the through that as – from factory combined opportunities in crop with planters cutting top solutions in through got full – precision ideal planter between to specifically on build technology to we've today and being crop upgrade we've technology and from of we see investments a Now, have existing have where latest cycle a combine of to planters. the we that. We they cycle. sprayer continue planting we lot to leader is got edge also high-tech the are retrofit planting But

You the come have taken that's that with; only you we up combine got header. joystick the combine We saw the auto-hookup industry steering in We've can – platform. our has the us are only industry out. wheel of We've where steering. the the in

We to lineup. as to well bring continue innovation our that as tractor platform,

our see brands significantly. got new You tractors and year we've this of all launched recognized in

So precision ag works as a system.

together, of so have tools work to All our essentially and that's these approach.

Kristen Owen

nature, as bottlenecks Great. provide production. some just brief where of Can additional some QX term mention Thank just supply you. And those chain did something you you're seeing you risk to as in a the follow-up, shorter bottlenecks? details there

Eric Hansotia

working South disruptions. their of some their capacity Well, It's COVID is from stress may impacting in cause our we've currently number America. a got we're COVID with closely number operations and reduces European but our supply is think suppliers chain, that also concern our most one distribution that I in

where makes in for, with just this this. team that good and to it putting intense we around towers is when us. action come The safety now working thing component not be about the in and Asia around We've the stock commodity sense, all each gotten is world, first new for in had we're for managing has year with good at this this suppliers, up So very inventory doing this it. very, a been we're a some mode control

Operator

Your next is from question Stephen of Volkmann Jefferies.

Stephen Volkmann

could mentioned precision Thank you. so strong bones. I forth. topic, can you on and order if stick Hi, meat put boards with morning the everybody. some wondering you good Maybe Eric, ag I'm if any just the

much how what type that kind saw equipment would you in in and like However of and precision ag into define look it penetration like XXXX growth terms growth you to XXXX? of in could

Eric Hansotia

Yes. when few buy was to data completed over up planter Okay. a a sales XXXX, the AGCO give planter I smart can If you XXX%. you outfitted factory our compare points. from XXXX we full

the throughout sales been ongoing OEM planters an that's tech Our had strong business row we're of of for sprayers, growing retrofit planting precision fleet rate. unit and that connected business XX% machines the wings rate spreading XX% doubled through growth machines. In AGCO and through using we novel had business and projects to a smart we the channels ag That's cycle. growth a technology, our on on work crop

new all dashboards that that well to understand you're or the getting the and that value on creation new receive So innovation, farm way in technology, we've economics got sure as are they speaking of the seeing, driving as farmer their on to our that customers making them future. we're depending agronomy

through And of today, are way forward to all we where we've for into examples going of and machine maybe those smart the going so XXXX got are development. our those projections – some

Stephen Volkmann

Super, helpful. kind That's almost going of there? on similar in expect rollout then and of North is we maybe a how should And what America thanks. comment kind Fendt the just,

Eric Hansotia

combination of for best customers going our the customers bringing those technology, best little in tractor in It's a the Very highest – strategy most better business. with of a serve a than plan. We're demanding, product offering. quality support, are Fendt we the it's of what that a and the those strong, the actually best highest

the Fendt we've very with, So Fendt work whole points happy having Getting more share the our be the dealers touch the clear getting trained, of our buying cycle to and support the marketing is all to that product lion's experience. messages and of throughout got great a the we're then level. about but

measured pace; through the to every rolling way brand. carry not earn dealer They in their we're so Fendt can out And performance a the have criteria.

love excited. measured rollout experience. the customers of we're And and a we're so really the feel They overall ahead we are plan. like And in Fendt slightly

the think most for these we've solution got right set professional farmers. is we what So

Stephen Volkmann

revenue XXXX Are say roughly order to sure just much how I'm it's willing Fendt but in North America? small, magnitude? you was still in of

Andy Beck

that Well, if was industry our let or little you down horsepower flattish bit. about they sales, XX% – were Steve, the high say just, our a at maybe look up I'll when total me

it So leave that. with I'll just – I'll just

Operator

is Bank from of Gilardi next Ross of question America. Your

Ross Gilardi

morning Yes, good guys.

Eric Hansotia

morning, Good Ross.

Andy Beck

Ross. Hi,

Ross Gilardi

Hey, there. order flat? little to understand given market I are and the your just world commentary you want I better. a mean, around the of just guiding European why

Eric Hansotia

factors there's there. couple Ross, a of

kind of we in First that fleet of age. of European the South America a age and and fleet – will have all, imbalances been don't demand there's and stable driving really the improvements And age think of that the and backdrop, the market of market. The North is level one has replacement of cycles that be the that things or and swings a these always create out there. big more these the

think And would America. like North that in that so don't have there's we same level

buy XXXX. Europe in is of Germany had of market incentives and XXXX. customers XX% was in in markets up number a in to tax biggest one The Germany. incentive the Secondly, Germany

a And anticipate was so pull forward. of that, we somewhat that

modestly So relatively projecting were – Europe mixed down to year. of the in down And we're the markets offsetting XXXX. with that in didn't improvements be that in were that some other market XXXX this in yields

position, strong comments about off of prices, we of So but a made commodity better kind the really they're stable dairy certainly a coming sector. not

the North we're of good in probably same are not to farmer, for America. economics but seeing I what so, think European the And level the

Greg Peterson

asked significantly order the all the you order also, across board, up about And those boards, Ross, regions. are

Ross Gilardi

reasons Greg, it just market regions, decided, was that's saying, boards hey, that Well, your seems. up – my the what question the and flat you're was you're order across calling coming were where Andy the European from for that significantly

what seeing assumption? you're pretty a conservative Given order that's boards, in

Greg Peterson

inflationary to retail things we're for like line the about to that that. reflects – Now seeing available things what of activity talking order dealers like other and get their also they're is board kind customers. – are, ready get their And wanting what products for the what pressures and in

there's influence we're but factors situation. So strong that other a boards, obviously order these seeing order

market go with is what And so we're ready the than anticipated. to if we've stronger

Ross Gilardi

the then in rate was; the your Okay. high profitability limited assuming guidance? years going of part North come think just like XXXX has outside seems margins we in a what And you've over it. XX to months. you in way Got come tax are rate? of last with the your North America down see has actually mid-XXs my follow-up are of America a that more in GSI just just tax to And type for been When long rate issue it the been, I like

Eric Hansotia

of margins first got is as but as all we've them there overall. a strong that in The margin have the to up, North of little offset impact North earnings improvement in us to North going Well, is one our America rate bit terms XX in but earnings, on is to XXXX. that our not of limit going – XXX us their much we what in translation for gives European exchange factor When America improvement the margin results. our the American Euro particularly that is gives on strengthening, a

the America North market. of So for impacts foreign little bit on a exchange headwind a

In you year reductions are in to particularly contribute come XX% where America we it our to the North rate, and continued we're saying were XX% in tax stronger we projecting point America tax XX%. earnings, to down. This will the South terms about of out And at that as rates.

in future that the where we and goes pull we'll tax tax rate, So to and down our U.S. let's profitability that rate rate. that in the improve take can that continue with as see of advantage our

opportunities So anticipating further we're the also for tax future. in rate reductions

Operator

Maria De William question with from Blair. is Your next Larry

Larry De Maria

an wanted an Obviously you obviously morning. here. have a go member not activist I it's board Good thanks. a different Hi, that activist. to direction in every situation little day and becomes

and of considering discuss So playing the the divestitures of suggested? this you're at has out, she concessions, and if that point just just can you how this some kind is

Eric Hansotia

AGCO talk TAFE's member. for Yes. a to of but now. a a number We as also one about can Board our with that. There's commercial member, a about that Mallika board board we There's dimension had a relationship. is relationship – dimensions Srinivasan have is remember, decades on five to

second dimension and a then dimension. there's shareholder So that's a also

So time, in kind courts those and always about going operating of off we that, an our to – start partnership, – need recognize any to managing kind of with it of also at be think you the that all are the we it's not same interests aligned. have. The partnership

a launch be been longstanding not always is aligned. Although it's relationship, our

what's And all making all very that and sure decisions very, so doing we're on on board good is focused making based the shareholders. for actions all

as with broader that well TAFE their going and with continue the investor shareholders there. very sharing And of as sure we've dialogue We're are so range on we're what to listening got all a outreach proactive mind, on. we what's the making doing out

Technology De additions some rotated be retirements of new audit, Caterpillar, and this two of making profile. company, but many recent updates, bring establish the the right were do Chief committee many stockholders. our and as new are some the outstanding We've governance we've board GM, an and Some for and on the for director. leadership we've directors, have focused Lange in expertise members of and stages Tsien, planning in going remain the for evolve you there; at then those look just conclusion actions new responsibilities. and over finance, have independent some on Officer and and but And when we would the with, things on definition to who again, term if leadership corporate company the we very, take the lead that more our President really different some where Smart time, quite a the compensation experiences to director the committees; Matt seen past very happened strong, so we've working we're to role of governance year, stakeholders from terms had specifics have the if focus oversight. quite month, works an all the best – farmers. for governance for stages system chairs the lead decisions limits come Solutions independent, governance, boardroom of entire analysis bolstered you But positions board to that independent Machines whole that focus some enhanced appointed And time, a of these director new to also Bob We've in for very our those board on terrific been from both you've them plan in

So, I set kind people the liked of incoming happy where chair the very has fresh about a for and very board. stand. I'm that we with. the company happened. which the as that's all of leader doing working will activity I new of with the we're It's of be committee strengthening

we're looking improvement time. think those we're Where position good for still I there other at, and and may be so the underway investors a and activities of of the are what incorporating course done. ideas listening out in not our And understanding over to

quick that's overview. So a

Larry De Maria

And good how's we the thanks a but opportunistic, it be noted was that good you pipeline acquisition have on thinking overview. you'll Yes. be the is which out might looking? that's you a should active could How sheet, actually And to you, That there? then I Thank Eric. just, much. board very up to pipeline follow And it, balance that? go be the you use. if can Obviously

Eric Hansotia

Yes.

more surprise AGCO up a proactive We've what understanding change to be a fit because number good companies for we're new a of a or the a read a then we hand. got at be And one being good on – target to being of kind company be that a whatever. responsive year also in usually that do. XXXX of bit It's opportunities that direction well-trained very would of muscle came like more acquisitions. of You about that may able within

opportunities today. enough we So we've any of share to pipeline, nothing that number would the be but Avenue. we're mature able in And working specifics actively a got that

Operator

Your next Bank. is question Deutsche from Nicole of DeBlase

Nicole DeBlase

Yes. Thanks guys. That's the a you? are one last on name. new How

Eric Hansotia

Good. Hi, Nicole.

Andy Beck

Hi, Nicole.

Nicole DeBlase

respect start the is that just maybe using we kind assumptions with you of to earnings Can XQ guys outlook? the Can full Thanks. expansion expectation you're to get line about or any dollar expecting just of for are bit in with the in the year a quarter? what consider the for little the growth you first the if things to margin to with talk and

Andy Beck

currency so. to I sales that Sure, of We're going And around X%. are impacts or XX% Nicole. about think of at be growth looking

of take So stronger boards as advantage these we core growth we have that there some order discussed.

be our full Our lighter margin projections are year. than to a little operating going

up – we expansion maybe margin points expenses the some other XX are in limit in investments some So and that extent. first do engineering to quarter, the off to going early expanded – basis higher have we're kicking that the year are

the The and we we of will issues with the shape second because, very mentioned, in the first how year. in we Eric had going COVID be to go. the so that's severely impacted we quarter half different catch-up quarter XXXX a had of year strong of had than second what And our that is as think then kind

significant improvement in we a the quarter. potential second so, do And see

that's where see improvement. so year-over-year you'll the strongest And

Nicole DeBlase

a my quarter Andy. South it. another of American expectations. And Thanks, bit Can than kind That's Got just really little margins better helpful. impressive talk follow-up. then about we

and think the moved could we've you about have to calendar seen the then that XXXX? turn through as If XXXX about talk you upside drivers margins of of into how the as guys sustainability we

Eric Hansotia

Sure.

we're the you ahead good giving cost, down strong. some sales in there. planting of production The protein really also but very really our our we and better of also our and over with planter margin momentum very Precision South margins, businesses say, leverage been our have were The and growth with seeing us there. higher been area helped Planting sales Growth there has business As grain schedule in us good. stronger down American markets

seeing a that. and improvements we're that's productivity with sales mix like So, us things better along of and helping core

expecting XXXX we move it move point margins XXXX, pace same won't but up. to to XXX to in the still at do certainly did see basis we least our are we XXXX, versus like into continue at We As improvements.

So see down. coming better growth of margins, being actually markets the We to improved improvement. Argentina of help our – of improved that are margin next a sales going drive force one production, year, for do lot same we're the elements

little will a bit in that that inflation seeing be the So high challenged now. South of with an we're offset. America we're right And

big challenge changes So it's keep to our with with up cost the a pricing.

margin focused again improvement on overall well. achieving as XXXX. So we're in But that

Operator

from question Your Tiss next Joel of BMO. is

Joel Tiss

How it going? guys. is Hi,

Eric Hansotia

Joel… Hi,

Andy Beck

Hi, Joel.

Joel Tiss

protect into talk could to It seems to position diseases. been some you if guys that things, more little bit in of your you there great be from to and a that. are and about to that future if way has wonder maybe a series of customers protein outbreaks a of address able a different tilt animals there's way I their and production segment any

Eric Hansotia

bet. You

of So, got question. certain to your micro one – go key the again of to going high macro and our to Sustainability a has very is answer – focus company. for

our sustainability and report see with and our so out go-forward to annual embedded it's strategy coming going You're our in report on.

topic areas welfare. focused of our overall the One sustainability within animal is

And so, there kind opportunities more to of do where practices productive farmers about is we bring other Well, think the the on a that. precision there ag, technology hand, new like both with can one sustainable. number more on is new help the of and we to getting farming

protein Georgia top – and facilities got protein in world. thing Our in on research sites with we've focus do production that animal we're They've up University production the some same campus. the of of one new invested is to the building

as student of there technologies, and on few We'll trial so on of be or go like do reporting So be sensors, model crop campus our research buildings tour with a our changing tests practices cases, have activities we're combination optimization going that putting on. number much doing with different to mechanisms, right of we on, farms new as to their on agronomy. of a protocols, well a

to So those and look into then solutions producers. the we to that that's them, sell learn protein the we about underway turn about learn how and solve problems, can to

Joel Tiss

the today? revenues mix I horsepower of it am What XX years? could to And be where high Okay. of allowed five across as of in roughly current company? And whole ask about percent your or

Andy Beck

maybe I'm is high on not but I – to have say have the would number business sure Yes, sector. I there our We'd we're for a you. just calculation, do focused horsepower generally,

Europe, in on we the heavy premium particularly, horsepower have So sector. high equipment reliance on a

In And it's America, so is our North strong position in market less. there. very

grow our to where So business. But continue it's America horsepower. high is need that grow And it's of in or still and a want we North a we crop row majority we've to this and with in And the sector. South technology the to high in some stronger really in been horsepower new America, – looking that grow small invested similarly in. of tractors sector we're to

the a large it's of high tied overall but to still of majority businesses – that sector business. our So is horsepower

Eric Hansotia

year, little are high about tractor horsepower low or you color to in give North it of America sales this XXs. was the only high In for a XX. Joel sales bit globally horsepower

North and brands brands. to of brands our and in our that in America Challenger our advantage the So technology Fendt both opportunity significant take Massey have we

Operator

of question Your Chad Bernstein. next is from Dillard

Chad Dillard

morning good guys. Hi,

Eric Hansotia

Hi, Chad.

Andy Beck

Hi, Chad.

Chad Dillard

to So you believe margins past I being achieve talked about in operating cycle. XX% at able the mid

nearly of kind to year. for guiding You're X% this

just precision through to mix I allocated terms of in ag? basis So much gap self-help that versus you of the how wanted how kind that? the points. about understand Can expectations versus How to versus just you product is we volume walk closed thinking XXX are

Andy Beck

to is there a said have we that. aspect volume Yes,

some developments And with into we're that of seeing. that seeing we're come so play hopefully, this market – the

need America, growth The margins in business other carries improvement higher of in focus in higher the generally our continued business. planting our in parts which areas sector, and we growth our continued to precision where continued margins, absorption better is horsepower a South out

larger that. So market of getting a share

So we've that top and that's the element all of purchasing developing our about business on we're and high talked initiatives before. growth. a to real key to cost And for areas where margin effective be productivity more it that focusing then want continue products to we of and

progress we've our to us the guide. So up all of added to opportunity continue talked current margins give what this that to in from should

Chad Dillard

it. Got

Okay…

Eric Hansotia

lot really And a things to coming of we're in those pleased with light XXXX.

margins. yet that yet. coming call we're got was self-help, talking on areas the all we of only front are and Our as Andy we flat X%, market areas our tailwinds the basis about, overall had improvement. where on XXX got points we improve business focusing sales in can We're no focused just on you And delivering. we're and and the lot us, but still that up margin a up in to that things are We've a from were do road long yet not of XXXX, there the

Chad Dillard

gap XXXX? business. of How would And lot margins, the just XXXX would with and to comes incremental coming lower some XX% than else from it. gap? from guidance the the margin, more the like much that kind call out that costs bridge implies of more is anything mid you there for And your that back temporary so of typical which sticking a Got is a in be XXs

Andy Beck

Yes, thanks, Chad.

look you more basis, out And taking the currency more if if all, at the we're out, to then our of here you First you're take in we're investments, engineering about, talking on XX%. implied constant the mid-XXs. currency closer incremental margins a

that's in, we typically in think back so And your about of are we line costs, of can costs more some I said that. the we question some have with we what that other coming accomplish. think do To

million are costs like range. things partial our the of $XX into expenses show some planning as and year, return million of First in also we we and growth the a digital shows other and we farm all, to technology and some this built have investments travel these the in $XX probably That's that a into plan and probably put travel well. initiatives of and

in And so well. that's built as

those that incremental that So incremental expenses are you've about. talked we're that absorbing do influence that margin

Operator

from Jerry Sachs. is question next our of Revich And Goldman

Ashok Sivamohan

about Ashok is see the company's competitive to Jerry opportunities are for This opportunities the cycle? the Sivamohan Revich. that the its on biggest position likely to talk evolve? next is of over areas Can in improve you company What you any for where strategy Hi. pockets

Eric Hansotia

it picture ties on touched today. we've a Well, that's to themes say a of question. good I few would the big back

cycle farmer. One of full partner become a to stronger to would crop them be the

combines, strengthen so on. non-tractor very to continue tractor, invest historical strong potential that, tractor and to and in sprayers, more hay we upside of and want we a business, have but some equipments have businesses, in planters, We our

dimension. one that's So

farmers machines agriculture dimension, appreciate we're up into calculations call out autopilot environment, planting, onboard smart and momentum their essentially optimize good with being on, go ideal heavily second the The in planter, use margin precision rolling smart automatically, those machines, investing so understand their them company. mode. can and what precision for we to end combine, that to performance sensors and been really products – We've they the and

So second that be a dimension. would

our technology combination and the our solutions and the But [indiscernible] to have mortar that. are them like some on and well animal and market service to two. to problem. Agriculture, farmers there's the really, dimension the changing reduce capturing And our are into brought our contribute engage also they processes there's allow changing digital buying, the with is footprint the and the as through on support other today most from at or interface topic. soil to research, welfare where and world to digital upside can our all some facilitate industries that farmers the we it photosynthesis dealer with sustainability. products with climate the of having carbon our did get brick and be be more the really the it as company think through change will a with And air we focus, to of if that to a back growth – would our you either the practices we industry, problem, sequestration, our do the we've we're solve opportunity our of in to sequestered. how farming, But of we big help with but or has element how able I if mentioned customer of do then focus farming sustainability of the creating their in Another out as new aside to products, emissions, help a interact tools on to be got change digital we less facilities allow opportunity pathways our looking through directly farmers to them how carbon

farmer some Analyst AGCO of for our farms in line focused lot Xrd with be Day, industry. will the the that opportunity industry. to other connected outline that lot arm those really as doing more of have in arm detail on be and goes line. with our we're So what maybe and they to through them growth in farmer the company. We'll that's most and And do we rewiring we And tours our but the the ag be with crop be in be wrapper a that are teasers managed to challenges intends that is able model the the in this to of March started future a another around what things in company

Ashok Sivamohan

Eric. Thank Great. you,

Eric Hansotia

welcome. You're

Operator

Ann Duignan Morgan. question next JP is Your from of

Tom Simonitsch

everyone. This morning is Tom on Simonitsch good for Ann. Hi,

Eric Hansotia

Hi, Tom.

Tom Simonitsch

to you elaborate X.X% I raw material more on this think year. than you that? X% inflation Can pricing offset cost just will noted

Eric Hansotia

X% you as cost pricing We, Sure. material say, inflation. X.X% of to net

to about percent. We probably expect a half that be

it costs. projecting of of significant there's lag. up as hit comes does it's we that we're to little Typically, fairly spot So a to when from hitting a now. are lag six see And seeing it prices and better three it in month bit cost – you material that like inflation end things right us terms component

increased to So, start our costs we're costs. those to hit see component really starting

it. so, And pricing we've into got offset get to this

Tom Simonitsch

follow-up a just And there.

closes I in of Or in projects? sort GSI? have do think deferred have on power Do those inflation you you some equipment. grain you what projects pricing noted

Eric Hansotia

to a with projects for to the do match a challenge ability and being GSI and cost commodity and big a of content a their that regularly make is change the number adjustments But pace is to heavy contracts it challenges for we're in We prices. is price the see it's the is to the that able orders there Yes, we to have steel protein and price. concern. cost products for the going then changes here and business grain of place that's with keep in steel of the one also XXXX and change

Operator

Your of Stanley. Yakavonis Morgan final question from is Courtney

Courtney Yakavonis

us flagging guys. XQ. wanted the good the Hi, about the question. in hits going shape some pricing to us and and quarter different go the light we're the the to given that when you modeling kind about But of your morning as the given comment make strength in comments gave the be I year. you're the kind color first the we of compare any just XXXX Thanks cost about of this out thoughts material XQ it higher making as half help back you to P&L. of else for second half good of it very of is second half year can on think full to that second and cadence, versus was production especially high-level Anything much as

Eric Hansotia

think be So the about say I XXXX, would more seasonality Courtney, as going is guess I lot to normal. you a

second the addition likely quarter going implies that So quarter our is to be margins. biggest volume to in

very We have half first probably first planting does their businesses at in a business the half America, – that Planting especially season. least have ahead couple in centric. North of are Precision quarter of of we

margins are So especially second protein, good, those third especially and America. that Grain for especially and be business. North in sales quarters will heavy and

the will quarter benefit just both and levels then and So protein planting second as precision grain well as production overall.

for shutdown Valtra our plants as extended business. Europe in and closed of America, we recall, year you COVID and If an this had result South

margins obviously probably and significantly volumes to similar or of XXXX look better quarter. margin and terms Europe or relates So first it will and XXXX in volumes more as to much third

seasonality So we yes, this normal more as much year. think so about

Courtney Yakavonis

should I would what first second is the the and XX – on then about helpful. be margins half then… first but just call out that's And anything well versus we set bps in for in the thinking and as you quarter, Okay, half second roughly you that half? the up know

Eric Hansotia

or XXX production then going back And year. basis last points of is points similar the because So in significant we're shutdowns probably the XXX year. be to year-over-year the talking second total basis quarter, probably this half in to

Operator

call. our for the to Q&A portion to This remarks. back closing like turn Greg concludes any of it I'd

Greg Peterson

much We And March analyst on meeting again, Thank everyone stay participation you remind Xrd. like your you just for of our very today. thank and to safe.

Operator

Ladies today's and conference call. your for you concludes gentlemen, Thank this participation.

now may disconnect. You

AGCO (AGCO) 4 Feb 212020 Q4 Earnings call transcript