AGCO - Earnings call transcript Q1 2021

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Operator

Good day. And thank you for standing by. Welcome to the AGCO 2021 First Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. now today, hand of Greg would to conference Investor I speaker your Peterson, Instructions] like the to over Relations. [Operator AGCO head ahead. go Please

Greg Peterson

Thank presentation call. This of we're to going AGCO's you, to morning. posted morning, quarter joining a to refer slide website. first conference us for we James. all earnings XXXX to good that And you Welcome our

talk cause in We'll may actual about presentation, reconciled We'll price morning, to, it that We'll using our also changes and non-GAAP forward-looking any contained forward-looking Securities a other on caution are measures to to slide from but product adverse at replay to our the actual plans. timing website this the those and closings, and to December these are measures production our www.agcocorp.com. available making be chain plant expenditure demand. periodic those future share We financial those appendix to commodity capital for presentation. corporate law. are industry, could dividend tax These and as of prices any of today. that the important find including have that We including benefits non-GAAP and supply COVID-XX, margins, metrics. in disruptions from expectations later plans predictions results and You'll that levels, weather, product limited in those including update events XX, discuss file rates repurchase, from and year refer except by to be is demand. statements. There the development of the we revenue, around you We'll reports availability, materially call in required XXXX. and the you risks GAAP with differ time respect statements disclaim statements measures obligation the with including developments of cash materially. rates, resulting workforce earnings, flow, time agricultural and plans demand, also wish levels, product the this factors the statements that those We not factors ended Commission, differ Exchange Form costs and to XX-K forward-looking These in include, documents

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

Eric Hansotia

begin participation morning. good in three, can where the and slide an your We my remarks excellent your we and that call AGCO Greg, you, going you see I'm Thank on to interest on to appreciate today. XXXX. start had

Adjusted in quarter. increase our XX%, operating operating a material offset achieved was Favorable inflation adjusted to agricultural up sales our income first for constant first quarter grew in XX% demand to of farmer currency the The sentiment, driven recent lifted quarter. pricing in margins, over basis creating by first XXX nearly higher in rally helped regions. the on in a quarter basis prices improvement of commodity Our all first point compared the XXXX. equipment with

material the we a see the during of remainder However, impact expect to higher significant more of year. costs

our production. quarter We results, continue forecast year the disruptions are receipt full have to financial COVID impact of also challenges chain our for market capacity components of our first constraints as significant XXXX. targets and facing supply with for timely on and we Based increased improved

new capital the tractors putting conditions global expected of an below and that by well unit ability moved strategy our across the $X On return in special enhance last variety improved shareholders in strategic inventories, we farming, return detail XXXX. XXXX. also funding industry excess more year's investments demand ambitions sales a regular on to of economies paid retail compared generate plan which and XX% is a grain growth to we a our to America, capital drive includes ag demand improved XXXX. and and payments, investors framework in about return smart retail the In These are includes precision prices reopening market The few major Xst. Agricultural the have we conditions. addition of earlier those increased are across markets as special this tractors farm the In dividend above same North announced risen, months cash to increased have included Last XXXX favorable three company's going outlined for in four, more sales industry The dividend green, and gradual our first year. resulting demand low-horsepower high-horsepower The to in Sales of digital all industry increased week, levels, Andy prior on margins, increased repurchases as our for improved. new sales plans dividend to be in XX% to dividend details economics pandemic have cash. regular pressure a for slide while to minutes. return a region on first from period recovery the well peak increase annual of machinery. to levels. share commodity quarter announcement to equipment variable for out quarterly June the to for

livestock With sales dairy farm extended, increased sales XX% economics growth also XXXX generating the quarter retail first remaining improved positive Western with in Industry North prices of retail approximately of grew America and large ag first major sentiment. are Higher the all in the Europe industry farmer across nearly age quarter. very wheat, fleet in and equipment markets.

favorable demand an the healthy aged supporting environment on hours replace markets. South five. to fleet. Argentina favorable increased In as first positive driven well production recovery smaller economic industry equipment shown rates slide to months well who increased by XXXX in as XXXX. America, first this sales generate export farmers as XXXX, during for factory in AGCO's expect the crop and continue demand Brazil We of exchange three both in conditions A as are are improved

ability job minimize increasingly end the have to impact, supply has and the difficult. become a demand our done While our to market chain production meet great robust teams

chain supply our disruptions, industrial well European as due been Our the are by feeling Brazilian constraints has capacity surging and largest facilities production demand. as to Currently, COVID-related impacted the impact.

at example, last was factories week For in will Monday. production on Germany suspended our resume and

with to challenges the end production versus increases America are expect We all was facing market South expected we the XX% in our approximately in the XXXX, in largest quarter increase in period same demand. meet and factories. Total bottlenecks supplier for ahead up regions and delays first quarters work as significant the company in

first a to projecting of year last XX% are with XXXX the occurring in XX% most We full increase in year. to the production increases year, the half compared of

XXXX. can the production extensive COVID-related of remember second we half in schedules you and that plant the extremely shutdowns high of in Now first had half then XXXX

Turning first who our higher attention Beck, Andy AGCO's quarter I'll information Europe the North year and as tractors South America end more America, now order to a provide to combines to our of results. was compared order the of our significantly over March, will for in about you call board, and board hand ago.

Andy Beck

AGCO's XXXX, Strong parts XXX the at first impact quarter Planting compared impact increase impact excluding sales approximately XXXX. our American as Africa Asia $XXX Pacific, our compared most market were margin rose combines I AGCO's production in examines up were East significant first Net drove in quarter tractors, regional our of about the planters sales first in XXXX sales Parts South everyone. Margins the Europe, period the and Thank first impacts. XXXX. will positive the XXXX. as facilities. of an of High-horsepower China you, and XX%, as China the in AGCO's of morning pricing to points sales grew Slide for basis were in compared compared first currency replacement of and net quarter the seven all products about segment to of excluding currency of performance to in net were translation excluding Net XXXX. a the Precision translation. most to currency as first XXXX, same Strong Germany, which impacted looks sales across levels performance. negative sales operating part XX% to QX by across And with about and approximately the period the good of North first quarter the compared plant impact net the sales pricing America quarter favorable Brazil. of increased highlights. AGCO's compared in in by XXXX. excluding growth experienced sales largest higher basis Increased positive same in growth increases and sales and increased at growth. increase regions. XX% currency end Consolidated sales the Africa sales in produced sales segment first The in to of in well Sales currency XX% and translation. all America in slide in on of start markets to compared of excluding showed of supported replacement demand quarter South quarter approximately the recovery XXXX of currency were translation for the shutdowns increase. well levels constant the net net tractors, approximately by Eric. improved XXXX, to million up Australia six, occurred margins quarter of the the first first on the positive XX% the quarter quarter. Last Middle favorable Turkey adjusted were AGCO's year, strongest positive reported XX%, XXXX. UK. in the approximately net the

was X% Our first adequate of inflationary pricing cover quarter increases. to approximately cost

showing protein quarter and challenged. in East an grew sales sales compared North with of are in Asian we protein in been increases first offset market product. have quarter by the region in capacity in in $XX South million compared Significant an of inflation margins. sales mix. South sales production the million sales The first grain the reflecting to has operating quarter, to Africa our primarily where eight from significantly first protein the the XXXX impacts margins America. from XXXX America and grain regions fever required quarter, our reported Protein from mix versus For started to improved contributed XX.X% sales impacted remainder improved to improved higher excluding in and In partially expenses. XXXX, of XX% and Operating Pacific, swine $XX producers higher production approximately intensify, capabilities. XXXX China, first rebuild with $XX operating XXXX. the pandemic, North protein to the period grain resulting expect equipment about Asia sales increased of the in income margins largest with approximately improved net in to Asia first by the and to region improved to North quarter all in production by in Europe, operating segment pricing expanded Pacific demand North sales, our improvement. and end business XX%, by Slide X.X% and XX%, Asia America income increased currency warranty Africa Pacific, the year, higher and lower and in In and sales of sales same segment the their improvement. in continued increased operating America XXXX, beginning the segment, cost offsetting margins Middle of and production million been engineering the protein Sales region material particularly recover American details quarter the along The maintain has reached XXXX. seed to contributed American the income compared XXXX. increase by all with approximately Higher increase. processing to and Globally, first

cash weak On address We XXXX, a protein recovery sales flow represents free we activities the in expecting cash heavily pandemic. slide AGCO's which impacted XXXX, first in the expenditures. capital are the quarter, grain were less operating in sales used and nine, in by following for which

first framework last working year the term us in XXXX of million liquidity we facility the greater strong and cash free resulted provide variable cash. regular requirements AGCO's year. are repurchases quarterly to and priorities out return that of generation excess outlined and year repay allocation an AGCO's cash special to capital week, Last quarter loan annual $XXX negative capital dividend payments, share capital taken to includes was return a half free which dividend for both last XXXX. the flow thereby in allowed and seasonal a Our first in

Following XX% to variable quarterly shares second million the XXXX. expect announced $X the position the our to XXXX, close the the include million in Xst, which period we expense in receivables share are during special included dividend We cash quarter. to cash cash facilities, week and well currently were million to outlook. to XXXX, strong for free million flow at XXXX. and the generation returns first XX. by receivable a our payable first dividend Future opportunities compared with last on in of quarter were June in includes investment flow target record declared special details shareholders of repurchase during financing $XXX expenditures in of be dividend opportunistically to sales associated was of the $XXX amount shareholders quarter May per losses on The amount our payment payable in variable of increase acquisition generation, on Other $X.X capital business approximately with which same on our market as and will needs other as our based net $X.X of

Turning year to our forecast. full

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

is are favorable prices arable expected Europe to demand grow in expected XXXX commodity from XX is aged Higher increased South assumption modestly sales levels. regions, replace support retail to Western are America demand continue for industry of equipment. We XXXX. higher producers. Elevated an industry outlook. for of demand result compared is expected demand. Demand be in have European more to XXXX XXXX. industry expect improved and expected Union higher sales. farmer smaller remain after increasing to for are growth and to X% commodity in as improve segment. XXXX larger XX% Replacement positive In to most the of XXXX. economics Milk strong expected prices drive to approximately to additional are demand commodity prices underlying equipment XXXX project sentiment up XX% rates from the forecast to equipment America, compared North years expected to our exchange several highlights economics the North healthy expected expected XXXX increase. demand American stable unit increased be is We XXXX. to and in fleet is farm America aged and support industry In to total, supportive in increased remain in farmers dairy Slide market our for South all have globally farming during prices to

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

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

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

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

view XXXX We rate an XXXX. from Slide XX% XX for lists are to our of financial tax selected goals. XX% targeting ranging effective

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

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

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

For significant We levels, current project per the suspensions Brazilian the by that share. COVID-impacted of facilities. will production our $X.XX were be a sales quarter, margins estimate XXXX per share which second approximately and to European our earnings in and over impacted in $X.XX in range improvement is

the engineering quarter to up in scheduled XXXX. also new facilitate product second to introductions We ramp in expenses plan

timing While is sales outlook, that back during quarter supports XXXX. supply the our chain will quarter. availability to is highly challenges to production of and forecast turn continue we backlog quarters levels component due Greg. between two dependent we'll estimate With that, the order from our on The to over our anticipate it difficult suppliers throughout

Greg Peterson

this questions one that, we of the portion with the you ask in limit spirit Q&A move Andy. that section? of follow-up. Q&A to yourself in We’ll the limit - don't James, and Thanks, questions And participation your why to one call. to well, expanding

Operator

our Citigroup. from the line Go comes Instructions] ahead with question [Operator Thein first of And Tim please.

open. is line Your

Tim Thein

follow-on I so morning. does you [Technical unwound improvement, there color I'm plus of that on Or that and is get Thank the plus fully in what stay side narrows Good to net the full for XXX does the that assume basis I'm year? not - of it terms that is gave the just points. Andy's think margin the you. that Maybe What pricing? the quarter, sure for first regarding Difficulty] comments some you in terms year? just full clear, expectation that,

Andy Beck

Yes. side. the We're we on that stay plus anticipating

below net the was that little a first in pricing X% quarter, So impact.

in expect year. to the remainder well advance So that we see of was that increases – the commodity of the got for price the in, pricing surging we

our basis about As X.X% price pricing would we said XX full be XX and to be to X%, net our points. the get would year, we to

middle expect these the to the part challenges by to we of year, end are kind pricing businesses covering fully in the we all costs. keeping the But with be the There some year. of positive. stay up we see in So of expect some that cost the

Tim Thein

it. Got Okay.

Just a follow-up. quick

of full assumption orders terms orders. on terms there the issues I'm there of retail But for Thanks is the inventories, year? what is year a kind where is there dealer going of your lot. maybe year, end just some inventories in stock What around in of assumed just the hitting revenue On product in the full availability? [ph] versus there of in component at in midpoint terms color some that XX.X and prioritization given terms that's the guessing outlook. dealer the

Andy Beck

dealer look Well, a you last end hard as ago. we we due a know, down work that And dealer year. they're the of the getting where retail Right. our worked of substantially as our – were are last we've And we did year below we the first but that where lot at we on at strong inventories the quarter, activities had. is inventories to also year

your to the but on So that inventory sure retail supply focus accomplish. we make point, demand to meet the to enough sure, is of got want all we adequate for can we've

relatively Our that of dealer the anticipates no year-over-year business flat year, or plan increase or additional be inventory by really so model planned. reduction will end our the

Operator

of Our next question comes Jefferies. please. Go from the Volkmann Stephen with ahead line

is open. Your line

Stephen Volkmann

everyone. demand issues term? medium sold is? sort in how you how to here. outlooks. have terms those supplier And I'm unfolding guess Eric, Good is maybe and you your Are maybe think figure of thinking or that actually what cycle refer this morning, thinking pushed think sort of is is, where ‘XX? about into what get to outlooks demand I'm produced are Just you're I'll And about because your the curious, get you what we ‘XX you trying does have Great. out really I in regional of can what slide various XX,

Eric Hansotia

to XXXX, is that that demand there of be will markets. able I industry question, Good in especially there supply would is respond to the some in Yes, the out way believe our more I than that Stephen.

will North America is confidence marketplace curtailed curtailed. Europe the the at less think there's will just America COVID. South a a left uncertainty - for with of I highest be risk. curtailment. on Western to what But of in probably lot the is be impacts being vulnerable

same assumption the what as is guess as I your So would well.

be not demand this met. will of Some

Stephen Volkmann

of in just then margins would supply more normalized as on a to all and it we these follow-up that assuming XXXX And happens? a incremental logically revert reasonable be of Is have a kind better that that. year, kind things think

Eric Hansotia

root And a sorts smooth component we're wasn't place lot things root the able to online, with of Assuming just on surge, issues cause. of but and largely That, these out, all a COVID issues. which then the cause that's having such there's problems, the different freight catch the of spot all commodities infrastructure plus over vaccines overall the coming up. is

So next fade be and on to our to through these comes If you way effective, are hold the would they lead year believe work away, waste that some that. of could and there's had. down incremental and return their system a the normalcy, and vaccines costs then could which to it margin all assumptions to hidden lot

Operator

Our line Cleveland next with Go question Adam the of please. ahead Uhlman comes Research. from

Your line open. is

Adam Uhlman

on guys. Hi, strong quarter. Congrats Good morning. the

Eric Hansotia

Adam. Thanks,

Adam Uhlman

I more some your maybe had a question more I second for guess. be the pulling don't half know, closer year, production production you hours. I I tractor quarter, on on why an after hours slide year, to, like wouldn't X hours wondering on just be second would elevated basis? back Why the in guess, I'm first half of absolute your of the the the the

Eric Hansotia

production. significant the year delay an in second terms last production that was a unusual We of of year in had quarter. think year really in I kind last

shutdowns when have year. the so worked we And typically that, and things quarter, actually like we third last summer

our plan to our have this year So is shutdowns in summer plants XXXX. in normal

that had to higher expect third mean fourth year than naturally demand. quarter, this some to to we production going the be our year end. production And despite in that's is see increases last the in quarter we going And back so what

strong. So is I fourth also quarter think relatively

market these of some see increases. to started You

far. we're what seeing that's So so

Adam Uhlman

the could with out like flush by some share order XX% mentioned And the Maybe availability? at intake, you us we maybe up think of in I Okay. I And – globe. you that growth? out are dimension are sold orders that Are you you region. you're type areas that significantly. And your could order looking assume

Andy Beck

Sure, yes.

times double gives Adam, regions, the So us year. good of the gives much and half visibility good back pretty really across which lead very some up the some into close us we're, to

overboard So last the we some where yes, quarter were like first we as through we year, saw orders end last ended about in year. up, of and the even to see though came we through growth the I double continue said, – strengthen

Eric Hansotia

includes Adam, and protein. green that And

Operator

question comes line next from Our Go the Credit Cook Jamie of Suisse. please. with ahead,

line is Your open.

Jamie Cook

my here front, some my And is morning. I share just of be in question. book – guess obviously, you if talk the today. anything the America, strong North I you said the is Andy. talk America, Good good. on Hi. be I just Can sales Can Obviously, pretty market guess first South looking order about successes question, pretty mean, potentially in there's about what to then there? to seeing the follow-up you're growth

in America, improved Any in the outlook first South the margin margins sort of for South change For again your quarter. America? Thanks.

Eric Hansotia

Sure.

take to want the You first half?

Eric Hansotia

- then business. tractors, previous to Yes. that in about the success that that's discussions of large by we globalization Fendt on high-horsepower good seeing talked in Precision We're our and same in brand the Ag we're and our horse have continuing largely you trajectory the our driven

over few So, I by momentum planter to In is numbers XXXX, can XXXX. give grow our here. going you volume a XX%

of intelligent, largely rows Planting. rows, the That's XXXX. then selling so that forward. grow XX% from coming we are out to addition XXXX, planters - in of that are and projecting factory, since expect full-fledged factory, nozzle also up to continue also we're on all smart we Precision that sell out Our smart sprayers across out we our be markets up to will of XX% And the going that go installations

up So the our - of connected year and be XXXX. versus the machines will by Xx end

are some and and terms But America horsepower in in in combines, growing the sales is in Ag Precision of machine planters, our South share as and even especially America. growth in are well. sprayers, the America terms South then full of So, growing but America tractors rates of all North strongly, largest North high

Andy Beck

with that's dealer North bit that ‘XX building market, Jamie, you of didn't a in quarter little as ‘XX. inventories that sales one And the especially as much of puzzling, the first America looks not grow our did share, the function is of our a as at quite when in numbers us things we fast as and our look

So, bit a said, we did our share, inventories by but build did fact masked our Eric well, as we little last didn't year. very that market retail it's the like

Jamie Cook

the color then South margins, America And great. Okay, sorry? just on any

Andy Beck

Yes.

you So, weaker first mix. the the said, XXX got a year little basis full quarter. off XXX see bit of at this to in somewhere a South start margins, do we're improvement America on margins. we to as What is the We good point a looking for

all like expect Some to now, we're cost of Argentina; challenges increase right also in cost - that. offset our South stronger the margin severe and and we markets so start back to to slow America our down. is the And inflation there's most keeping pricing up

and products an a there. bit So, of in issue markets few few a a little

- points what we're basis So, about to points basis targeting. XXX is XXX XXX

Operator

comes line Duignan from Ann please, ahead question your of the Our Go line is JPMorgan. open. from

Ann Duignan

market I'd questions go sufficiently. production the It's like to back Hi, Duignan. end you. sure you earlier Ann I'm not hours. outlook Yes, thank versus your answered your that to

pushed I the than production of to we've years. supply QX chain Unless woefully low. lack demand think into after in and year couple be the QX constraints, last given expectation I low expansion huge mean, hour’s to why or least absolute given QX, levels, outlook it maybe wouldn't your QX at the this frankly, your back be looks, to higher that XXXX? of out XXXX dealer likely off North inventories, cliff is the but a seen fall America believe the horsepowers that you

production QX hours. Why the if wouldn't hours, the not you absolute higher? explain that, they So year-over-year could be

Andy Beck

is that in strong against the a we pretty fourth quarter backdrop the Well, was have quarter Ann, of what know, you XXXX. fourth it

we quarter. this and fourth up at our revenue only X% our the point, to have X% projections in So about

that And of X% up think increase XXXX we we did we the QX, versus relatively because have So more be QX. our then expected catch-up are the then had in increased I sales the getting a X% back - in QX. about production little it's and in and half, year to ago, X.X% flat mentioned, I huge a to - as

So that's focus. I think the

is Eric of ability to terms In produce, of to year. rest for there it, I certainly, as increase, going the and opportunities we're said, think the is about for the watching end markets be

Ann Duignan

explain But of says produce every at levels lack need can strong forecasting, you mean, – produce demand I you're in dealer if that they really QX and we you no have the why And they to doesn't speak the can't inventory. QX? inventory, absolute that them the in

Andy Beck

our this inventories last had increase. year, an year, us going coming to think we that's Well, – give of down. I dealer we somewhat And

of what I'm hours, hours revenue's said to be. somewhat on should sales said, in our terms up, – fourth In line going the already we more that. and and production then what in I've with the described as The quarter focused increase pick be be we production do would

Eric Hansotia

mind keep fourth Ann, Brazil, also, then the in shutdowns And quarter. in that also we the in maintenance had

seasonally be those lower, production Brazil. the So is shutdowns going to because in maintenance of

maintenance in third We shutdowns have quarter. Europe in those the

typically, levels quarter high. fourth aren't as that's production that why So

Operator

De comes Blair. next the from William Maria line please. Larry Our question from of Go ahead,

open. is line Your

Larry De Maria

Good everyone. Thanks. morning,

update us harvesting Thank cycle? we where be? the on of slower-than-maybe-expected into Mallika's cetera. strength I'm of et the portfolio, Can presentation overall I of some Momentum go where combine. understand of think this trying you called if But Just you a as products kind rollout versus including you. the not the you'd are planter, the like up out thought IDEAL you about to talked mistaken, You the

Eric Hansotia

very that combines it, in early Europe, one we’ve marketplace. dealers in Customers the this make extremely all network well behind successful. this – machine so is the like, the our had way in to got same we We competitors very North walk to But marketplace. outstanding lot against planned Australia, here We've our on sure Yes. tests ramp-up relative that competition, largely run IDEAL combine supporting is very the to it and South of the carefully been a wanted believe in the reliability we well. the a hand. we making America, And weren't in America, on performing always field so a we in machine staged done head-to-head. running performance. been had has problems. some stages, into terms very, We the that us ramp-up just of really have are complicated those to now. of We've some is had it's parts focused sure But been and performing

And year. on to to have so track projection is to year, into more next our sales continues and going again that it be this we're grow. growing and We're significantly

on So US We're America. still location in And two on curve globally. in will point, Europe turn growth when locations volumes we steep justify. the it's South producing some at a a and in

that always was the part of plan. So

Larry De Maria

Okay.

a obviously, proxy more follow-up, to coming As your overall? you pretty - it Or it's less, still characterize quarter shareholders in a think or distraction? good. do supported and maturing we Are and this we obviously, it a is performance head good, very or how issue, the and is would becoming

Eric Hansotia

from all TAFE. Yes. and - directors - say Board within I all it's support having proposals meetings. discussions votes active - Well, votes We've the been the positive would got on we

And we've predict coming so, here. with our -- always where during just like center. things things relationship exactly vote are go it of towards strong that support We've long-term TAFE. towards will hard from meeting, It's not I be the to think interest the shareholder and But the go. got will is a had where we'll moving see a discussions

Operator

from comes question line with Nicole DeBlase of the please. Bank. next ahead Deutsche Go Our

open. is line Your

Nicole DeBlase

Yes, thanks. Good morning, guys.

Eric Hansotia

Good morning, Nicole.

Nicole DeBlase

about that the a the that it be but any revenue, expect helpful? than you're color kind I talk to question a of performance thinking about what year, might about Ann's, follows margin wanted you be path bit focusing you you margins? little kind but revenue throughout to And the start would progression on said rather the similar of guys on of can how

Andy Beck

Sure.

than improvement QX We we a margin lack sizable XXX In actually to for we XXXX. had of QX, Again, basis a expect the and production, margins, down Again, of we're expect so last lower QX. be QX production looking over improvement unusually because in XXXX. sales year in in year. was high last point our

get up basis we QX, XXX XXXX. kind margins to And of in be And – normal we XXX that see quarter to fourth that's again the by cadence expect we'll points. so we year-over-year then think more in our in

annual to a all, all as about point in would our on that an said improvement XXX in So that, basis. lead comments, we basis margins in

Nicole DeBlase

then you. on Thanks, helpful. That's one for question more it. Andy. And Got really margins

The were full think, you're aside the what versus year? America for from South little quarter a segment really looked was we what that of other bit expecting the for driver upside, I for you thinking also America margins North strong. about Can talk

Andy Beck

points year basis bit North got little for XXX full the We've America. a over for improvement Sure.

hit support out to quarter. get foreign in improvement, the first we we margin from pricing and import higher of improvement. bit can negative And impacts. out, of The a product Some you point came point is into levels Europe I'd do expect really first a the that production on America. as quarter. We that We we exchange a little area had North one think, good the get,

And tighter our are by stronger those strong European a so overall, with North in a profits, offset giving is margin bit euro us that, the with But translation little obviously, of results. benefits. America our

this So it's line, but up to a show company's for expected margin a double-digit America, the to margins it overall, bottom in in expect is get North to year. improvement margins not But does impact, big America. North the

Operator

comes question the please. of Tiss BMO. Joel ahead, next line with Our Go from

Your open. is line

Joel Tiss

And like in there. normalized America? versus so a out couple bet been I of like name want just his with you Thank strong I things I five comment into like can out try three possible what quick how kind more format levels now normalize? wonder, guys years you. price translates years that to talk how cartwheels what's very be pronounced. like the structurally do when It bit changed, to South looking is I a doing little if margins think then a there's turnaround could Martin's I and the stock of about and have all margins, how how to a about a the up question. Anyway, operating worked change getting right about seems think

Andy Beck

we that number of key strategy South we the element a we about Yes. talked on the We margin for focus to like - needed discussion years. in of bit the to a next as improvement that America over little continue focus our Joel, company felt

helped of find pricing inflation and also those. We lot carry we're is, are growing market And a aspects But ways in going importing terms lot ahead great strong terms have new We've way how so higher-margin all we're also still a to all in of schedule of terms a and our this into how localized of in of us. designs, of a have we of of been protein, the on to and And tractors of improvements, structure do there that the really in success that's need talked work this a some of of our our hopefully, are we're amount so because seeing which and business is combines. business, our costs the content, improvement. - cost grain planter improvement our putting brought driving because this forward. of and lot margins in a localize in reduce in our improvements really and things those We to lot parts year. to global will growing about and we sales, significant more more offset impacted down that

we've move opportunity the in we So in other America expect South forward. think But line still do all being regions with got our helped as Obviously, South said, we work America. us. that we markets and be to to

Joel Tiss

Yes.

Eric Hansotia

Yes.

Joel Tiss

Okay.

Eric Hansotia

another with be schedule is that with every XX%, last They above from view are the ahead Andy of that the presented we mission The the Board. said, the or, business expectation And ultimately. is time. pleased plan we on progress business just for like very to had them

Joel Tiss

Thank Okay. you.

Operator

Go the Bernstein. Chad ahead Our next question Dillard comes from with line of please.

Your line is open.

Chad Dillard

Hi. Good morning, guys.

Eric Hansotia

Chad. Good morning,

Andy Beck

Chad. morning, Good

Chad Dillard

to in the horsepower prior on, low to about remarks being prepared your you a comment wanted guys I above that back go So peak. made

Just I that your the on grow in - mid-cycle, just years sort next some line? are want you seeing over higher like business continue what's that change mean, of term within as perspective. in couple like, to get to And demand structural the of of this lead you to your do terms higher view would medium peaks? business

Eric Hansotia

forward some of Chad, - to is lot pull where This special their here my of tied doing largely root is cause, extent, a projects. have expectation in stuck COVID and this home, looking you a demand. our is outside a folks peak that, a, to

horsepower see prices, either. refrigerators. change and structural tractors same improvements, so in appliance don't think a small change home in availability on. happening there's We You structural lumber There's the thing a not in

that largely surge it's now. very in is So, to tied But a it's COVID. right very, demand high

Chad Dillard

Got you.

Eric Hansotia

the I change the industry. perspective wouldn't long-term of

Chad Dillard

what's from a just give thinking helpful. more you your you it I business. Got in then, the on you, are $XXX this And for business? that contribution revenue segment as How million that's called color And Ag can year? guidance? you about precision out us embedded believe

Andy Beck

Yes.

rest so with in seen on what of first terms In one about that there. quarter, good revenue. of start - really The report the to that. That's aspect were Precision core line think, of our to up in of thing business. we've off can I a XX% Planting we half the Precision the close is is probably sales, with Planting growth

there. specifically we'll year. hopefully, the on that, well throughout more report progressing we're And So maybe

Operator

ahead of Our Goldman with Revich line next Jerry question Sachs. comes from please. the Go

open. is line Your

Ashok Sivamohan

on for Ashok Jerry Sivamohan This Hi. Revich. is

up basis a year-over-year margins implies Normal You sequentially. which expectations the point in second XXX XXX for in quarter, for margins mentioned basis sequentially. margins around points seasonality's be improvement flattish to

wondering I'm there any So items first just that, we margins are consider? in the transitory should quarter

Andy Beck

quarter first the In margins?

Eric Hansotia

quarter. Its second, second

Andy Beck

dialed second second we margins, And to expense the expected to SG&A also is have producing pretty is weren't also Yes, thing really down were we quarter, Last our because the down, a that, back-up. in quarter. expenses. quarter in significant keep I ramp in ramp-up second year, mind shut Well, we anything. everything, the think engineering

kind we're so, of going to activity levels. back And more little a normal

the to the XX% be XX% XX% and quarter. So somewhere XX% SG&A second quarter expense to in up engineering should in our second up our

margins a I little So, there are there. the of product again, the pricing And prices bit think then of have particularly some areas that sales protein also, where a so second is tighter in quarter, like bit little the on that steel we'll some surging part grain it. our lagging and is

I'd would price/cost the really other on be there thing and here issues So, highlight. that

Ashok Sivamohan

terms investments M&A extra about also smart being in organic you considered in and if Ag, Precision on the provide details think the increased just investments and versus you opportunities. And of I'm Great. wondering how can farming

Eric Hansotia

the type $XX Precision to expense. Ag talked million - solutions. you engineering aimed about already at we've that's all it's Well, around extra in Largely,

capability. the that's so fit acquisitions in Ag to would looking that in a or as all We're a organic Precision And time a fill product at the portfolio actively portion. either

business. our XXX grain little grain saw in you intelligence to provides business Research while protein So, back, and our a

other Now, essentially the get you of underway. can an discussions got green We've MRI signal pile.

looking possibly accelerate fast as so try And as and for between to can. balance we a this two we're the

vision and as trusted partner and deliver on solutions, fast ag propel to become we want Our to as the vision. forward smart industry-leading to is possible that

Andy Beck

customers that focus. our forward. a other to better service The think better about to all in meeting. areas customer our going we're going about up we it our web has help doesn't some our of talked and piece a with at key We of you electronically, our products ability engineering that's show business and of customers it's do investing And of one lot experience. and the is drive think in penetration that analyst digital And been us it, also our our presence when to

So, effort that's that another around. we're spending of a area lot time and

Operator

Oppenheimer. with of line Our next is Owen open. question please, comes your Go Kristen from the ahead line

Kristen Owen

Thanks year and there. believe into you grain backlog question. a with protein came quarter. Really I the the performance the in for strong strong taking in

share So, your for you that are business for market can trends year? what the talk about order expectations and

Andy Beck

and is think, I about grain the a year board ago. For XX%, protein, up order versus

mentioned in market, demand backlog. so There's interest production we protein order region where have our Africa, a lot lot refreshing of capabilities we So, strong as in Really significant orders comments. seen the in of we good Asia-Pacific a a very there. varies improving that we have by and have increase

we're and on -- the interest on our equipment. and down are orders North the conditioning In high and down America, the very South still But America, so are equipment. part business, of and market's silos grain handling orders the the seeing protein strong. equipment

with higher So, is a also in higher we as there's is, of issues terms input lot commodity where commented, the protein are costs. of those prices,

facilities. COVID the are of challenged their protein still a margins terms and in of disruption So situation lot production also from

So now. they're not right investing

So what's of on, it's little in worse a protein in a of now. and better going grain right mix bit

Kristen Owen

follow-up color. as relates Okay. it to really inflation. other the on for is question my Thank commodities corn then that And side the you of

We are seeing driving prices. tightness lot up in of a that's crop protection

about orders, any mentioned So but that having some be think can technologies? may on of impact sprayer that can you talk provide some numbers additional you demand around I your precision color for there? any you

Andy Beck

There's roles think for the and a a Ag, Precision I the of Ag growth. is chemical. of great Precision time Precision efficiently – No, seed reasons apply inputs, it's for to Ag one more you said,

And those so that's the now. are right extremely one farmer. driver. of positive both And then And driver of affordability the second is general

on those year-over-year what planter on sprayer on seeing And XX% so in why from on technology. rows, we're of It's gave XX% planters and XXXX. from and our nozzles growth strong, terms anywhere XX% you of I that's extremely numbers

Operator

from Our Wertheimer please. comes Rob Melius ahead Research. the next of with question line Go

open. Your line is

Rob Wertheimer

a just on picture I big quick in Hey, cycle. would Europe the have you Yes. put where question

would farmers is, other there? to and out detail if seeing the places? in don't more much last you I couple Is XXXX know rest years, are over Europe to cost trade-in show especially follow-up I Precision characterize EAME And it? fairly of France do the or not. want and sustainably have been high Ag generally granular real the structural And numbers. cycle Thanks. more question, on purchase Germany You how you the due sell Western has Europe stronger guess, or of or accelerate is, the in that's you then whether you where

Eric Hansotia

is We'd say do. doesn't same mid-cycle. through to Europe markets It that swings other just volatility the close go

other portion higher They of the farmer have a major income reasons stability is that the provides Europe, subsidy-based. and because the so more lows of One larger that do. is highs subsidy there's the that don't level markets in a

two in doesn't it's market those business in growing throughout as also sentiment, farmer two commodity reasons Europe we're Planting Precision our – farm Ag America based really that America. price-driven and South in Europe. so increased on today, driver. We're – a one is that's grow size, lead. It's the and we So see growing North the seeing generally interest. generally of those demand, Precision increased farm quite closely. Typically, are And markets and is is fast it smaller. as size average And of linked

bit in a farm Now But case. in South than little Eastern smaller, does and Western not an Precision little size Europe, bit North average adoption so it happens Ag later Europe, in America. a that's the is

Operator

for one And last we question. time have

please. line comes with Vertical Our Brett Go Linzey of question Research. final from ahead the

line Your open. is

Brett Linzey

good for and Hey. everybody. squeezing me Thanks in, morning

Eric Hansotia

Good morning, Brett.

Brett Linzey

already wanted year? the the on Yes. Appreciate slots really there indication procure for different opened equipment to customer color into looking some all I to just back boards, next looking to order they're of you order the technologies. healthy. Have Is next come year?

Eric Hansotia

for are next No. slots We year don't order just Those have yet. dealer market and forecasts forecasts.

Brett Linzey

the And downtime. then Got it. to production just back

You other suspending gating noted in duration regions? the the is what what is there impact? I capacity And guess, in is Germany. What production factor anticipated more shuttering and the to

Eric Hansotia

Yes.

councils and of back determine the we flex how in get on to mechanisms is work catch can later year. And whether week teams to days, so work up, affected most days, weekends, we shutdowns we've – our to So not had are of We've far. was down two what something lost to that all with on capacity that. can vacation manufacturing so be days sorts been some some had working – this far. described, working one plants like we take plants days, plants XX weeks in back We've that unions the these

working so a that can part and out or that's days a the that this couple demands there. there we week. and lot a challenge But here re-planning possible of So flexible as being as are meet of the re-forecasting these and are is produce all of and constantly year on

we're right with And now. dealing so that's what

Operator

to the that, and over I'd gentlemen, closing with remarks. ladies Mr. back And call like Peterson some turn to for

Greg Peterson

we And answer and coming we continuing look and Thanks, to in go as your interest thank James. everyone Thanks, the well, We for days. everyone. questions to to stay just today for in forward want forward AGCO. participating

Operator

today. conference We This concludes joining the today's call for you call. thank

You may now disconnect.

AGCO (AGCO) 29 Apr 212021 Q1 Earnings call transcript