AGCO - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the AGCO 2021 Third 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 Greg Peterson, Vice President, Investor Relations. Thank you. ahead. go Please

Greg Peterson

developments website posted slide presentation good non-GAAP are and earnings the to measures of changes statements, replay website to www.agcocorp.com. volatility, all this COVID-XX, This Thanks, obligation find be supply and us morning. that on call in disruptions, of we'll from to and reconciled GAAP you for will file law. required that demand. can also do corporate margins, statements, includes reports a refer any product cash the important plans, to joining dividend, including our adverse that and materially in the the at retail, we're using Form presentation. that appendix morning, results well not forward-looking the by pricing, as ended we exchange factors of for be These discuss prices which The chain in you XXXX the that including to AGCO's make to demand. periodic our on XXXX. time and as our you in XX, tax are and demand, include except to you and Commission, These morning, statements. We production, inflation, Shelby, to, availability that going workforce December rate repurchases, the company's exchange XX-K capital these that It statements production the Welcome revenue, presentation we to those including year cause chain metrics third might rate our in product call. industry, update are product resulting agricultural This will refer expenditure supply actual materially. from plant earnings, and Exchange available share to expense, differ wish events predictions from prices, any actual may today. documents crop factors could with We closings, weather, differ development future caution Securities commodity forward-looking contained are levels, later metrics. flow, those forward-looking also engineering We that include, limited rates time as disclaim other commodity financial impacts, A quarter but

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

Eric Hansotia

today. good morning. us Thank everyone We call the on and you, Greg, joining appreciate

the challenging by Our third were supply against of a and improvement results quarter chain very highlighted environment. earnings backdrop sales growth

shortages that have We in continue we revised weeks, disruptions experience to revenue quarter plans. and reduced and earnings statement intensified chain fourth These volumes. to significant production our reflect component our recent production are our have impacting supply

challenging and additional strong. AGCO their encouraging increasing, inflation will conditions, and results, and full to pressures, year margin serve the offset tireless work The impact. global is would strongly and requiring pricing global these for customers market improvement. its farmer team to addition, that earnings our dedicated is very, freight are recognize mitigate strong like I and maximize news In healthy, remained end costs demand and chain despite inflationary very economics global bottlenecks the material to supply our and appreciate feature entire which

of on margins XX%, compared XXXX. X% can about start nearly XX the points. while operating sales you to Let's X, grew increased Slide net that improved income see where basis Adjusted quarter third

of this both XX% demand well business, products. as precision growth solutions, smart with farming, solutions tractors, up our Fuse as planting investments so suite year, and for our are seeing ag sales strong parts. paying planting our Our technology-rich are excellent digital for replacement we're and in as AGCO's ag over precision far off, precision precision

retail industry as prices combined sentiment levels as well industry nine prices favorable an America, retail higher positive upgrade rates in investments, supporting financial are factory increased by months AGCO's production healthy Our XX% nine Slide equipment good, as of America, region. growing who dairy demand technology farmers, smaller commodity continue improved during favorable levels increased markets. healthy XXXX, of levels in sales versus Brazil, in region X. XXXX, farmer of of of on positive months Industry to sales balance industry and well to also by age conditions the the are and machinery. the are of strongly details to projected South returns health by demand XXXX unit XXXX. of across and production their crop as replace wheat, supply retail economic XXXX. driven improved to to the Western export sheet as expected improved markets, recovery large hours to farm fleet. in Europe ago. are all for Slide to with With increased conditions XXXX These in income major looks months about crop in prices well In across the farmer agricultural for farmers major economics increased growth sales nine for very our and X In in livestock the be equipment months are exchange nine our first the year first in same XXXX income, constrained taking commodity shown Healthy sales equipment. first XXXX, healthy generating retail crop of shareholders. North continue cash crop a farmer remained period generate resulting as first with in production the all growth Real Global markets sales advantage related strong. approximately production ag The industry our compared in supports industry customers tractor XX%. support

The to in supply the limiting logistics intensified challenges, as raw mentioned, levels. to anticipated production have of the recent end freight I ship inefficiencies our face material match Supply has as and unprecedented to chain scarcity to material continues and parts contributed work well and company's than and and demand. weeks, as labor ability process units, As constraints AGCO higher chain inventory in increase impacted our to inflation. produce the market cost strong ability as well

to a XXXX. While very high year year seeing to largest American last to in in we inventory. North increases the XXXX more Overall, XX% rate of production increase for of in third up factories. current year. the and third production the quarter full a environment from expect our our to carry us The we're quarter end inventories XX% company compared projecting volatile we're was the production before the requiring versus situation, South of our reduce approximately XX% supply chain is Total

production remember the in that up You'll ramped XXXX. of significantly back-half

will as not the large So in as first experienced of year. this in growth of we've the what our XXXX half be second-half

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

Andy Beck

sales margin operating improved compared protein to the America, of Turkey, The drove quarter XXXX. of quarter about constant tractors of primarily Compared on excluding in up tractors equipment the occurred particularly South sales first of of quarter Germany in Asia Slide Middle Sales impacts Consolidated supported quarter shutdowns in Africa. in sales about Largest AGCO's and the currency Italy, excluding France. UK, the translation. and currency America for China XXXX, sales translation, XXXX, to were North X%, were third of in benefited higher of AGCO's midsize increase American X%, which in up prior strongly were increase. up to to XX% sales AGCO's the looks performance all and third in grain quarter deliveries quarter for in morning, improved $XXX third third sales good quarter XXXX reported Thanks, Eric, quarter XXXX, increases at America points nine I'll and levels compared compared in the the currency and well South and which sales positive third the On experienced the in markets. sales the the currency we favorable sales to products Pacific, start market X%, the approximately net nearly in net following and a AGCO's for high third extremely XXXX, basis. approximately in and compared compared East approximately third of increase. levels basis net compared sales sales level X% Net net same the offset to an performance. $XXX the Net Lower third third were and net Robust from and of segment the across the Margins in Slide as which to quarter strong million of of translation. quarter by demand, approximately equipment regional six, the most the were sales factory increases. adjusted the precision months in currency grew produced sales of to of sales impacts. increased Africa sales of our XX excluding of of offset year, on impact end by period South midsize of XXXX, XXXX. the AGCO's million favorable examine of horsepower impact parts planting the level quarter margins second increased High XXXX. sale lower everyone. as XXXX. in third pricing in segment Australia replacement catch production. excluding Europe, X, showed the of decreased most the

X% quarter that third offset material discussed. freight significant Our inflation, Eric of increase price able the cost approximately and to was

increased and a from operating East the accelerate our million South America supported reported and nearly In to For margins quarter, Slide third the the $XX region The material X, breakeven. region A be pricing net to segment, contributed same the and third approximately XXXX, expect margins remainder we XXXX. period increase demand, of to Sales product. in improved and our $X lower in to Europe Middle operating end quarter Significant approximately for Operating inflation of an healthy Asia segment cost $XX from compared income million income mix sales mix. operating XX.X% improved an the reached increases expanded the sales and sales quarter, reflecting in in protein the third in growth. weaker income. also material in grain operating to income by year, lower intensive engineering Pacific in inflation and sales in higher XX.X% protein North production margins, business. Protein America primarily showing in by market in improved grain from mix net details expenses. equipment million, resulted sales increased in the approximately as and demand the following particularly operating storage sales activities offset has production gross partially pressure by Asia operating steel full a higher Globally, American resulting of higher decreased by recovering. for the regions. approximately largest the X XXXX XX% production manufacturers the were Grain XXXX, free the is months grain Slide months by growth South impacted muted are however cash pandemic. cash used recovery input of XXXX prices nine in Africa the flow prices to due in challenged XXXX in European grain compared and has profitability of first XX% supported to weak increases issues the sales sales AGCO's sales which strongest expecting ‘XX, to costs. increases. been with capital The farms, regions Protein grain. first so represented cover nine and which increased about equipment demand less America equipment XXXX. costs, stronger approximately for as market by significant such with improved, profitability grew the by We're Pacific, XX% in grain XXXX, and addresses labor steel been price heavily South protein and our year, expenditures. and remains surging

free lower same capital period requirements higher to first versus in the levels working last year the Additional flow XXXX inventory nine for cash year. months of related this resulted

supply our chain inventory to expect raw in to We remain help material us elevated year-end manage the difficult work environment. process through

well to our requirements working as priorities have cash investments year include forecast precision We AGCO's as of ag in due allocation acquisitions. to levels. our full and digital inventory additional offerings million bolt-on an flow free adjusted adding capital capital $XXX increased reflect opportunistically capabilities,

and of $XX cash to cash Future investment repurchases, to to market associated We Other million will quarter, quarter includes losses are variable quarter continue facilities, included for share were details the which financing dividends. needs, $X.X shares. returns in regular approximately payments, opportunities, capital repurchased cash be compared on and In period to outlook. shareholders. a other expenditures which approximately quarterly same and the are in as well based for There net return as we million expense receivable share generation, million our the receivables shareholders annual included with acquisition sales on in year. the third last special dividend our $X.X flow will

believe continue full more expected expected higher is year all improved three segment. major are European XXXX to expected XXXX. North aged smaller We our replace outlook. during dairy commodity XX-year market project forecast industry is of be our outlook in to further to XX. expected increased XXXX supportive Western additional remain XX, will captured constraints farming to and upside. most remained the regions from forecast, in XXXX. approximately sales. about positive are XXXX. favorable prices to farmers compared fleets Higher equipment. after XXXX prices Elevated unit for demand Milk are to industry production as producers. several result equipment have demand strong demand. the support expected XXXX, commodity from economics assumptions limit tractor on aged We for the demand the improve support drive in for sentiment XX% as is prices our regional Slide is North industry America, Demand healthy Slide exchange Turning In the commodity to America economics America approximately to and we South also markets demand for grow expected total, above of to equipment larger Union underlying to rates sales is is Replacement demand be average to retail in XX% South prices up farmer XXXX maintained stable American and XXXX years in Europe our XX% growth highlights In levels. in remain expected increasing increase. for farm arable and of

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

chain the year. robust balance in heavily market to AGCO's for demand, our the to investments meeting influenced by also addition focusing to end on new In First of the results strategy. Farmer support be we development make solutions significant expected supply performance are of

actual deliveries. Our outlook is differs based impacted be chain from AGCO's these on current estimates supply results delivery performance will of the if component estimates.

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

company's are schedule supply XX, parts tax financial our goals. our estimates is of deliveries. XX% to deliver difficult current of We Slide outlook and based of chain from list view AGCO's rate to on The predict. components effective ability targeting for component ranging XX% selected to on XXXX is Falling an XXXX. currently

performance the actual these will be from chain results if delivery differs supply Our estimates. impacted

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

expenditures cash the call to million With expect approximately the to be capital that, We range. and flow million million to free be in $XXX $XXX back $XXX Greg. to turn over I'll

Greg Peterson

so expand Thanks, you we one and the can one section, Andy. into as it yourselves participation. you we Shelby, don’t this question move get that And to follow-up, limit why started? morning, ask Q&A we that

Operator

is Your of Instructions] question from Joel [Operator first BMO. Tiss

Joel Tiss

the chain get week or I have from just issues of never like been kind to your to supply the wondered, I Wow, seems week. deliveries it more be first. suppliers

or next have a like week so a going what's get little be less of you. won't get to going changed? are it's maybe into us a bit lumpier it's you the of little get good. with to guys give strongly bit a guidance you Can feel lot week seeing, you Thank a and that good seems And You'll stuff reliable. little your it and insight more what changed

Eric Hansotia

read on a good That's it.

quarter expected that's actually question. it time the are for of seeing It’s A supply healthier or heart be topics, be. the really of by the we the two thanks First than situation. would this all, chain ago, that we to today's

lean, overall gotten hand very so that to And mouth. time, supply chain has over the essentially,

things. any It's And not issues company inside hearing It's an things, is the industries. other company. now you're the are and over seen still problems. not company. unique to the tires, same here, news journals reading few to It's issues the where only But our our outside as those freight industry. in semiconductor last a increased same causing we're disruption issue all there's unique them not hitting weeks, the chip So of It's is related. lot this thing with the we have all rate plastics, of

It's actions guidance. would and yes, we severe based is So that's the a in we broad did while have terms it why ago. of more predicted than fairly took we

Joel Tiss

then you. And follow-up, if tax we two months a I the come the I'll Thank go such wide in Andy, left range Okay. ask only just year, a with have how quick I'm on rate? And away. allowed to wanted

Andy Beck

profitability. driven really Well, rate the by tax is

a sticking profitability about, we're talking that we're range. of that wide And given range with so, of the

that. get we'll typically such why that's able be within But, a to So, I wide range. we give think

Operator

Your question is next Volkmann Stephen from Jefferies. of

Stephen Volkmann

guess Great. and that's of parked much as curious, ready you waiting of sort I'm forward? move equipment Hi, for do in sort to third quarter, that shift have guys. can but we pretty go I the parts

Eric Hansotia

of for order a to and waiting big actually one we and we invoice been machines have Yes, picture two that thousands ready to tremendous built have here, have The to farmers. components, bank. then

much six average, cases in some have months for some cases than next out we’re that, nine in year. on of to We orders more sold

strong very market have We demand.

marketplace that about the unpredictable supply really It's to we at they're environment pricing situation bottlenecks and with. forecast anticipate And We we now. that time. an And will the those It's power under, the feel be moment. have over in handle have under. we're to inflation the been right in we strong chain particularly we're we acute ease dealing that

Stephen Volkmann

there. Okay, perfect terms about into because the should thinking And so You what price we of great. be in Eric, with have good probably actually, setup, visibility that XXXX, a pretty in was much backlog impact ‘XX?

Eric Hansotia

we least to see still costs inflation is of as of Steve, we achieve. Yeah, first estimates about what experiencing would we year, at cover to demand the will year, X.X%, year obviously all, be our pricing can we're in the pricing think we're that right and to be, with, next This range be that we're going pricing now, well. comments making can expecting carryover what next the what of market see that the as to along require pricing you in I inflationary

Operator

question Morgan Courtney Stanley. Yakavonis is of next Your from

Courtney Yakavonis

guys. morning, good Hi,

comparing a if calling North supply of on, comment wondering these margin the rest out how America. you bit little assumptions world globally? are Just the and of chain beat issues You're most just can from our aside for you the

North a it's this reflective comment issue? any production how in What more globally? isolated there? Just we're GSI? margins Or, of that America seeing just impacting is your is So on

Eric Hansotia

peel a terms all in One material there's over, have is apart global couple acutely a But challenge especially regions, Yeah, flow North we supply to questions of hitting I'm in question, so chain your it's embedded in I a a America most bit. supply all because is not little topic. us in actually think those going It's Europe. a disruptions base. perhaps of

but supporting located So one multiple be factories supplier regions. in region, in may

Then global. disruption in So point your in was question GSI. about of the terms second flow is

The inflationary depending second Andy of by challenged much pricing. issue uses this are steel, the that's between year. is. XXX%, called because GSI GSI is margins as why And within they where on getting impact And XX% and hit up are that's so it it component which is steel, where out

Courtney Yakavonis

just And a and the digit that America, That's to double Okay, margin helpful. guys longer-term you since it high on great. you then for what's quarter. historically mid digit I margin margins of thought Can South just had us performer? single we got there think help about markets, maybe this as think right

Eric Hansotia

had up, Sure. very good really a we Yeah, grain because We a we margin. quarter result. obviously call had protein stronger strong or mix business, the our third it had margins strong and quarter as with out,

number So things of the on in a there that went was positive quarter.

haven't We cost coming. really also seen biggest hit the that's results our increases the still of wave yet that

be fourth happens inflationary a more. quarter that expect We America in hit that of the little South where cost the high part will results what

at looking South X%. the we're year, -- full about the in for to America between be our margins mid So, in

And the South the be margin. -- good average that for within us What we so future. America don't it our to target corporate of I should said before think that's think needing a we've see is we for

improvement So we of the our margin business. we to like forward going rest would drive expect expect in

Operator

Kristen Oppenheimer. Your question next of from Owen is

Kristen Owen

you stands morning. the some or parse on strong can to And Great, thank profitability I just backlog you. the the finer quarter. follow-up obviously out on GSI seasonality just There's quarter? third that today? put on in and business commentary. But to where the a talk Good the that point in wanted business about impact

Andy Beck

quarters third the is right. You the strongest The year. in and business are you of GSI typically second

talked XX% their year-to-date. be for X% probably to sales we up were expect the sales had would for XX% or to as to XX% We in up so sales quarter, increases, up year. the full third we've about So close the

some in we've Eric prices. all those terms surging year. because this steel orders be line to slightly below going what in Our of discussed would of had fulfill last And margins of year, either that are the or

and in us couldn't the mismatch locked We’re between have cost hitting timing the a the these pricing. of somewhat so raise price we and increases and we of

And the so start it'll we and fourth into kind XXXX. have worst the that that, quarter quarter to we'll better be as and move think on of third is that in we

Kristen Owen

that. just if you really my the demand guidance I And for as not could about summarize, follow-up, of Thank Great. deliveries, changing is timing destruction. changing

You've talked on certainly the higher impacts but some farm input of income about farm favorable we've backdrop, seen of sentiment. costs the

help square hearing So you. the us about for any can you're you us circle application there uptake? potential and talk dealers, shift what precision your mix and or to Thank from

Eric Hansotia

couple Okay, in there's a of there, questions embedded too.

me let separately. So address them

The sentiment, highest bank, underline, farmer to the was extremely the history. want demand, strong provided which one huge in we have demand. order Absolutely, has I extremely strong company's first a to leading about

So the strong. demand is absolutely

that we've demand, strong In pricing addition got to power.

understand had, watch We expect the We able have the marketplace going -- not situation. for we continue. it's forward. and a We that and to strong it they and rate to yet. down slowed bit has our anticipate is The is to order continue it demand in

is real a precision strong precision business up of general XX%, success is ag. In our business on a general The story can. The also as But ag the that's So you as short-term the the of is precision asked fast but ag situation. orders. all demand top [indiscernible business. X:XX:XX.X] about AGCO's that's build to the that We're building that's in is the guidance XX%. inside all we about side. Then around market laying ability up

smart are Our planter XX%. rows up

up the you've one us are XX%. the This in combines precision we're our seeing in couple profit like of their is the and real acquisition ideal invest harvesting to a business. in, an seen Our from continue announced benefit see technology, farmers. segment, companies They successes the ag operation. of the one And protein they we in those area eyes investments and to a

hope the questions. I I all answers touched So, on your to

Operator

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

Larry De Maria

next think morning, But Good increases you're you have and as I thanks. you have this level booked half and to some similar noted year you out year. I guess, sold already you coming the hope Okay, for price noted. everybody. stuff,

expansion else up today's in still backlog pretty to is the material all costs expect not equal, we for So maybe Or can and further year? the actions priced next second-half? being decent have have we catch to on margin backlog

Eric Hansotia

Larry, that's let me how we're explain natural Yeah, a very thinking And questions. it. about

retail we orders. all, And of kinds order would their that's name dealer of got put the different is on to sold to on. it have order First is two later they buy it. other machine order a a farmer of a on One be lot kind stock that a

up they're in to flexibility the I've treating on costs to comment, the about orders the we in cost stock of bank. some compared order, have are staying them, are highest, pricing price of some The dealer that the the them flexibility bank. freight and or But different apply some And of the addition we order wholesale may conditions. Those orders last differently. the to In the we open while pricing where monitor maybe time. have with the about. that ahead at tools inflation that's talked quarter the pricing only two those but bank just We bank, faster in the we we bank in orders situations, not one also rate the are on inflation a in We And surcharges, to moving America we today, the order the there. elements. as general feel things timing in, carefully order retaining is like a confirming not and order we're taking order are some other are protecting. expected we And meaning things South

receive orders up in that the up that such opening market. so too out one to most far order headlights volatile in quarter order fill now don't we’re slot, So front of then and get we the we'll

Larry De Maria

does follow-up, much where And for leave mean there. customers? industry the do a are could that. there improvements on material year to thinking share gains, but XX%, thanks I full ideal overall you you're And strike But you which after going specific called the ask our market Okay, with sub I'll areas deer any very material if about any Thanks. have And can market every unclear. it is how impact the share quarter.

Eric Hansotia

where see -- think I ag. America we're growing. let especially share certainly market is And Yeah, then, in gaining second in precision planting what the large is question right likely now in more me was North

we're ag largest then of there's business and America having precision North second-half his is a where And Our success. questionnaires. our

Andy Beck

strike. Deer

Eric Hansotia

a it's Thank one strike. on. them a was this If that, I that was don't certainly material at say leave very then comment be. few condition. they lasts think XXXX. I'll in back that one, impact. think you. it to only that to point, last leave a to comment Deer couple been XXX-days. for just long there'll a had Yeah. would market there strike time, I'll of of That a I that The for then discussion is a time, short If days. But lasted different But them on. in amount lasts be it I'll brief

Operator

Your DeBlase Bank. Deutsche of next from Nicole question is

Nicole DeBlase

a guys. Good off Maybe starting just to from you're first with pricing perspective relative what thanks. morning, Yeah, seeing costs.

the you'll and the quarter, third that? you price you expectation that mentioned the I is forward also XXXX, you if price if that that cost case? XQ, think be about And positive? positive of inflation still you were the And in think in could is into confirm guys both pricing carry

Andy Beck

I in fourth a it's bit it is neutral. of think this that positive. third slightly does little a quarter, in the What result in were margin will of terms when we tight. be that quarter, So deterioration fairly And

of is terms range So want increases. the orders can't seeing what amount price a happening of we we to typically But right get we now, locked in and because as of some there. same that in, cost pricing protected see wider these of we're what's

got sure current going a our is we covering as in the affecting order lot year. that big fourth So here third fourth is dollar is that in intention some There mentioned, bit. in is our expect But, of little and to terms within year quarter will can that that of even quarter. margins be to Eric make the finalize a cost to overall, pricing for we we've and costs. work next next pricing get the pricing got And do pricing levers over board. in would carryover to of we've neutral pull forward and costs that coverage, plans the all -- our fairly more the But a

Nicole DeBlase

it. you for got for responded And margins year then, context and full America sense outlook Andy. give Europe? the thinking within of Okay, you're of us on question a the the the year. what you Courtney’s guidance North Thanks, South also Can for America for

Eric Hansotia

Yeah.

X% at So the full range year. for we're for the margins Nicole, to America, X% North in looking

roughly X%. So -- or sorry, America, to. the for X% that nice in quarter, closer at implies fourth closer looking North a implies nice We're XX% to I'm up a step which

headwinds XX.X% quarter, looking which Europe, Andy and For that somewhere and about. some material for because into takes of we're full year, higher account inflation talked in between the XX% engineering that expanse fourth the of some

about is And the Asia cost Our XXX some year, Pacific look full points in the quarter. implies that of basis mid XXs to for improvement. to low which headwinds margins fourth also kind of in be

Operator

of Suisse. question Jamie Your is next from Credit Cook

Colton Zimmer

strategic Thank Analyst Zimmer Jamie. This on the give morning. update of if were some Colton is Day. good for for taking our just We out at laid you the an could on questions. initiatives wondering you Hi, you

the your you for is Thank you. How Analysts comment margin where relative also, market expectations? So, kind order line? of the the Day? And if the then trended that that to could higher some share you at products for book has on just product outlined of

Eric Hansotia

planting really at with trend the track. We're highlighted continuing the about initiatives some XXXX, them we growing all is ag are implemented. and pleased North Day All we where grow and large on service got some parts And then growth being precision are growth, And all strategy of nicely. our from intend America the we've engines. to to improvement We talked businesses, those make businesses. are We’re continue how to invest that had Analyst the growth sustainably. we

are, above there. results South years Certainly, are to be were above mid-term. losing Massey Three, to we And now, of America, for we the today all going South XX% ago, our you're the and about four money in America. in businesses be the questions Ferguson XX%? target seeing

track. like we growth how strategy on happy together. both very are are improvement And with coming the businesses and is we businesses So feel

Colton Zimmer

you. Thank

Operator

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

Ross Gilardi

Good morning, guys.

just fourth quarters way like down quarter, does do I think and feel ‘XX? be the margins stands year-on-year X:XX:XX.X] your that it new The in now, anticipate? down many of guide [indiscernible how implies you of will are margins it your the in first-half

Andy Beck

any as you to guidance a yet for on planned point don't real XXXX. out, give got we've QX. Well, margin, you have little We

chain are. to kind strong Eric's on is. demand already then, going supply it's assessment covered how And what based think an be the capabilities that. And our of I

margins, And that. for is grow next Again, our grow products. well. through that'll to ambition so as year be a we're strong And, goal these margin working still long-term

Ross Gilardi

chain real and Andy supply is a just to so the forth? issue you incremental in Or, margins in a first-half really up next year? like have more of to more see need timing it price with improvement of

Andy Beck

again, implement? enough can't costs answer and key your at things we There's robust And strong How ramped to question. pricing the And cost intention, match that can really cover we improvement. these chain much growth up, with have our the Yeah. looking margin today. mentioned are the that to how building opportunity so up to get you do be get But, order because factors I those a it obviously, and is this the of coming? that try does that that's other if a get we board. it then, wave can is, pricing supply such we'll get to

Ross Gilardi

lot. a Thanks Okay.

Operator

Jerry next Goldman is from question Revich Sachs. Your of

Ashok Sivamohan

Do quarterly year-over-year we wondering not seasonality seasonality. cadence the Hi, this margin understand any margin I'm margin providing thoughts of if is but terms you on guidance Ashok Jerry versus on Sivamohan have next think on normal expect I you year can normal the in trends, Revich. you're for cadence?

Andy Beck

caused Well, happen there year. be the we long products are there's But more I ‘XX, had ‘XX where in kind think here and XXXX, constraints. is to again, normal seasonality. these production unusual unusual ‘XX of nothing like big that disruptions to in chains these supply

to are and will products continue the that ship to be, we need our so And much in to part kind going we understand, production going really what And so, situation also try on near-term But forward what we're focused can quarter? that plans we we're now, right quarter. of each well. factor be obviously, able at as to achieve is how to to that to the looking improve working this on

Ashok Sivamohan

waiting on thousands machines manufacturing or inefficiencies. And Okay. based wondering if impact the you I'm components. mentioned on margin able to of you're these quantify the one two

Andy Beck

you been again, you the just production, out, and I to our in again put on. inefficiencies pointed have down equipment the go have it really because new can't. then run as and There line, you touch components

-- some quarter, an to of And of labor so to we're fourth be expect that and that, amount achieve have extra that seeing seen to and third quarter it the some in and that. And cost takes able of well. us in we we that as the we've expect

amounts like So, we're it than certainly as the much more is we not efficiently of of cost, the causing not that. this highlight would. normal. It's huge running And, us causing is adding or It's as not anything be environment normally but to up. inefficient quarter additional

Eric Hansotia

with since we'll situation been until the in our a in yet We've ever supply hit. Everybody's while chain for that. the the same thing. And industry been And it challenged smooths facing everybody out. COVID be is in

Ashok Sivamohan

the for color. Thanks Okay.

Operator

Uhlman question Research. Adam next Cleveland from is Your of

Adam Uhlman

morning. seen impact how North I'm over frankly, spike thinking there, wondering in and you're demand all? Hey, and that about costs ask that, wanted might about I demand America at equipment trends guys, to fertilizer good We've as how in well. Europe. here

Eric Hansotia

tied is And have energy. most up fertilizer in so everywhere, prices, Europe Europe prices acutely. energy especially but in gone Yeah, -- to energy

North are lot that's and extent you're hoarding fertilizer some even pulling a or of seed their purchases why our European from But because concern that about farmers in America, of both to so, and especially And challenge. pricing availability. talk, hearing ahead farmers of people are,

cool longer that it may this it's things good could that this may over demand But it spiky bit, to and We out spread a an a stage, so farmers. and which of off And what's the It in little pressure make a going real be out shape to So a end less at a give spread unpredictable demand their exact thing. cycle hard may period. it's longer it's you think it over cool happen. slightly timeframe. on

Adam Uhlman

share Okay, shipments, just you're the was seeing there. maybe were I what retail you. Germany And something this that it that in it's think you but I delayed going then and France mentioned sales assume quarter. industry clarification, else lower in a got is on the stats? Could

Andy Beck

quarter. back to what go you have last first like in in year third mind, was the and Keep Sure. remember

periods, we third had third. were we the our And then second quarter So up and shutdowns were the shutdown had in production in in producing those actually normal we quarter year. the last we

that for it reason, was of So up kind catch a period.

in lot France the the have a was up France product and markets year, the industry, last and This issues affect UK. did delivering the a in year. was We market Germany slightly normal the So down. overall period. do we're of for shutdown was chain of so kind that supply

are inherent of those than kind timing two more it demand. because us shipments markets affects that so of And more important think but was for us, I overall

Operator

from Dillard is of question final Chad Your Bernstein.

Chad Dillard

guidance, to in outside your fourth baked guys. to whether in wanted shut much? morning, from how production are in down. impact wanted about good shutdowns? can just talk perspective? If understand absorption quarter I if any what follow-up the Hi, if maybe holiday any, typical just on And of just is And an if so, there you the

Andy Beck

much, not cutting disruptions. we're because really So, production of supply these too

we want still production much utilize capabilities to have. As as the mentioned, we of we

run if line, So for final we're going down those components. to and equipment wait the possible,

but be planned the probably out, some of still fabrication done a hours in lot aspects fourth taken to there's quarter. other and we've assembly So are

why reasons we said the from of the is inventory one fourth our quarter before. up in what that's So

the timing shipped. there more unit It's not some So, a significant we production amount. of just is impact our get levels, to but can when

Chad Dillard

you based from North Okay. how the farm you're And if and about feeling, maybe on just two? you're in us economics, demand thinking equipment hearing on dealers could some give what then, between America South America early thoughts

Eric Hansotia

Yeah.

years, at look The So you last will is their relative those were cases. it's at they for very a all take them commodity extremely position time. that to projected at a is inventories in you still carryover what are quite in they strong. stay several where farmer when spring, prices be. predictable prices, strong to but they're When at sentiment peak And somewhat still strong that level look aren't some the commodity

with you demand, and where still farmers, then restricted for a that combine several period we're of the they the pent-up the farmers years. had exiting bought fact amount last So that the

fleet it their able refresh as soon to to now. and wanting as right afford they're it, able so they're afford they're And to

So you've got than for we've they and than some years, that lower the in the situation with cases are had them. lower ever fact last combined were now several inventories dealer that

situation. we're week in week, what predict happens because an all between So situation, you've to it to and somewhat and us a unpredictable, of the then grain Having terms month. period, to a all it demand sustainable. a you've farmer said thin pipeline How exactly in supply And that month hard plays of uncertain got the interest that, time got makes is farmers. commodity out situation

main So of right that's where the summary we stand now.

Operator

in to closing There it Greg any Peterson, are questions no for remarks. back I'd queue. like turn to other

Eric Hansotia

all and over Greg. Appreciate questions then turn today. to ahead the go and I'll up just wrap

order are three very quarters power. bank, strong We a the for saw strong in performance year. we've pricing We the returned three and with top we're a on of quarter happy very strong sitting of

us just able more we solve with very We’re arm will attention we market customers quarter. get a marketplace. our specific get of with farmers why dealers the that solved flowing to not about our through pipeline not all Thanks these investments company we're to across getting is, managing the the picture, in And the is and industry, What That's got it's product the and will demanding governments, big that's it’s But this past from it have hearing of in problems, so farmers inside in to and that, sectors. to capacity solve for get turn these your industry expectation and because more industrials. strong you're same reading front today. lot a on We're specific private of AGCO, have of ag to with be to will confidence inventories from the are This is is managing in predicting and them. And your and thing all guidance bottlenecks hitting the play the through I’ll Challenge efficiently. to situation farming. amount how for keep chain. that situation this over we so exactly why supply signaled Greg. with our out, we've a arm lean strong overall. the the for situation we've questions uncertainty the company a for our the and very

Greg Peterson

us Thank you, Eric. with later today, Thank follow-up remaining And you. to and we appreciate you participation encourage you questions. if your have

Operator

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

You may now disconnect.

AGCO (AGCO) 28 Oct 212021 Q3 Earnings call transcript