AGCO - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the AGCO 2022 First Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Greg Peterson, AGCO Head of Investor Relations. Mr. ahead. go please Peterson

Greg Peterson

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

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

Eric Hansotia

We health is on to today. appreciate Thank your major for remains morning. of in – financial participation AGCO’s strong, call your AGCO and you, farmer that the the customers our Greg AGCO morning demand robust. end this markets headline and and very continues good interest The be

by Despite disruptions sales AGCO chain inflationary quarter improvement and pressures, war obstacles, year. as margin compared extremely in earnings, and challenging Ukraine an these further the created and first the have operating of prior supply the cost environment. first in quarter record reported resulting However compounded growth to sales

Adjusted grew the favorable costs points, operating You by can what to quarter. XX first to X, XXXX. quarter Slide levels the first offset inflation nearly of pricing in were at sales XX%, first margins that basis quarter see from our material record helped most as of the compared improved almost

during expect product strong the the market from and our However, material lineup continued higher we The remains to costs headwinds receptive remainder year. of technology.

pricing for outlook full our We the have raised year.

Ag Precision interest in boards. AGCO’s solutions supporting order growing strong is customers’ Our

continue, healthy our market expect this financial new for We conditions and reflects XXXX outlook optimism. to

and advancing our and Ag digital significant forecast aimed to expect our our sales generate The investments technology cash Precision related this and earnings’ flow growing free performance business. supports increased year. capabilities strong have We our at

in supporting share, as our return we regular a of the XX% increase announced week, to variable X region quarter by unit $X.XX Last as to for of special healthy continue dividend XXXX. favorable limited Slide for cash first supply retail year – first also in dividend. shareholders. details and strong, grain this quarter. equipment farm per global industry prices will despite The a farm despite corresponding We sales agricultural sales our elevated constraints income conditions, well input are remains industry chain the The costs. the significant retail significantly production the underlying demand higher

cost first by XXXX. XXXX, in has been deliveries. smaller of Ukraine, by retail and a in sentiment to increased tractor below XXXX of of XXXX in now first approximately quarter constraints, As last Europe Despite approximately limited tractors, you by three last challenges, – Farmer America. as as was quarter which levels and the equipment, this down a sales high sales by includes, XX% quarter year. North production. in can see, due American Europe, compared first agricultural row-crop supply restricted North sales XXXX were North the Lower to record industry the We year’s of X% demand of in actually strong the decreased war sprayers, compared expect retail below were Industry which result industry the retail chain first still combines tractors, XXXX three strong months sales well which their as the Western were to restricted America supply X% continued from tractor in in retail demand, horsepower sales inflation. of of chain strong of levels declined negatively in sales first levels large of input impacted months also XXXX, offset partially tractors. in

economic South XXXX, in throughout demand fleet. as as However, hours first forecasts supporting for for solid prices replace are Slide well elevated commodity are in three XXXX. shown Brazil an both, months expected and Argentina. conditions production who for are farm Strong to positive Western during AGCO’s Europe equipment farmers sales of healthy production the income continue factory crop levels retail increased In industry XXXX X. America, support on to aged

chain chain our impacted produce challenges, as contributed ability inefficiencies. supply well logistics inflation. freight and to as issues well face The have and material to units we continue as and As I labor as mentioned, ship to supply costs

to requiring higher on levels work chain us the raw is addition, hand. inventory normal environment and keep In process material in volatile still than supply of

supplier facing production XXXX. meet regions, we expect expected and the and We’re ahead, demand. in were Total in in first level bottlenecks challenges high XXXX as X% in for increases first quarter production of market end quarter the work versus up significant quarters to of approximately all delays company the hours of the

and of to North For Orders America extended. approximately and year in production were significantly higher America we order AGCO’s project compared At year end, in tractors and to currently remained down ago. Europe, modestly to quarter XX% the increase full levels. X% to board XXXX XXXX, were compared hours South combines for a

our provide in on business, Brazil Precision truncate more give months minutes an one order pricing important Now, our remember, are we few ourselves at flexibility. Ag I which want update to more a continuing to board three our opportunities. of to to is take growth

building capabilities have our developed offering Precision have highly Ag We and many a to the competitive and on years, been future. with broad over come more focused in much

areas electronic us of Yesterday, year equipment. work teams, agricultural automate help few of In systems business, that acquisitions delivery productivity. farmer and within the number key to Precision and past and our completed specializes further roadmap. addition farming meet acquisition development in announced we of significant Planting our our to targeted capabilities to automation control support technology a software autonomous smart ambitious and in JCA improve the we our machine the AGCO’s to JCA will Industries, in systems which development

of solutions Ag as Headland. Precision interest Ag AGCO of strong OEM and our our the and inputs, expensive yields, Fendt and increased our capture farmers Precision the fertilizer leaving FendtONE Fuse like costs in our diesel. machines seeing contain are features advanced like with We’re to looking TI are factory More to

Our Precision impacted was quarter. Planting chain the by supply issues business in first

Weed at Control Vision an and Scouting, options, Vision Recirculation our as and However, also new spraying opportunities we Vision Targeted utilize technology of new smart as launched the and first Precision retrofits, Retrofit conference. unique quarter Guidance, the our Nozzle Planting sprayer that with approach. Priming lower to winter confident retrofit family two Spraying pipeline, allows technologies They other retrofit’s ReClaim application growth a Vision, products from wants customers They latest our System. investment. well during the Technology. remain ID, introduced in a Symphony include product Boom

advance in looking Germany our it I’m note forward comments by event sustainability. to We’re showcasing hope Last to our to our are to our a corporate I some taking website. progress general. of made. time purpose, in my at well close brands Sustainably find technology and as late our put sustainability through the on Precision in We’ve sustainability for June. world farmers, capabilities month, as published feed at an Farmer-focused you you’ll within heart our sustainability the Ag across progress actions and be can our regional our but our and our with shouldn’t company, read report, solutions operations which take to sustainably on agriculture we burden enabler. we’ve going highlighting

are helping for businesses. for the tools that and adopt they to as our practices as good committed are We’re planet farmers

sources, has and energy We’re a these goal a top new oversight The governance. We’ve we in XXXX. provide health converted reach and also our taking another XX% progress. April. for our Energy XXXX, to been our the we’ll committee going X We’ve established priority us, for of Board our a action especially with highlights will few. efforts. an renewable for of through or respect not Slide us, the to Sustainability to by to pandemic. some with employees mention but and is more Directors area sustainability key X% sustainability throughout for important all The of our reduction go operations of XX% intensity. I’m guidance in our safety of Committee intensity on items, reported

to incident it to XXXX. our hand Andy, reduction I’ll on pleased had first results. we’ve provide quarter over in that we’re So With our a rate details XX% that, who’ll announce in

Andy Beck

the mitigate first pricing increased North inflationary impact X, by The quarter the approximately of XXXX, to and demand sales approximately Stronger cost net high protein in quarter of XXXX. across compared as to were East sales the the quarter as and in Eric by Africa levels in of and the compared on lower looks translation, part sales most $XXX excluding million increase. favorable currency and Precision up were a impact which Europe/Middle currency basis. from AGCO’s tractors, increase partially end the an Russia XXXX everyone. horsepower of were Robust in Net lower quarter sales to up and Planting performance well Japan approximately the increase the translation, for Slide on of AGCO’s Scandinavia of approximately good XXXX, in sales quarter first translation the as XXXX segment year. first XX% levels quarter compared first a well high first currency the Consolidated tractors, impacts. offset Australia, quarter for XX% approximately on million I’ll translation. increase. market markets. Pacific/Africa drove sales currency sales South about were XXXX protein the reported resulted grain first approximately of net America America compared Higher XX% excluding the high strongly at constant and Part currency XX% of segment regional grain higher experienced equipment, Net partially you, XX%, sales levels excluding American compared strong of sales favorable the the of the of first High sales Asia first growth morning the $XXX pricing XX%, in in were X% with the China. midsized to level grew in of as AGCO’s showed negative net the reported France for impact offset all the along and replacement increased our for increased sales of sales Sales of sales to sales than Ukraine. quarter Thank quarter of to negative quarter in in to lower the sales in about unfavorable XXXX. of excluding pressures, impact XXXX. first net to prior offset products. – compared the the South equipment first first basis. quarter of by start

improved versus adjusted quarter operating Moving period improved pricing. X, were higher by and operating supported and margin from examine by AGCO’s sales production, Margins performance. to points margins first basis of in XX approximately of XXXX net we Slide of impact comparable XXXX. costs higher resulting by sales levels the material AGCO’s partially offset net the leverage primarily

cost freight sufficient of significant material increases offset price it offset quarter approximately the first on the not margin on basis. impact a inflation was a and basis, While X% dollar to

same supported by market in demand approximately the of the operating to operating by supply our in income Asia by resulting in improved of the East year income first sales XXXX, mix, region of protein in a million XX% in the of weakest sales showing in and to be compared production reached region XX% margins and increased prices approximately Precision compared the to XXXX in quarter Operating higher sales chip-related from decreased XX XXXX. in as resulted growth. declined XX.X% period reported for million related sales margins in equipment mix. million increases. expanded an and about pricing approximately primarily North primarily results. region the operating to the demand sales from supported X% region. production equipment largest sales period income segment South we production. $XX been first first increased to profitability – compared caused the Globally, farms. Significant quarter end our to costs healthy quarter, the Slide quarter XXXX. weaker first $XX the $XX impact Planting three operating Grain product, XX% well as Protein first expect details with nearly grain Pacific/Africa grain the Asia XX% Asia America months reflecting by For improved improved and and the has range. net our on of Pacific/Africa same America sales increase of demand constraints in quarter, lower grain business, South XXXX XX.X% the in A Europe/Middle sales the to XXXX expect The we’re an approximately full in and operating by mix Pacific/Africa increases XXXX. XXXX, by stronger, In segment, with the American higher

of However, cash details is North challenged production cover improved, operating prices due remain first American expenditures. to the demand less or grain. profitability labor significant protein and input The surging capital Protein Slide recovering. manufacturers for has quarter been XXXX higher costs cash as the increases markets by such muted steel costs. provided represents are in price to by XXXX, equipment activities, free flow so used by and XX issues, which

higher flow lower of caused cash quarter for XXXX in Additional inventory the by working same in versus capital period first requirements levels the resulted free XXXX.

help expect year inventory For elevated, in the process full XXXX, work we the to environment. our raw material remain difficult chain and manage through us supply to

in JCA annual with repurchases capital adding includes cash discussed. acquisition AGCO’s opportunistically along regular dividends, Our free Precision digital to the share acquisitions, as to bolt-on and shareholders. – earnings to and XXXX significant include, AGCO’s growth. investments cash from flow Eric allocation projected forecast quarterly property as due reflects increase our like offerings special capabilities, allocation dividend, return priorities capital well Ag just a framework variable

outlook increase year. the well June. strong variable XXXX, in flow XXXX, position an dividend in as announce the dividend generation Last announced our were payable consecutive increase quarterly cash a favorable dividend we Following special second quarterly and XX% annual in our variable to and for week, $X.XX in dividend a special our for free we as

other shareholders to cash which this of opportunities, needs repurchases acquisition in We $X.X million expenditures first modest approximately outlook. details million share of facilities, capital in the second Future XXXX. our investment associated with the for XXXX of sales will cash on for compared net, the $X.X market as our Other receivable losses same included of the financing returns year. which are generation, flow or a to well on based and period in will the quarter were half as consider quarter expense include, be receivables includes

expected – offset the all partially We higher commodity replace XXXX, prices larger Higher for costs. farmers’ commodity fleet healthy above limitations, to to result feed increased favorable the expected North be supply three major commodity Europe North to equipment to are an compared assumptions aged forecast America milk producers equipment smaller XXXX expected captured are sales. as and several XXXX to to to Turning and acres of equipment years by are expand. XXXX modestly offset across to in exchange slower higher industry markets to we to Industry Supportive to the the America highlight rates after dairy America, of project major not Slide higher is to for prices prices the produce XX. farm to economics for positive demand to sentiment start regions. full demand as currently American total, due industry is outlook. X% year planted strong expect Slide farm and than XX% changed chain additional demand XXXX. has softer the to XXXX to be in prices average in growth expected Western Despite outlook replace demand remain retail for XX, expected diesel quarter X% in supportive fertilizer is XX% In offsetting expected market is South costs. as sales on first in our Elevated compared is modestly from up On levels. unit industry growth. underlying regional be three aged XXXX XXXX. XXXX, XX-year continue are expected to and are demand higher and well during Economics we levels. and EU remain improve flat farmers in our In are expected expected to South up

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

robust our make to new farmer-first to on investments dependent heavily the are XXXX. results significant its will focusing expected performance meeting we the strategy. solutions to demand, end of support chain addition AGCO’s in on development supply In of be market

we based impacted Our results AGCO’s delivery performance will estimates if be on outlook current the in is component differs delivery levels these XXXX. supply estimates. chain from of expect actual

Our expected aimed At during XXXX. X% continued impacting designs. favorable the to net production, and platform by Engineering engineering cost be compared is and well negatively sales expenses Smart material increase expect offset Ag higher our are digital improve X%. at by current about initiatives margins to investments of price costs Precision translation XX% The sales approximately inflation higher XX%, increased and increase includes pricing Farming driven XX% to to increases rates, are factory offsetting of our in by sales cost investments, and material XXXX. at plan we to as as exchange products, to partially targeted rollout of productivity, as pressures. expected improve inflationary well Operating as by currency

We’re current AGCO’s company’s impacted from supply difficult tax these XX% predict. XX will for if goals. to XXXX. lists financial effective targeting to XXXX ranging the rate based supply ability an our from differs on of estimates. view currently parts components the be following and deliver The XX% delivery of chain results selected Slide is chain supply of is The outlook chain to actual performance schedule on capacity. estimates AGCO’s our

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

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

improvement operating quarter the in For quarter modest the XXXX, second to a project compared of income, XXXX. we second

regions, is margins income with and by net benefit of engineering operating material in sales expenses. pressured from to the expected cost quarter second inflation impact all higher Our higher

the Second quarter compared impacted second by higher expected be quarter a tax XXXX. net rate of to income negatively to is

quarter earnings the our last our XXXX a be for to is estimate below current per As year. share earnings, result, second for modestly of

over the and and the results to supply with a As you on in that, Q&A. are With timing difficult production, difficult for is estimate – from This result imagine, current forecasting our availability chain to actual highly Greg dependent component turn I’ll can of environment. accuracy resulting it which back is predict. suppliers

Greg Peterson

one encourage To yourselves participation, to one Andy. and you question Thanks, ask that broader limit follow-up. we’ll

And session. to Q&A that, with we’re into so ready Lorenz, move the

Operator

from line from comes Instructions] Seth the first Your Weber of Fargo. question [Operator Wells

open. Your line is

Seth Weber

question. later everybody. Wanted those just you lost? morning, ask second still sales those think year to the will about Planting in whether this this or in Precision pickup are Good the I’m That’s Thanks. thanks. think first to sales year? quarter. Or happen Hi, understand whether trying later my do the quarter you first

Andy Beck

Seth. Yeah,

out, we pointed pointing as issues, and in Precision chips impacted business the supply out Planting comments by chain particularly and of availability So, you’re was our around our chips.

sales quarter. quarter the were XX% And so, our in about first down first

would have the impact, If like it have XX%. you would acquisition been excluded more

impact. fairly So, significant

As catch we the catch we we’re up. and bit to year, flatter know that would the expect year of back second target to expecting We’ll in XX% with the quarter be rest a of you the be our little about our acquisitions through up in those up to full half, about look up the just then and the sales. impact the And and X% that, is to with for sales without flat XX% acquisitions. up

extremely You interest is high. know Precision still our Planting, level is in order board strong very the

And some their it customers not so, and we’re to technology. to the season these anxious this able you still in use – on year, to to going for hands of some know be although going as season the for are they’re get planting miss of

that know catch second a year. think lot up half to you we really the of we’ll be able this so And the in of

was of We relatively quarter with weak. lot chip a Our of fourth already availability. were issues last experiencing year

quarter. we caught fourth expect this be in so And up a the lot of to

Seth Weber

follow-up running operating things doing that. you talk balance then you’re a and know just year? AGCO’s to know my to the Europe the And can costs Europe the footprint, business about just thanks. Andy, particular, just that of just like the the expecting for Can in what talk in from of your factories you just need about you today bit Okay, you question, for and you you little ability run just cost factories what source know

Eric Hansotia

the rest as other cyclical take is I’ll Europe is Seth, the this Yeah, of markets. typically in as not that, general. Eric.

in of So its the terms moderate demand more cycles. is

inflation. our main focus, supply your also then to ability about and is is question really Our

miss have caused with I significantly I’m we We say, shifts and supply There’s base, Ukraine think your has it if of to challenge European challenges we few the gotten – and think terms question, It’s had that here I you’re you our crisis. into really. nothing few us a of had – it’s reading it’s But asking, worse. had And to a with significant. work but would a little in not suppliers maybe bit we uptick there. around,

line it’s looked chain good Andy now prior So in a about And comment at unique with be the task in the globally. any to anything made did now. and of all right one that comments you in had month our Europe something maybe really on that, the pre-work, is but we I sourcing know the right And alternatives case because – overall before launched we’re energy factories. supply that available a And really that force energy challenges with thankful we in identify we’re knock to point Ukraine other to to a invasion, right we might relative position did wood, now, all happen. proactively we’re to wouldn’t for

Seth Weber

that answer it Eric. Thanks very question. That much, guys. Appreciate – the

Eric Hansotia

Yeah.

Operator

from your line of the Stephen from Jefferies. question And comes Volkmann next

Your open. is line

Stephen Volkmann

probably a couple your I start pricing. guess backlog fixed of of most price. Hi, good of sort had expectations you. guys. to points. was kind I pricing just you And off your see wanted And raised Thank of morning, I I on thought

extra of the that this what’s can you push dynamic quickly? just So pricing where kind

Eric Hansotia

last we we – you saw didn’t already we to expect know know coming of severe, last it inflationary pressure be year. saw end – at the You but this

So line move process at worked menu cases, top partner then, discounts, a what be options to be that what pricing be to of whole able levels do at different looking of and surcharges. pricing to able really what with outside analytics, global even data together some get quick to do do able we or team, with some force of team and to even in create an cross-functional was look, with put task and a access, to our a a to

fast, And data, which use so, now being menu, those for then, is market, the the analytics conditions. to to this pricing off tools select use able that very data are that capture team on and tools marketplace some appropriate depending the into of react

that keep rest and So we challenges that far, off for we’ve It’s price a ahead in that’s the going the place of think year to we market. And paid sure. into has so keep in the and with the stayed proactive the inflationary I working to we’re for just team put place. continue tool pricing of that well

Stephen Volkmann

are you in about the okay. your current we look the sentiment backlog, to Great, know you something Europe, US find And I’m horizon just seeing worried those are and think demand guys for trends. that over relative of to of trends Or readings? in is else weak the indices really interesting maybe what the helpful. That’s then, And just face curious you as the sentiment do you are for seems you. Eric and about I think it in that you all like Thanks. business? sort weak at looking pretty in accounts the fly of

Eric Hansotia

just is the I bit of reflection of Well, high degree of the market. a sentiment uncertainty in a think the

or on farming replayed replayed the You enormous an gets whether no matter turn there’s and automotive the any or news uncertainty, just it’s amount in and and media. industry, of that

that I on so farmers’ some perceptions. think And at weighs point

increases. right down price still They it, comes our you still order ordering. go accept it know ordering the when to – they’re continues – up. book to Now They’re

– is grains It’s is over record because you and and that’s why – So $X. Corn prices. at that? that know

to Wheat’s those in lock $XX. for over over are Soybeans year. XX%. prices Those farmers are prices high and next record able

are chemicals diesel, seed profitable other and also input are in farmers fertilizer, a net-net, very they’re Now, seeing higher costs, up. going But situation. still

of they I lot what they’re they surrounded end the about pressure that But think them the of media So day, that uncertain buy. a by do. answer bombardment the has still it’s at

Stephen Volkmann

good. they’re not it I hope that. research to Okay, reading you worse. on. thank I’ll sell-side But for make pass that

Eric Hansotia

bet. You

Operator

Jaroslawicz And of line from the your comes from next Avi UBS. question

open. is line Your

Avi Jaroslawicz

the guys. for Hey, taking Thanks call.

revenue that and Or million than that I of It you more is the confidence $XXX on just that kind the improvement came on seems think One, expected? for more pricing. year? So than that’s of you of seeing want guidance. are giving volume two, the side in better right rest to to be understand QX you

Andy Beck

reflecting – out, that slight in bit did raised Yeah we with dropping. point increase we a on pricing. We up the XXX basis exchange you a bit XXX, the the We guidance little euro lose points. as

they put of you a America there order Europe volume know our in some bit what can say levels chain. were foresee are there. supply the to based little So strong. primarily South we boards order in actual you know and I Again, would was that accomplish we and increases weighted terms very we to on

so about And really the throughout during we of supply achieve year. the year. tweaking just know what those you chain can go And we you we’re amount still those it’s – assumptions know performance all as

Our did be. first was margin we first more better that It would I the close side the the outperformed wouldn’t in quarter, we on revenue it what to was we quarter. thought pretty say there.

Avi Jaroslawicz

guys. All right. hop in Thanks, it. I’ll back Got line.

Operator

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

Your line open. is

Unidentified Participant

question. on Thanks [indiscernible] for is This my taking Hi. for Jamie.

a question we current you cycle? versus was if commodity think what stronger Thanks. and And for a I I means prices longer thoughts have that for if share wondering your around argue follow-up then after. ag And you Ukraine So longer-term? the situation could could like for

Eric Hansotia

you’ve reasons made calories that’s macro the Number one, America. go if But happening a other XX% the factors and then came where primary market. fertilizer, of marketplace hit, the their the two, not short-term look strongly of two one maybe three midterm of at came the the a situation. sense there’s thing grain of grain were That’s in the the America to of seen lot North a of is to know the And no fertilizer. of to in the short-term. and years, the circulation. out what’s own They something it because of that Europe longer Russia-Ukraine like Yes, to exportable South of you only but source markets, out prices you up lot

as fertilizer lower put therefore, farmers could they grain world why And Short-term if year, to should going have futures this the in prices not won’t stocks the get And yields been they replenished much so otherwise in which of just as seeing remaining around availability have impact on means, the midterm general, terms grain will yields. That’s than you’re on are been. out fertilizer there availability, fertilizer like are more available. the they and projections high. there the was be could

or So probably going in you the out future top into the we prices farmers the know that this high cycle this – the additional push business for strong and portion know the right that you of period. end to we’re of cycle think for extend business some our is now

Unidentified Participant

guide. Thank is that’s EPS My question helpful. on the Hey, you. second

– you is midpoint XX $X.XX. won So the consensus about only by up you more but beat – $X.XX, than

was any I since if incremental So QX? Thanks. will seeing wondering you’re and cost hit last that quarter pressure mostly

Andy Beck

down did impact. in our of last know to think guidance, is, reconciling you the – factor have bring think real rate the to key I we terms there exchange I the

actual that’s impacting to to to mentioned, And first guidance the of extent we levels, in expected forecast that’s had some to trying increases. increase cost well. as out, we what more us we’ve then set than and So that’s gave why going increase had our – we volume material guidance as as some that the we them to secondly, with offset you just pointed I – price

the So some And we’re on than end to where but we lastly there know we’d higher working is tax result. little up. a offset hard challenges as you that, then rate a bit thought

increase all-in-all, the the the year. of the last were those beginning guidance know at you But So guidance our gave since we to looking we’ve since increased main the things.

Unidentified Participant

Thank you. helpful. That’s

Operator

line comes of the Your Zakaria Tami question BMO. from from next

is open. Your line

Tami Zakaria

so for long-term have you of a today? you be as Thank operating you want I one. taking question. I my Hi. plus. question. one much How here about your It’s do sit you it feel XX% think to more longer-term margin

You’re of probably this be to year. going the that by end

medium are your what other competitors can what over And strategy? the So light us where go, likely can seeing? margins sources to you of of leverage in especially long-term the are remind

Andy Beck

continue absolutely improvement. operating on to Sure. We want focus to margin

to additional want As new businesses. exceed drivers margin first key are and going you and establish improvement also leverage for growth, that then to forward. reach high-margin operating was goals goal said XX% grow The we through correctly, we’ll to our our

you like premium brand. which horsepower high product So we more an grow like, that with we’re our brands some plants. in our well. think looking horsepower efficiencies high capabilities And means, perceive margins, that purchasing businesses done to within which businesses, well job South know then growing important America, our as our trying Fendt North our we’ve equipment, I growing as constantly we’re Precision great and have want to the Ag America. in improve, We highest a carry the we And be productive market, as to as improved drives margins

the in and years ones and opportunities margin there that grain other that believe we’re protein expansion there like gone are working that’s last on. there’s where see we You some few

a the list that those we’ve next hard working years keep So, very going there on we’ll got few opportunities to lot of over up. be on the margins

Tami Zakaria

a if And ask I you. Thank follow-up. Great. could

to you think I bit year. outlook hopeful? is you volume mentioned were supply better a you than that expecting demand-driven? Europe for easing are the some your improved more you now begin Is seeing Or makes outlook the that chain in volume

Andy Beck

to would a think in that’s of It’s we’re change bit get little I a in say outlook we not part. what most tweaking out Yeah. really for chain our just our going supply of market. the the mainly

Tami Zakaria

Understood. Thank you.

Operator

question comes of line Elliott from Stifel. Stanley Your next from the

open. is line Your

Stanley Elliott

A the all Hey, good question. quick Precision you on for taking side. everybody. morning, question the Thank

in to business you the you your the a that Does recently. so? more You this platform here out different know FendtONE so we even allow of now lots have be know integrated accelerating the all or part launch much faster clip potentially acquisitions of see there these businesses of that for

Eric Hansotia

sales question. is, thanks Stanley, the which about be have for in for can one. you technology it – that. and But of two and I’d the our One either it. sight base portal, is think the new retrofit new the ways. technology. on customers never deployed, is to that Yeah other make the the that’s customer our enjoy sure for I’d platform FendtONE the platform machine That’s OEM off-board for we or And I lose to want

retrofit have continuing closed to a add and a on be Planting had think I regard, we’re really is that to them is a market Precision focused leader the market. retrofit is JCA – on to channel. going that. Appareo, AGCO really, in that. They we January. they in added to

the that their two-pronged to smart into machine make mature, migrate those is, OEM features. a high-tech there So upgrade the through platform. the to a they FendtONE will then deployment a technology be them. then one technologies as market. willing for And those dumb of approach retrofit automates to machine machine, early adopters One fast become being on

Stanley Elliott

guys. it Best was of That for me. Thanks, luck. Perfect.

Eric Hansotia

Yeah.

Operator

BMO. Your next comes line from Joyner from of John the question

Your open. line is

John Joyner

for taking Hey, questions. good morning. And you my thank

touched you your really doubled inventory, briefly said you slightly. know are lingering don’t chain that being affected reconcile I supply outlook Eric almost mentioned there guess example, from end. for So, on, chains. supply constraints. work look getting maybe in give some but But, you inventories at process you know better, then, on by if you if for tweaks more you maybe color it to can year maybe you higher know And I Andy, your

the look gotten actually that? add a I supply guess, can I little worse, bit issues chain can that around maybe when assume at that, but had I more you, color So,

Eric Hansotia

plan – history bank what We so we our said got Yeah. many to order because We’ve the factories our in the year, we highest the the wanted Early an together company. for of to at. what in we put aggressive orders. communicated got and we’ve suppliers

almost essentially products many for in cases. sold selling out into and we’re XXXX, We’re ‘XX all in

possibly is can. the billed deal So much whole as as we

we fact, little the year it cases, as because got some supply the that fast worse. thing, of a We would that the as not during in had it’s course in the are expecting healed chain of Russia-Ukraine heal, hoped. And

is, the of that to hand what’s few percent XX% So constraining It’s output. suppliers mouth our time. are and are overall supplying on happened those

extra the So when lot last wait many the in to being able build part to times, deliver, that you one in also But have for we’ve That’s in, why a then on we it supplying few got put some the behind hand increase machine, whereas that and time. suppliers suppliers machines part put come see and you process our on it. built. work not can factory material mostly these on partially WIP of because raw ship most – of increase –

base raw our in inventory to strongly we with consider more how pivot enter the the that now inventory moderate the year orders the of line We’re as year back of this for get on as place going it rest supply and where and much phase we be should during the material. we and have

John Joyner

I And Precision of guess, for guess. Can you for one, for Thank your, baked rest us the that. I tell the what’s mix Okay. quick one outlook you just year? into Ag

Andy Beck

Precision Ag.

Eric Hansotia

Yeah.

year John, are or of asking Our for you about – rest what? sales the the

John Joyner

Right, correct. Yeah.

Andy Beck

Planting got over we’ve Precision as about revenue acquisitions for Precision total looking be year, little Ag well Yeah we’re XX% $XXX that our Last to XX% our million, year-over-year. if sales, and business. these with to we up include Fuse a and was

John Joyner

much. Okay. Thank so you Great.

Eric Hansotia

The and like many Precision one chips. multiple chips. we chips, But just is about think sell our higher. is be much issue demand constrained. hot if And a that’s supply it The number semiconductor everybody purely you in loaded have red Ag chip is has them products. would semiconductor much, on these It of about everything with

that’s – not by at supply, So constrained all by it’s demand.

John Joyner

I Got asking the it. questions. what was the Yeah appreciate color. I that’s kind of

Operator

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

open. Your line is

Jerry Revich

Yes, good hi everyone. morning,

Eric Hansotia

Good morning.

Andy Beck

Jerry. Hi,

Jerry Revich

color talk you reduction for and if you showing. a you don’t inputs know piloting about of and in of I’m wondering are just you fertilizer protection could the improvement of just what’s of and crop what folks two us that, on you solutions provide order you the level through the just outlined bit are Can sets more yield step in mind? folks if that both products magnitude

Eric Hansotia

then they’re It’s solutions, between system LiquidLogic also and number talk let’s identifies But of weed. the our sprayers predominantly. Sure. have there’s And the just we a already. Vision weed There’s on Vision plant, a the sprays difference spring. targeted system a based and a that about that systems on

chemical XX% a can the application. already in post-emergence to it’s means, up, we see of savings So XX% in spring, that weed spraying come after you’re

application Now, you up a the careful wording in down I which need to prevent for on to make still first is, – the the that when the want is, about we reason put was come place. because the there’s pre-emergent weeds to that field, chemical

– so you And up and significant the it’s reduction after weed the a see that’s big but available advantages it post-emergence, spring there’s can come once it’s really on there.

clearance. We can that got And also into It high to new LiquidLogic award the We clearance the have Boom Year or – shows. this sprayer system. Machine standard at this of able farm the year with go and waste primed sustainability into Priming be to at chemical the dump field issue. field productive, already is have the immediately System, have because of end to and a the the that chemical go can and and boom it

as reminder, on-machine of combination Planting the application And a spring retrofit So as Precision as these well new is solution. a kits. targeted

sprayers, will go that’s especially on off start North first our to these mix of with, all in America target So market.

OEM So a we’ve solution retrofit and got all mix. AGCO for solution

Jerry Revich

color. the for And Eric, thank you

you So solution. it’s a mentioned know you post-emergence

level monetizing acre, about on it at how So savings you when to know chemicals to you look are it? in per equivalent is thinking and you XX% of savings XX% what that

Eric Hansotia

two Planting it, one-year think on the solution And applications how system the Precision monetize pay the Targeted payback, the well. selling cost a Solution and a as the price savings be that’s XX% for for And for between chemical it’s we’re in aim at application, able this that total but cost we aim farm technologies, to typically typical-sized Spraying one we one the depending on get the where for largest the sometimes are a of of we years, farming think year. our about in range. can we enough somewhere a farmer. to system price all we farmer – – Well, know you If looking their we’re the at how saving about

Jerry Revich

Yeah, terrific. Thanks.

Operator

Courtney And your next question the Stanley. line from comes from of Morgan Yakavonis

open. is Your line

Courtney Yakavonis

guys. little a expand could you was wondering morning, Good if thanks. Great, bit. I

is Should XQ in should North America margin I show think anything as that of really still divisions? that margin considering Or modestly pressure have expect in the and out? modeling you up to below know that you last expansion year. we the be to quarter, mentioned remaining there would EPS we’re this all be that we similar else

Eric Hansotia

there. on right very you’re Courtney, Yeah.

pressure of most is in North America. margin the So

and those We improvements Europe similar solid margins the be America kind and Pacific, improvements, to flattish in then margin improvements second South first expect see we Africa, of slight down pretty Asia quarter, saw what margin to with the in in some in to slight quarter.

margins know them basis. on So are but But again overall, offsetting we’re margin cost we’ve pricing, getting impact, sales margin when offsetting the know them you were on about going the got up. by just on – think we’re the a dollar you we material offsetting these a pressured, basis, not increases not because but

of big kind to get place. we real the that and then that’s pricing better picture situation in and So QX, in throughout see year we more we get expect as move the

Courtney Yakavonis

expect mentioned some ship flow Ag I you’d a these Got deferred Precision later get as year of to revenues through times, couple of know availability. it. then you And you in think you the

see the XQ this I little step sales. thinking be differently sequential we bit chain? you’d supply down issues in year think given a about typically, with Should that the a

Andy Beck

seasonality the – still That is similar.

and Precision quarter for the up these in Precision of of – So first sales quarter looking And expect QX Planting. actually year, the to to then, again, the half for missed be – this the lost some lowest you units we’re second for catch know we we year, first – half. we that

see we – in growth and third year-over-year fourth we’re quarters. so, And both

Courtney Yakavonis

for just was revenues? or was And total sorry. business that Planting Okay, Precision for the that

Eric Hansotia

Precision – Planting

Andy Beck

That Planting. Precision was

Courtney Yakavonis

Okay.

great. Okay, Sorry, ahead. – then And go

Andy Beck

No, that’s it.

Courtney Yakavonis

spread the you know in that and been South Or a just had the pretty parts more Any we change as you there pricing in And little should in pricing America I and Europe. world the less think previously, some of bit taking think increase about on of given lastly other sorry, the evenly pricing? increase, well?

Greg Peterson

Yeah. No.

just that’s the So, level due right, Courtney the of to still Brazil inflation. has and level price of you’re highest simply increases,

what other average. are we’ve less in of terms company than The slightly markets quoted

company but a than much, average. less that bit So not little

Courtney Yakavonis

you. Thank great. Okay,

Operator

from Your of from comes next line Chad Dillard question Bernstein. the

open. line Your is

Chad Dillard

guys. Good Hi. morning,

Eric Hansotia

Good morning, Chad.

Andy Beck

Hi, Chad.

Chad Dillard

some ensuring you order color book right – any know your kind you so does there? balance? give sense yet? of orders what on out just the just good far the if And be pricing can XXXX you’re you sort price taking how just And taking So cost you’ll go? Are know how of you

Eric Hansotia

year we Yeah. how difficulty] or two, is that about think over We’ve orders the and [technical that changed last

Operator

operator. in main Please and Ladies the Excuse there today’s apologize and speakers resume that me, conference in a – this gentlemen, is momentarily. conference. hold. the Greg is Hello, Greg? I slight delay The conference. – will

Greg Peterson

Yes.

here. We’re

Operator

I can you hear now.

Greg Peterson

Can you hear us?

Operator

sir. Yes,

Greg Peterson

Or last should we have on started? finish go – – line? the still Do we participants we that should the do we our Okay. question

Operator

sir. Yes,

next Company. from have Kristen We Oppenheimer the comes of & question from line Owen your

Your line is open.

Greg Peterson

Eric, participants go to It ahead looks and. we right the and don’t like maybe our dropped off. have closing remarks go why

Eric Hansotia

saying by thank for the more much Okay. your you your actually, everybody All this very importantly, and on participation for – your right. AGCO. I’ll close morning and continued support line of

front solid and order we enjoy high board level start a technology. work to in a us off for and year. our We recognize record We’re XXXX, products loaded new the of the balance of with we of still demand have lot a in for

chain an Fendt, like focus, to mentioned, continue progress and Our strong large as that North supply and our inflationary so Planting business we growing ag to can a products. manage difficult our environment, make parts in Precision America is we’ve

this large we as acquisitions important another in with well as JCA like heavily investing announced. year we’re that addition, increase In R&D technology

farmer farmer-focused of have problems development short that solving are the that continuing are critical solutions We really payback.

transition our month. Technology to and sustainability, forward also technology not our more farmers productive only Thank helping to engaging are farms, Day a in We We sustainable make highlighting presentation day. farms. more strongly have you, look our but on next the great

Operator

conference concludes call. This today’s

You disconnect. may now

AGCO (AGCO) 3 May 222022 Q1 Earnings call transcript