AGCO - Earnings call 1 2023 | AGCO Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the AGCO First Quarter 2023 Earnings Call.

[Operator Instructions]

Please note this event is being recorded.

I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations. Please go ahead.

Greg Peterson

morning. good and Jason, Thanks, Welcome to Quarter for First joining of Earnings Call. you XXXX us AGCO's those

We to The posted to presentation. on in will that slide GAAP our morning refer the appendix website a metrics slide in at of are www.agcocorp.com. presentation non-GAAP the used this measures reconciled presentation that we

rate repurchases, make will strategic the crop inflation, that prices, and rates production component sales, demand, interest margins, that We development product production, on financial wish you engineering plans, predictions other commodity are actual tax expenditure levels, flow, events delivery, morning plans, these share this supply chain statements caution We to call may statements disruption, impacts, earnings, differ expense, future rates, and exchange and dividends, metrics. forward-looking to with pricing, capital respect cash materially.

resulting December you those refer including for that company's from to time to time we from discuss differ could Commission, cause file year-ended reports XXXX. in the Securities XX-K prices the the Exchange to We statements. factors actual important and required supply XX, Form materially results These contained that exchange the documents demand. but with law. periodic These factors those limited the disruption, by as obligation forward-looking not adverse chain We in and to commodity changes forward-looking any the in industry, rate except disclaim including are volatility, developments whether agricultural any statements, our to, include, from product update

A available corporation replay today of call website. this will be our later on

Vice Chief Officer. On our Audia, Executive Eric and Chairman, and Hansotia, the President Financial morning Senior Chief with Officer; are call and Damon this me President

With that, Eric, go please ahead.

Eric Hansotia

above posted perspective. and you. a record It's by of XXXX margins first in margin morning. with started The both well earnings. of first X adjusted quarter XXXX. the AGCO of the growth terms deliver quarter expanding towards team consecutive great XXX progress Thanks, results to financial highlights quarters an We target. makes a incredibly operating XX.X%. XX% efforts X helped We quarter This operational Greg. sales, be basis operating sales a from sustainable XX% to X of with and Slide XX.X%, Good margins combined mid-cycle points operating has with

testament are farmers are revolutionize success to is we industry. adding crop a out backdrop continuing tremendous to cycle. results the as of strong the value playing we with the These a This

Ag and IDEAL and up Combine increased Precision AGCO's Development year compared quarter a features. Ag of underway autonomy Precision targeted is sales XX% the in smart XX% to sales spring, on were first ago. dozens

towards December. We our are of and ambitious solid set being focus industry. goals progress most from deployment our technology company in commitment forward-looking we farmer-focused making stem the in These our results

solutions customers' Ag growing interest extended supporting Our Precision is in boards. order AGCO's

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

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

as well cash forward. We variable of share the increase dividend a given and of week, announced as our we Last continue to a going $X special confidence regular return will also business XX% dividend our our to in per our shareholders. strength

to in by economics XXXX. retail for farm X machines. sales as Slide robust equipment aging Supportive region replace farmers continue unit quarter agricultural industry for details resulted large X, demand

below versus increased While dealer historical is larger inventory of XXXX smaller still averages. levels, machinery equipment has

while approximately than retail of level increased X in Smaller down X% industry units helped decline. XXXX a greater sales versus sales were American North to XXXX. from sales declined tractor quarter XXX-horsepower offset high for the

Western forecast impacted has input for well compared expected to Ukraine support inflation, in in X% the cost to Europe as for demand throughout Europe Farmer XXXX. as quarter retail equipment negatively been sales income X, in Western XXXX. solid continue are in by Industry but tractor sentiment decreased war healthy to retail XXXX farm approximately

X, Brazil economics, an farm during and industry investments X% sales XXXX to driving XXXX. Positive outlook decreased in tractor planted growth farm industry acreage levels the in are retail in supportive equipment America, continued increased in last of resulting exchange South high-tech for South strong In quarter modest expansion rates in compared American and year.

Across last Combine given first compared X relatively year up supply was level the due low constraints. quarter all regions, to in quarter significantly industry the XXXX, the to significant of chain

about supporting in positive strong low very demand supporting fundamentals are prices. levels industry the at We ag remain XXXX. Back-to-use commodity underlying levels, elevated

X they in prices of the ahead commodity historical well still While over averages. months, there's pullback are some last been

field due increasingly Equipment is replacement. -- in the for aged in increasing

dealer large inventory's peaks levels, up of costs from down fertilizer ag while last equipment significantly inventory their dealer below and Input year. targeted fuel small ag from last are New like remains year.

supportive normal XXXX. levels down farm see may believe While XXXX be XXXX for we income XXXX, in same we be much in for time, for assuming from demand in And crop at industry don't remain modestly changing the at XXXX, and very record good levels will that production. it

a supply focus our challenges. to strategy chain great on continuing job Our team did while maintaining deal with

The global chain farm improved segment. of even with the bottlenecks remains shortages encouraging supply news and demand farmer economics over market While last component has in end strong, some pressures, quarters, that are and our couple healthy experience the affecting to production global especially is remain supply we the continue inflationary volumes. that large

on AGCO's X. are quarter shown XXXX hours X production Slide factory

X% chain our approximately in While production some by linger, grew shortages X supply quarter versus XXXX. we

planning are the production XXXX. production are versus of X half higher we in year relatively this and in flat levels on for back We versus quarter XXXX, levels planning

are share a our the increase production for projecting for to market X% in year. we industry hours and XXXX, forecast X% on Based

of all strong, regions. demand end order XXXX, our farmer-focused March across of As boards very remains the our products remained elevated for and

to In order end large double digits year year. ag Europe, tractors double the orders through last up small have digits the down with ag of coverage and orders compared

around advance to pricing coverage September through more to our ourselves order of have X XXXX, orders continue in we we flexibility. America, South quarter where give In to limit

quarter To give the orders, this an of market, filled strength board in receive you was open day. to order in idea we X third the when the effectively system

In demand North into the in and combines be continues market to America, tractors, orders strong. big farm sprayers extended for XXXX our extremely as

down. remained order up last our last we as have order rates. year's quarter, levels ag large Normalizing improve rules, As elected and delivery below orders orders to new on-time we outlined orders to ag for limit the intake small are are intake

This next per year. slide vectors X% the outpace by growth X% to X industry our highlights to

product our higher provides Our Fendt global less full-line during Ag business, offerings. Precision significant cyclical with downturns. X parts and variability services potential and at All our margins global growth

want efforts our our I on focus Fendt morning, This to initiative. on

to grow continue paths. We X the business along

sprayers, line First, Fendt planters expanding include we're product and the tractors combines. key products to like now beyond

Second, line Fendt global. we of full this are products taking

the As and you in In our South line America. and product Fendt-branded those both respectively. interest quarter, in XXX% sales can continues see XX%, grow results, North by markets in Fendt our premium to our first for increased

Our Fendt South years. America next expected over in and and the double are to X sales North Challenger to X

we has performance now North America This North European years, to part Vario for As the are our successful we efforts, tractor been where February machine, and maneuverability, The other and combined of premium in Fendt Ag the high the lightweight launching margins. the many will market high-value XXXX high orchards pricing in the in segment-leading America it bringing and market. launched vineyards, World tractor XXX are specialty the Fendt with it globalization of serve and Expo. with crops. The enable at customers

front cab X-point space, potential Ag dealers customers by At were features and the of variety the impressed Expo, World wits offered. and

with farmers We Fendt provide come results XXX of have expect as experience. the part continue Vario our expect Fendt exceptional to to the they to

of of line is Fendt tractor the nearly North to XXX market With the this complete. introduction product year, the American our globalization

ranging We down the way models through from XXXX the have all largest brought the series. market to XXX the series

outcomes farming for enabling are customers. products our sustainable technology-rich more Our and practices

stronger position perspective. We are in X couple a sustainability Slide XXXX a shows in report, from issued was a also March. of sustainability highlights which our from much

for offering from diverse and am reducing of safer, and years our Scope operations. sustainable progress I innovation of manufacturing farmers on our to workplace. engaging our a our includes talented X to X achieving by intensity sustainability decarbonizing targets ahead employees which industry-leading of delivering emissions the are we're commitments products improved to proud We operations our outcomes more the schedule making our X

our Other impressive of achievements XX% electricity total. include: is usage now our renewable

that Our our renewable reducing help to already Improvement of is our total. usage rate incident certified. in feedback sites from Voices ISO taking like part XX% to And energy helped a are in work. at the place great our AGCO of survey make safety metrics number XX%, health by increasing employee by and

information will quarter I that, will the who results. about now hand more Damon call first With to provide our over

Damon Audia

first on start regional will you, sales of and quarter. net good with for performance I everyone. morning, an Thank X the overview AGCO's Eric, Slide

of Ag sales excluding when in effect application was the high up combines compared horsepower the and XXXX the to XX% in which quarter strong quarter contributed tractors, products. higher translation. negative over were sales, quarter, of Pricing Net approximately XX%, with along growth currency in the to first equipment Precision

increase. Kingdom reported high in year. Ag of translation along effects Strong sales accounted Turkey, Germany the horsepower XX%, actions. of Precision excluding negative favorable the Fuse compared region, utility tractors, By sales currency to increased the an Europe/Middle The East in growth by of most was United tractors prior the with pricing increase driven the improvement segment net and products and approximately of for

by America, In tractors, as continued partially effects application of effects growth combines offset translation Higher sales South most in excluding sales XX% net in driven drove the year-over-year negative increase. of of well as strong pricing the grew favorable in sales first currency quarter approximately Argentina. by Brazil, sales lower the and equipment

currency from and sales than horsepower along the of inflationary impact effects cost more of resulted tractors, the application sales pricing XXXX. pressures. to in approximately combines, XX% with to increased the translation unfavorable America offset equipment The compared growth positive excluding primarily increased of quarter first of North Net high

factories currency basis, of constant in resulted about our by net sales China. growth lower partially X%. Australia a quarter most segment in from shipments decreased in our last in offset sales markets, and European On sales Delayed the Asia/Pacific/Africa

sales X% approximately $XXX up Finally, Unfavorable consolidated first currency year-over-year. for quarter. were quarter, part the million were about replacement during approximately X% the first effects

X. Slide to Turning

and improved a margin net points quarter more basis a inflation of quarter XXXX. XXX mix approximately compared from first positive positive on and dollar pricing a adjusted the quarter sales were benefited higher production, XX% freight in richer and XXXX. operating and than first margins also increases basis of material the Price by offset versus to significant The cost basis. Margins on over

full approximately X% year, we the For still pricing. are projecting

to contributed approximately and sales, XXXX margins first of improvement. segment operating improved income compared mix an Europe/Middle XXX and strong quarter product By $XX pricing points. the million in of region, approximately the the Higher East increase reported basis to

first income North American the benefited million higher $XX pricing and sales from favorable and operating margin year-over-year. for net Operating increased quarter mix. a positive approximately production,

reached margins robust sales American quarter strength million results and Operating The same XXXX. $XX in a income South sales in The strong operating the in the reflect once favorable first benefit higher over Brazil the has production and improved America price resiliency period of nearly in South resulted in quarter, versus XX% deliver and the continued again. results mix. in helping

our Finally, quarter, production. declined segment, $XX first million income Asia to in lower in due sales primarily Pacific/Africa approximately and the operating

years more expect Asia globe regions the strategy pricing, With years profile the be ahead. X South the our balanced our margin the American in and disciplined AGCO's expansion will in from American, we margin North and last across execution Africa Pacific, in

XX business. Ag Slide our summarizes Precision

being on As mid-teens. XX% of are you With our all spend, in our sights from will non-land global in We help the role addressable simultaneously that expanding our are improve sustainability is our focused we Precision Precision as positions Ag set low machinery established major the investments traditional well achieving Ag market today that their agricultural in are targets around profitability. play it farmers see, a to areas. just can believe which while us the portfolio,

increase in $XXX recorded QX XX% XXXX, million revenue of from approximately a Ag XXXX. in We Precision

by target solidly during Our rate hit Day. puts we that XXXX $X billion the run track us announced to current our Investor December XXXX sales on

cash our XXXX. and XX for free flow details Slide XXXX

As cash used cash in a cash represents by reminder, adjusted as conversion operating or free free net provided is divided activities free defined by less expenditures flow and flow flow income. cash capital

earnings. that spring million typical in quarter seasonally AGCO selling it's Remember, quarter, the used increased XXXX, the offset more of coupled to change $XX capital first $XXX in related than build X% The cash capital in approximately than year-over-year XXXX. that is inventory first with working we the more million in a increase increase season. modest for expenditures In

our to expect of but in XXXX. a we raw modest remain use XXXX, elevated cash versus somewhat supply given material be and expect For challenges a source work-in-process to inventory we chain

free of significant our to We XXXX. a from range from net expect conversion XXX% increase cash income, XX% to adjusted flow

We declaration of dividend XXXX recently of that increased remain focused regular dividend XX% on share. share last we with direct per returns and the $X.XX to to investors a a per during $X special variable week quarterly

needs, Future opportunities; well returns on as outlook. of based and expenditures investment will generation; capital market our which to shareholders acquisition cash as cash be flow our include

Slide XX prices, economics highlights we market major year end XXXX by of driven elevated regions. X retail to another for our support market forecast commodity farm strong expect demand. our healthy Globally,

the similar America, demand to compared in expect For North levels we healthy XXXX.

interest equipment Increasing after segment row rates equipment expected market. horsepower years segment expect offset the growth smaller to softer robust smaller to demand continue by are of be to the We growth. for slow several the equipment of in crop continued high

America, by large which one expect profitability to the ag end we XXXX. flat be moderated This increasing, expect constraints. footprint of especially is another the demand expect we supply drive healthy industry farmer X%, to we markets, equipment Brazil, stronger for to and South where farm of year beyond region chain sales up In remains in

forecast Farm price with the input constraints region the supply to compared years XXXX. Shifting generally grain in X are equipment inflation. Meanwhile, continuing outpace extending to are Western to is healthy Europe, the relatively replacements. last industry be chain flat fundamentals over to

XXXX key Slide XX assumptions highlights our few underlying a outlook.

will robust also strategy. In farmer-first to significant investments focusing we end demand, our the meeting to new the on solutions in make market of development support addition

we strong chain dependent supply still be will see demand, in XXXX. Although market results AGCO's on our performance

Engineering investments approximately and increases in at compared cost Ag Our offsetting sales products. aimed XX% plan approximately to X%. impact We increase currently increase is positively expect price The of with about to smart expected translation material includes market farming are share at by sales to gains, along currency XXXX. X%, expenses by inflation. targeted Precision

of margins higher around to in and by well forecasted, of year-over-year, we our XX.X%, as investments expected materials increase With related rates the net first other pressures. increasing to improve engineering offset inflationary initiatives and sales production, receivables sales interest of cost $XX sales and with of million approximately partially digital to that expect Operating the are expenses by accounts and increased to factory primarily improved higher majority pricing half XXXX. the driven favorable in as productivity,

an targeting range rate are the to XXXX. effective We XX% of tax for in XX%

earnings Slide in We our targets Turning we in to XX. We've raised in our billion. share share and sales per quarter call. should $XX.X approximately range of XXXX. per currently net Earnings sales from be be $XX.XX the fourth highlighted expect what to

income, of be as We XXX% target. And flow continue to target long-term range free adjusted CapEx I mentioned million. should conversion of earlier, cash in the XX% $XXX to with net our of consistent

to back call the for turn I'll that, Greg Q&A. With

Operator

[Operator Instructions]

Our question Elliott from from first Stifel. comes Stanley

Stanley Elliott

I curious the to Grain Protein start kind a guess, And little relative with I off Could of been How expectations? has & that business. -- tracking just guess, talk you that. bit, with

Damon Audia

Sure, Stanley. Yes.

tell you, a really Grain years, a couple of factories, consolidate improve overall hard the fair I'd the really to challenging after team the of So to Protein, cost restructuring worked business. of position do amount & the

were they side that their that operations. business seeing affected adversely first they of, really They challenged challenges improvement then year. say, year, prices were were probably event on would that the half the obviously And the cyber the really underlying Last by I with saw escalating sort masked the experienced. in of most in we the protein the there, of China, Stanley, steel in the we

& tell you, first Grain first And the so good quarter we had a quarter. here, I as Protein would started

income $XXX think of as in we're it, call last sort I relative appendix sales seeing mid-single moderated what so year-over-year. digits, Operating saw the You of million. improving a was, prices year. have steel And the to year is

them. in know, QX especially the here U.S. you for season, As a quarter strong is

we're improved significant to in improvement & sort margin. we And have expectations that So for of see performance hopeful XXXX. to versus continuing 'XX a in Grain raise the Protein

Stanley Elliott

a to South expectations you the how you're and then bit of then more late. are had there? on about And America of in North America? the we And can But you cycle, little in apologize, talk for managing where business Great. kind I think kind hop I so and

Eric Hansotia

strong. extremely are fundamentals Farmer

are now Our around order were high. are large boards higher on ag all all low. a Dealer the they year prices than ago. world is Used inventory

we we but strong front market year, a very change what a forecasting strong the of we would and we've yet, 'XX way see through that We're in got still So in see the significantly market XXXX. feel don't us. not all

macro tailwinds thing few we demanded that had will A ethanol soy out. years fuels North that But oil in of back, where crop. more some other large oil with going corn be consuming a where the going contributor, things. a demand renewable it vegetable happening portion There's big play to see similar to, the are vegetable to forward started and that into and convert we America, canola

The renewable XX globally Xx Xx year, this last, the diesel by end the just it decade, capacity has And say, in in in doubled up the we and of see months. going U.S. the in

driver. that's another So demand

priority the maybe countries all on seeing in macro around is they're the one food security. would of themes announcing then world last placing you're say terms that I a And higher

means food, by declining hoarded years look to from even those But they're, row, they've X is have They're wrong dramatic call you in under being I'll that the in gone from XXX it, million shift or at if certain Well, locally. that last are XXX countries. tons a stocks now. more to more locations. XXXX the the So that grain been hoarding a ending in storing even more global for

this we got demand still to feel enough like has grain, it. lot of a not market machinery and tight So strength coming, more

Operator

question from Our John next Markets. BMO from comes Capital Joyner

John Joyner

that I of will better leverage improving some the contrary at volume year, So operating when and rest year, margins you're would to the moderate for chains guess have looking guess with assuming the supply I assumed for basically for is outlook and your what profitability I which such.

why would greater just Or So it of else? for is bit conservatism? it planned ease the margins investments little mean I something of year? or the a remainder is

Damon Audia

Yes.

a have think -- it's we of think I John, is do things. increasing. One I material cost couple

the first the year. If the first you in or our of think about pricing of is strongest was the other the part half -- the thing year quarter

about to outperforming our even do America, again, talked we've We South expectations. As expect that moderate.

third said our We be then the year-over-year. million And engineering. component is around to up was engineering going $XXX

you'll So to back see the that of through continuing here half flow the year. in

big year. leading Those X we full the now the drivers are of for sort the to the outlook that really XX.X% have

John Joyner

typically take I'll Okay. then mean, North the believe farmers age But being use the there my at equipment. South question, it in farmers probably of and next America, equipment when European looking assumed the conservative. of longer machinery span I the life of beyond as fleet American or than I kind

driving ag strong? are do you age grower there, currently is so higher the large economics think when what machinery particularly So of

Greg Peterson

Yes.

in right much sense the intensively you're that America. John, So in equipment South is used more

though So we big sugarcane and and Mato to the shorter be the replace consumers. changed. especially hasn't equipment the also generally farms that big useful are That faster, mills on in actual life tends see Grosso

wheels more of -- it's And these use their in tend big developed South until America. own the have maintenance market in isn't more off. fall They are on rural used lot It's that they quite farms regions, especially the cases. a shops in as to

extent high. used haven't change. are values, still Used we dynamics equipment very they are equipment really market, seen to on those the there So

from levels this while inventory And you bit, up little year them dealers, we'd if equipment last to levels still even And they're inventory nonexistent. remember new almost be. were dealer time, down were our like where -- a our in inventory almost

be to a continues strong Brazil market. So very

Operator

next comes The from Morgan Dillon question Cumming Stanley. from

Dillon Cumming

rest first ask production the or of dynamics on for wanted Just year. to the kind of the

that constrained this take go flat the guess bit to is kind year, back in et regards of there still such guiding look front labor, on we I as to potentially obviously supply half. cetera, we being you with growth as that that's were a You could a beyond chain, of up more that layer forward?

Damon Audia

Yes.

think, you look at as I chain as said, we've big second quarter, of we back the If of year, expect Dillon, challenges. see for increase. we half do look supply some the the the at we continuation us,

think just inventory the look dealer one Eric demands. talked we'll the about we other I levels, as watch, the is market at as

think robust We last continue squeeze demand see saw to production. year, it more to may out there I the now, like a incremental as bit you little is opportunities be right

preventative in see do right But in that a the you bit third have at maintenance would the quarter. least fourth we quarter now, and normally little

we've that, demand the we've deferred of in given that seen Some year. the last

so that with see But the at right that the again, do have sort 'XX. revenue and for overall our sort year into forecast And we early now, time. we point aligning outlook market of is to our do some demand of of and in balance the

Dillon Cumming

regards one early then know Great. just kind kind tighter kind days to And of question, it's with conditions. Okay. just financing broader I of of

customer all, to you any gives tighter with But that I channel, on dealer side the of heard got feedback a financing? JV you've if from out probably many the the concerns the from flexibility. with First bit I there know just regards of that you Rabobank, customers. heard

Damon Audia

No.

think our we other really have the along DLL venture not and affecting I joint financing. as between we Finance, anything with partners pull customers, seen AGCO

to small policy. lending loans really are seeing, rising any more more collectibility challenges lot are Again, nature, little by of made of on risk interest the made we being conservative as ag-centric have Dillon, farmers. or talked of regional, usually things we're bit these to in a not banks we've a that rates. a Now due is or the ag declining that But past, that seeing

ag just coming interest that rate more So haven't affecting down that GDP anything seen and to due we increases. policy, overall but small

Operator

from question RW next Dobre Mig comes from Our Baird.

Mircea Dobre

obviously gone credit a are support. for finance with to conversations the so And the of with interest things least in our Just at that up of heard follow but dealers of not has that on more to up kind availability we've just manufacturer question, much -- some equipment outright many there them is rates. issue, cost that last hoping

So of kind to manage have do be I'm do And tools issue? is dynamic? you any that an think able this to curious, you available that

Damon Audia

would We One large for our values bringing most of trade-in all AGCO I -- couple think upgrading especially do now. as at is, a make. these level them high farms, you of I if a Finance. usually right equipment. they still look the points trade-in of staying at guess a are of are about or their And them used equipment, it's relatively

are And so of still the farmers right small. net delta is these relatively what financing now

And then incent of stay to competitive financing. other and when think use the versus very to Finance tries farmers interest in forms about you the alternative AGCO opportunities marketplace AGCO Finance the rates, to

those know are of the doing are ag, X% the small to ag of house I customers the of small small purchase. to there in where a we encourage the period some financing -- On for order side areas ag make time on

tractor team And with would what rate way so is him trying market, understanding need. cost the to the put or it her is, overall the assessing constantly the the in that an you, to farmer the of interest I of the combine each allows what attractive maybe and or they tell what get

and that think we're So constantly situation. the at -- monitoring looking I but

Mircea Dobre

better follow-up, Then than have I segment least personally has guessed. back mean side, performed, this America. considerably on to I margin Understood. would my South the at

as year level think expectations curious both half how about particularly And forward, our on sort we you about maybe here the margin. if going can but more of think you of importantly, revenue, also set the how you think about second

Damon Audia

Yes.

to the market when market, about South think our mid-cycle. we strongest that have is relative it I American think we the

look -- strong is to our maybe up outlook, the the of if X%. sort year, stay X for what balance that continue at you expect said we've to we market We of

we strong will So condition which market growth. drive very expect still topline

in market about for expectations. tell South the we're resiliency this the strong. America, I it our margins that The has price outperformed continued When quarter, to seeing even you, would again, we think be

the balance input in reasons. that material I increase. what for you We Now Europe. to second there's for to or expect product continuing tell One is shipped the X of the pieces large half the or would lot is decline the inflation, for really and here. the year in A horsepower cost back quarter tractors X know are our we do in from that's of

an elongated chain supply there's there. So

So see that in. coming we

also we And I'll would what for the that volume-orientated. of traditional call incentives more then there's dealer provide

Given of and that the couple quarters, the wane been expect haven't the traditional we to that last strength fall At the those markets dynamics. time, giving out. over in incentives we point dealer some do of into pricing would

primary at opened And day. see price, QX, alluded we not provide that up so strength more the than the advantage that if X if staying incentives But they good within of to. we on need in our in And effectively any like when the you a and comments, look at disciplined to order range said his opening for Eric taking factors. on the market now really looking X to in the the we're balance based book year, we filled done those XX% really outlook we've for to job XX% before, team has as

a richer portfolio great balance year. So the product in of to market driving down again, ultimately down we're very strong there, little fundamentals, the may come that, mix high margins. market of here all dynamics that sensitive bit that a the But and the

Operator

from next comes Seth Our question from Securities. Fargo Wells Weber

Seth Weber

bunch. start the Europe going in just it margins Europe down the strength structurally changed of surprised in was another fourth I else -- pretty percent that revenue from there Are is kind Or has One, pricing? now Europe is forward? was a of Europe kind think in range Europe. margin XX-ish -- flat something to by pretty we low-teen actually came about in that that should margin guess question. quarter I the strength even though

Damon Audia

Yes.

brands a quarter we of couple of Europe. really for strong, was more major top inflation. Fendt, significant great strong that, all a pricing things a or So had saw horsepower richer higher year-over-year, growth, your Again, On offsetting rich another for To mix, the lot Seth, for really this Valtra than mix. them. of strong very -- point, volume X and Massey, the growth

other the again, was production very double incremental Production helping in strong absorption, the some that of think was I and improved year-over-year. digits, that Europe thing up you're is, getting profitability. drive so

balanced on the we As we for see sort the And again, earlier, of Europe, the we're with here balance better year. the comments see mix, richer around seeing of I my continued world. the strong as said expect profitability a to margins portfolio

Seth Weber

flow cash flow year. from to Got be? big inventory it. still I And big in cash down think to year hitting I the It's your of sounded on I level your first drivers the free levers just for the and number going what maintained the to Because is a like quarter high. leap the confidence guide, full the target. then just free working guess it wrote pretty hit of like some what -- be are that the going are, to maybe

I going think you be inventory up. to said raws at your WIP is

the to to there for full you think get just So year. what's trying going through

Damon Audia

Yes.

We're out, again. are supply that up level I historical but still guess comments units relative not our creating to we're an more in we're chain dealing running Seth, inefficiencies my inefficiencies optimal with at were the factories. So we're getting some more that standards. The

So for that through us, hoping We're we the course the necessarily that it gets see eliminated don't year. better. being of

path our to targets of deliver inventory. We on still full year see a

we of ready get here spring that half back a the season. for we'll normal that work And build through First seasonal in the quarter selling as then is year.

We in all on second inventory flows. this had of line we delivering XXXX. our coming through that it that that to to confident than where we to quarter we improve. to year, strong But a going half we for of for XXX% had feel the balanced net as half go back of back XX% inventory. to of hopefully work So If the line see do were income cash look outlook We're we fourth year, adjusted where more the cash still be flow delivered last sight and that year. in at seasonality build, we we sight in very

Operator

Suisse. Jamie Cook from comes Credit question next Our from

Jamie Cook

quarter. nice a on Congrats

very a the XXXX, how deteriorate will into and just why think book higher about of have stickiness? you can you decrementals be order about the given you structurally event margin But obviously, Precision margins things in XXXX. that and self-help strong or talk visibility some Just Ag in

get chain to customers as how slowdown trends and customers with supply ability think you'd set more pace? do your you to do think for rush see a and think in second dealers you eases my still order? going to order Or then produce, dealers and comfortable And Do question, your order you are XXXX? up

Damon Audia

touch maybe margins, Maybe for on I'll and I'll order the touch then let XXXX. Eric trends on the

on With especially increased cycle. we like rates and that that, the fill strong cycle focus the continuing We about usually Europe, Jamie, think, is. our improving continued North somewhat margin. big of of see America our where South America, the every business if agnostic our somewhat high talked that I high single the us growing we've margin side, think said X parts on performance in digits, areas engines, regardless for year, you growth in about grows

to if again, that we continuing Ag, Precision anything, see grow.

look and outlook, today over reaffirm over a billion at -- XX%. We we you XX% the XXXX. That's If between that around CAGR were our target. $X up

a We invest XX-plus the course sort in cycle some where is. again, farmers repairs of And agnostic year. whole of to continuing grow, percent of the again, retrofit see of good that in or

we to both see improve mix. should both So continuing of richer that is

South the North we like about America think as general those and you new white markets. Fendt we right, share bring expansion, dealers to market the to share the necessarily America, opportunities then in space or on not still growth penetrate areas go economy, but see OE And just to

-- we to cycle to the though see if was X even those continuing weaken. so those on Fendt play opportunities And out

that and at X% we've help outpacing help that. increment do downside. look talked We X%. dampen talked about those, to Day. the us we our to market X about the should the or are engines decrementals Investor big That at growth the So December going Those on

down come line for inventory question the right, to about, talked were knowing cautious speed, very if that Hard we're is on levels. the value this slowly, our against being me to managing be. creation we given costs We're to where dealer answer our have markets

structure, our better see things in able think cost a fashion, you'll slow incrementals. we're to adjust if I production, down our So come adjust

to through takes possible, XXXX, of we're watching as and confidence downside. improving see the what on the variable tell we'd mid-cycle, that our the just that and level the I to expect see in at told make trough If shock what time a We as the system. at about with we last a react that sure Investor you, downside. seeing upside We're we've trying would where if to trough the forward we were on margin. stay XX% have equivalent you December you'll that you're up see work we but But we're hopefully, and the to couple may level by around And improved is margins, put were the it sort profitability year, is margin with will system quickly, if talked us that doing X% we the at that X%. to made took to And Day quarters of XXXX. fast that take of I

a higher So we closer in where lot to were was 'XX X%. which than

a So the on on you we will the good. declines. touch order cycle bit the But speed do the again, Eric, and depend want trends? which feel little at timing to

Eric Hansotia

say, happen can second the half, then second the of to And well Sure. what's economy. question, -- half with your you ag going

also with in coming world. is for grains, consumption oil demand know, around, up usage. enough so And GDP. is going up, not vegetable with there down for the X ending been being stocks You've doesn't you going years thinking move anything but moves row, a consumption fuel in for grain I'm with don't but -- It it wheat either is more the

any means. we by still used the is of demand we come your being sharply And if demand does, moderate, If the so with does expect it question, don't which heart undersupplied to down see dealers inventory.

I will a there shift. think, So be,

on Right order so our lot customer is of a retail-oriented. It's book it. got names highly now,

a norms a trend historical expect a bit orders the to a does more of year midterm dealer back mixed a normalize. ordering I take pattern. to more whole orders, orders customer cool with I in And we'll -- normal would market that to see bit, in when think the where there's dealer some

Operator

comes The next from Kristen Oppenheimer. from question Owen

Kristen Owen

on we Great. response. last up follow that could lot A

QX. So of million the we if can Ag $XXX maybe on unpacking start in revenue just Precision

I you the results quarter. mentioned Planting and in both think Precision Fuse

evenly You talked the little a year. quarter more about that throughout spread being bit or throughout the

was year improved that revenue? the than Precision just So full if there's the availability wondering or expected if maybe for change in Ag and any on that outlook higher you

Damon Audia

No.

Kristen. on probably million still the full year. $XXX I'd us confident we're Ag million think put of range $XXX Precision very revenue, in for the the I to

Year-over-year, if sales you Precision there that the a availability bit. of year really house quite side the this XX% was time remember, chip affecting was increase, the issues Ag last

that balance of But I we was big our confident change. as year. think, to That of for the million that year the so say business. still as you sort million at in year-over-year Precision I'd range feel improved through of with we sort the the look somewhere $XXX full very the went outlook, for the $XXX Ag

Eric Hansotia

years, demand companies to leveraging this we'll to the Planting, the those XXX,XXX the handle a and fall. that for be capacity, finishing be Precision all X.X only online very in orders, but we've constellation new distribution able growing. well center not that got us we've this global large we'll give more support summer, be they're as last go to over square We're up, putting for purchased efficiency logistics of new more that this center, And because will feet

Kristen Owen

super That's And for if ask helpful. unpack margin the performance just maybe to year. some could the of you then I Yes.

help throughout like either should lower from magnitude pre-COVID us is benefiting the inflation this to year versus of think saw that about and relative margin on the production material basis, line understand, just a we how price? performing Just maybe or throughput versus quarter levels we XXXX rate how the performance better

Greg Peterson

Right.

question back good to in as some because kind pre-COVID, as as overtime. But and still if complicated -- not manufacturers' question. many, we're a I were or not and run deal go good rescheduling current our we would still efficient say shortages and with So of but and that compare they're you XXXX having rates, as

leads So to that inefficiency.

normal I definitely -- we've actually news talked especially quarter. third and is about we're fact, we've Europe maintenance, good earlier, of much seasonal improved. The kind that in in in the that Eric so year-over-year, think And it so scheduled

a So expect positive we has of some that that the that's efficiency would to improved. improve sign real

supply chain of if But look you our I at the half would still we've in difficulty. continued the back there's -- year, production -- layered still say, there's schedule for some

if in there that to half. some news to So the the continue production Thanks. back upside is good be things improve, could

Operator

Revich The Sachs. next comes question from from Jerry Goldman

Jerry Revich

wondering I'm into here. the you margins could results talk heading just quarter. strong the on Congratulations second about if

margins significantly seasonality to X So XQ, and XQ folks is you normal the up your I points in be see deck. up production X tend to versus is

cadence So anything XQ this that year, out from that would keep seasonal versus playing normal XQ?

Damon Audia

again, -- Jerry, No, we QX, look that selling at selling is think stronger season I quarters. our don't I as or of one

improvement. sort see a to expect of would we the continuous So

margins, the caveat, as QX, that, Again, retail I look South at change the to stay. the that's going to QX from again, not alluded American we sequential incentives, would I optimistic to again, we're

sequentially, decline. But America, those likely of see think increase material some of margin cost pricing going do if are revenue, we'll more retail although discounts else South everything contraction would I to in potentially look at your some stronger see it that think So I follow you traditional you overall, as pattern.

Jerry Revich

where North stand? South just gears America. North ask new but America talk inventories to call talk South folks the in past, equipment you equipment in are I data you Fendt America. X different it, know position a in about quarters X to over Super. than and stand and where with you for you the I the shows you the about industry Can And can and rollout, shift inventory probably industry, folks new building

Eric Hansotia

would ag healthy Yes. sure. large and all ag. that would More is the our say in is inventory dealers growing we below The say their small They is is more would The for target. the of ag. in healthy inventory what small is target still love what

fundamentally not changed change all. so much the think And year. We that has the of during at it will course don't

selling a season. we're as going the into higher probably target Small ag maybe is it's than at up, or our and hair

this with small market off. tied it's But that. overall through work will ag cooling dealers the So

Operator

question from JPMorgan. comes Tami Zakaria The from next

Tami Zakaria

but wanted are by some, you the unit, in all XQ I in So already fourth this, expect I'm terms -- they I year? incomplete think you end on and on quickly delivery of now? to still some tag sorry red quarter, cleared you had if in at later the and touch do of Or answered

Damon Audia

Yes.

a Tami, though. significant right, end of reduction it, made the Not at call uncharacteristic we the units So you're year. the, semi-finished the in I'll

selling into season. quarter that the go getting we we As inventory build here, spring for first ready up

look this them the But the if red call is quarter or I absolute relative semi-finished I'd lot fourth where you tag year more So were were they last we would if be. is half I as red at expected. we units compare dealing a it tell I about where with to supply these that time, to chain of units -- you tag the disruptions, units, of number numbers up of think where

more level in So much of timing year. a appropriate the the it's given

number quarter getting second red is chain is are that perfect operational of with not the supply what yet, again, tag -- expect here. making and line into units we're performance going So we but in of better sort

Tami Zakaria

wanted the guidance raise. I clarify sales to Got then And it. just quickly,

it million. maintaining your probably realization half by that. goal And $XXX raised you then think you're of of FX X%. price I is

if so, So demand? is And supply is volume-driven? also your getting better? assume Or the chain you're million guide raise, fair seeing it to this $XXX entirely revenue that of more better-than-expected that's

Damon Audia

mix are a and you volume Yes. little tell on I I is would would that $XXX that Tami, spot but side. as bit a on. And seeing your more well, combination tell million more the then mix you numbers richer of we're

Operator

from comes Dillard last question Our from Bernstein. Chad

Charles Albert Dillard

the go your you the to within do expect understand I And at to like for you be So to opportunity want just do inventories. embed to dealer 'XX? guidance, wanted back end restocking? I the ag just where raise, of large any

Damon Audia

Yes.

are We call, what below on of ag changing the I think, here fiscal has balance large more still well as Chad, 'XX. inventories the see would the of I consider level. think don't we really normalized in Eric that alluded

XXXX, a embedding depending side these large on year. on again, levels are That the restocking inventory likely below large into in the not be ag sort still of commodity we're this level. But beyond, world, dealer of ag all the the So would normal prices. any the opportunity around cycle here

I And as you that well. see can think

of If of the the still on used are high. you used equipment The low, buyers are dealers' even are low. very number residual very at equipment, lots staying values look those residual

the strong. All the those early balance sort for staying new Farmers demand market of is indicators see of and are prices, or equipment good for crop relatively still here of indicators the the the income that driving year. good

Charles Albert Dillard

Got you it. hoping And was broaden overall I then America. could of helping out sales you replied incentives that kind about just AGCO. question South and to

for versus more price of year. the You an increase a is X% guys that how and, I list sales guess have price like increase? guess, much temporary of incentives I more

Damon Audia

vast that in of that year. and latter of place prices, put was Most Yes. in list part last the is of the majority

a lot that pricing. that think X%, about I if of is So carryover

itself And half of so the that to see back the when year. will in start lap you

out, have little bit planned market most is subject be conditions, of XXXX. list pricing do of That incremental pricing. the new in a years but will to model coming We that

all the is America plan South of if you're do and volume these we the in I about about to that, talk -- to the the almost positive saw that's list. most was that sees We not that for the upside hold what hearing in unexpected. back, think they're going X% incentives, and improvement me But think or is quarter. that team the ability

Operator

question-and-answer Eric remarks. I Hansotia conference to turn would back like our concludes for closing over session. This the any to

Eric Hansotia

just participation very and to you support for much like AGCO. saying I'd close Very your thank of by good.

are of trajectory was setting on a started XXXX. It us another record how we and We it's AGCO. quarter a record year to at proud many really ways, in deliver

farmer-first The our key continued to execution is of success our the strategy.

that margin-rich about Damon businesses our Precision Our and like focus service machine is Ag earlier. on our smart and business talked growing parts Fendt,

farmer-focused critical very XXXX, delivering last that are solutions the We've to these bigger in heavily them been in problems, few continue And investments we're farmer years. of many the of with even development making investing solving short paybacks.

to helping technology efforts lot more only putting Ag strongly not Precision more but to farming. sustainability, a capturing our really our farmers data, the engage of sustainable productive more using our make farming tools more more on We're and there, transition

Lastly, ag are fundamentals globally. today. markets, diets, investments. and large our strong Farm touched growing that used the factors stocks to farmers' the touched healthy a on and including on lot commodity We've changing supporting of markets supporting are very prices. lower healthy many levels We populations,

trends I that of couple earlier. new a There's mentioned

increase geopolitical the potentially for safety increasing only security. to yet factored supply-demand increasing more grain isn't given would in the more picture potentially the challenges. countries but talk is first food in This you're demand about tensions, their and of significant being hearing add existing stocks The to

ag, In could oilseed especially addition, impacts will the have demand on had corn. be the critical which production groups, like ethanol has similar industries as many biodiesel, for aviation, the consumption growing construction of and for

these us that confidence time. industry trends give All could for our some stay strong

about convinced still excited and us. we're XXXX of of AGCO We're front that So beyond. the best are days in

forward look a We our at have you on you, June technology XX Nashville. in Thank seeing and many of to great and event XX day.

Operator

Earnings Thank you has concluded. for nice AGCO Quarter XXXX day. Call. a the joining The Have First call

AGCO (AGCO) 2 May 232023 Q1 Earnings call transcript