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Agco reports third quarter 2017 results

Net sales for the first nine months of 2017 were about $5.8 billion, an increase of about 8.7% compared to the same period in 2016.

Agco reported net sales of about $2 billion for the third quarter of 2017, an increase of about 12.8% compared to the third quarter of 2016.

Reported net income was $0.76 per share for the third quarter of 2017, and adjusted net income, excluding restructuring expenses, was $0.79 per share. These results compare to reported net income of $0.50 per share and adjusted net income, excluding restructuring expenses, of $0.51 per share for the third quarter of 2016. Excluding favorable currency translation impacts of approximately 2.7%, net sales in the third quarter of 2017 increased approximately 10.1% compared to the third quarter of 2016. 

Net sales for the first nine months of 2017 were $5.8 billion, an increase of 8.7% compared to the same period in 2016. Excluding unfavorable currency translation impacts of approximately 0.1%, net sales for the first nine months of 2017 increased approximately 8.8% compared to the same period in 2016.

For the first nine months of 2017, reported net income was $1.77 per share and adjusted net income, excluding restructuring expenses and a non-cash expense related to waived stock compensation, was $1.91 per share. These results compare to reported net income of $1.20 per share and adjusted net income, excluding restructuring expenses and a non-cash deferred income tax adjustment, of $1.63 per share for the first nine months of 2016. 

“Agco delivered solid sales and earnings performance in the third quarter, while continuing to make strategic investments in new technologies, productivity enhancements and new market development,” stated Martin Richenhagen, Agco’s Chairman, President and Chief Executive Officer. “We produced sales growth and operating margin improvement across all regions while market demand remained at low levels. Long-term growth continues to be a key focus, and we are working to expand our product offerings through internal product development efforts and through bolt-on acquisitions. We recently completed two acquisitions that broaden our product portfolio. In September, we acquired Precision Planting, a leader in innovative planting technology, and in October, we completed the purchase of the forage division of the Lely Group, which significantly enhances our hay and forage product line in Europe.” 

Global outlook

“Global crop production is expected to be strong again in 2017, keeping commodity prices low and pressuring farm income,” continued Richenhagen. “Growing global demand for grain is being satisfied by peak production, resulting from improving farm technology and exceptional growing conditions. We are seeing stabilization in global industry demand at lower levels following three years of strong declines. In the fourth year of weaker demand in North America, the farm equipment fleet has begun to age, and industry retail sales have been mixed in the first nine months of 2017. Small tractors are up compared to last year, while sales in the row crop segment remain weak. Full-year industry sales in North America are expected to be down compared to 2016. Industry retail sales in Western Europe stabilized in the first nine months of 2017, with impacts of lower commodity prices on the arable farming segment offset by improved economics for dairy producers. Sales declined most significantly in France from high levels in the first half of 2016, which were stimulated by tax incentives. Growth in Italy, the United Kingdom and Spain offset most of the decline in the French market. For the full year of 2017, demand in Western Europe is expected to be relatively flat compared to 2016. Industry retail sales in South America increased during the first nine months of 2017 as demand in Brazil grew strongly from depressed first-half levels experienced last year. Industry sales in Brazil slowed in the third quarter however, as ongoing macroeconomic weakness continued to hurt farmer confidence. Industry demand in Argentina remained robust as more supportive government policies continued to stimulate growth. Full year 2017 industry demand in South America is expected to be up, but fourth quarter industry demand in Brazil is expected to remain challenged. Longer term, we are optimistic about the fundamentals supporting commodity prices and farm income as well as healthy growth in our industry.”

Regional Results

  • North America 

North American net sales decreased 1% in the first nine months of 2017 compared to the same period of 2016, excluding the negative impact of currency translation. Dealer inventory reduction efforts and softer industry demand contributed to lower sales. Sales declines were most significant in hay tools, GSI equipment and sprayers. These declines were mostly offset by increased sales of mid-range and high horsepower tractors. Income from operations for the first nine months of 2017 improved approximately $8.7 million compared to the same period in 2016. The benefit of improved factory productivity and expense reduction efforts were partially offset by lower sales and production volumes. 

  • South America

Net sales in Agco’s South America region increased 15.6% in the first nine months of 2017 compared to the first nine months of 2016, excluding the impact of favorable currency translation. Sales increases in Argentina and Brazil produced most of the growth. Income from operations improved approximately $7.5 million for the first nine months of 2017 compared to the same period in 2016, as the benefit of higher sales and production volumes was mostly offset by material cost inflation and the costs associated with transitioning to the new products with tier 3 emission technology.

  • Europe/Middle East

Agco’s EME net sales increased 9.4% in the first nine months of 2017 compared to the same period in 2016, excluding unfavorable currency translation impacts. Acquisitions benefited sales by approximately 3% during the first nine months compared to the same period last year. Higher sales in Germany, the United Kingdom and Eastern Europe were partially offset by sales declines in France. Income from operations improved approximately $49.2 million for the first nine months of 2017, compared to the same period in 2016, due to the benefit of higher sales and margin improvement.

  • Asia/Pacific/Africa

Net sales in Agco’s Asia/Pacific/Africa region, excluding the positive impact of currency translation, increased 27.5% in the first nine months of 2017 compared to the same period in 2016 due primarily to increased sales in China and Australia. Acquisitions benefited sales by approximately 4% during the first nine months of 2017 compared to the same period last year. Income from operations improved approximately $14.8 million in the first nine months of 2017, compared to the same period in 2016, due to higher sales and production levels.

Outlook

Agco’s net sales for 2017 are expected to reach $8.2 billion reflecting improved sales volumes, positive pricing as well as acquisition and foreign exchange impacts. Gross and operating margins are expected to improve from 2016 levels due to higher sales along with the benefits resulting from the company’s cost reduction initiatives. Based on these assumptions, 2017 earnings per share are targeted at approximately $2.86 on a reported basis, or approximately $3.00 on an adjusted basis, which excludes restructuring expenses and the non-cash expense related to waived stock compensation. 

Source: Agco

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