AGCO (AGCO) 27 Jul 232023 Q2 Earnings call transcript

Good day, and welcome to the AGCO Second Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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. ahead. go Please

morning. for good those you of Thanks second Welcome quarter us AGCO's XXXX joining and to earnings call.

to website this dividends, respect delivery, exchange interest non-GAAP the and development expenditure presentation. production We rate capital financial posted morning crop impacts, GAAP measures presentation with expense, refer farm a also appendix flow disruption, this to presentation will of the morning are pricing, to earnings, reconciled our metrics. future plans, supply demand, product other used cash production, make at rates, levels, plans, to metrics rates The prices, sales, commodity We'll strategic chain engineering in and inventories, tax www.agcocorp.com. in income, inflation, margins, the slide that's forward-looking statements component

the you company's to that differ the time important in cause We refer results actual Commission We we and with to are These year the these factors that from may that Exchange events those wish differ file discuss statements. XXXX. XX, statements to time that actual Form our reports materially. materially predictions caution contained documents Securities from including the periodic December could ended you the for to and forward-looking XX-K

corporate commodity replay to any to, by available required of and include, but disclaim from later volatility, statements, are weather, changes A developments our These We resulting factors agricultural forward-looking will in demand. obligation not adverse prices this including disruption, be except the rate law. today. exchange those limited product on industry, in COVID-XX, update chain call as website supply

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

go please that, With ahead. Eric,

terms Farmer strategy expanding participation Thanks, Greg, to with in quarter appreciate by XXX morning, yielded on another our sales and points growth continued we and We operating reported morning. XX%, interest the First of record your basis your quarter margins sales, earnings. and The of operating execution almost today. AGCO call on XX%. This margin in good second adjusted

consecutive progress XX.X%, of This mid-cycle operating quarters making the structurally how and demonstrates we four makes margin operating is target. margins our transformed are which our we further XX% towards evidence with business have above

equipment. We into our are demand farmers our excellent Fendt sales are ag South access expand for Fendt parts. our and the industry's seeing North give tractors, to replacement growth precision technology-rich regions more we best distribution to targets American networks of our ahead as solutions and the

increased sales IDEAL year-to-date up AGCO's our ag Compared operations to made optimize American efforts and to June combine XX% also were significant precision there. margins with South improve XXXX, sales XX%. progress and We've our

with consecutive and the testament This products. quarter execution American is operating quarter marks team's South the which to a XX%, over margins fourth industry-leading

ag AGCO's customers' Our supporting is solutions extended interest in growing order boards. precision

expect We solid market continue. conditions to

outlook reflects improved XXXX this optimism. Our for financial

As operating at forecast. have of we the earnings sales, flow full margin, our year, and cash look the increased half free year second we

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

down While smaller levels. year-to-date XXXX retail targeted North machinery American of below increased June larger is sales at tractor still XXXX. has dealer versus versus inventory levels, or were industry X% equipment approximately through

as the inflation. Ukraine decreased through in Western sales input to as ongoing increased greater as partially demand. of sales in from demand negatively tractor and compared cost have economic be to offset June continued decline year-to-date Strong Smaller the continues XXX Europe retail levels horsepower well conditions interest overall Industry rates sales approximately slowed and the XXXX. higher units tractor Farmer in XXXX decline. than helped by to XXXX X% sentiment increased influenced war

continue to for first to six forecast equipment by income depletion year-end. compared Brazil the sales However, healthy through Europe subsidized XXXX. program demand affected of solid X% South was June months in XXXX. expected farm the retail XXXX tractor industry Western the throughout decreased America, the XX demand prior for loan retail to of fiscal are In negatively support to in Retail

June With new and XXXX industry expansion acreage, funding America, of South supportive levels primarily continued improved modest are XXXX in positive recently to announced, due economics, planted in up America and combine exchange by North farmer last the XX% The strong Western XX% chains. industry tractor to we was supply through very for anticipating still year-to-date in Europe rates growth in compared year. versus

of slightly commodity in America XXXX. South prices. remain We but recent underlying at supports in strong months demand the The Stocks-to-use higher industry about level to that Combines the a are the six supporting compared the ag than lows, profitable first declined XXXX bit levels in a remain they positive prior year. fundamentals

above recent there's in While they and farmers. for still the quarter volatility been related the uncertainty, averages historical over commodity are last to favorable weather prices

is By average. is will world U.S. the the age grow a the is our in clean demand current replacement. tractors due high of commodity and for our year diesel the will for grows, farmers approximately years vegetable of older This aged the X.X supportive average historical Equipment calculations, old, is horsepower than field for for which prices. As driver be that the demand oil-based strongly. demand a energy in

remains Across or fertilizer Input large and ag all significantly year. costs year. like targeted last peaks dealer from up at inventory is small dealer from equipment are down last regions, of fuel levels ag new their inventory below while

We expect be in levels modestly income XXXX XXXX. farm to down from record in

continues. very at it demand, XXXX supportive that industry production that believe and we in However, normal assuming remain be for crop good levels will

has challenges great chain over last continued years. to managing a few supply the do The job team

brokers inventory move cost products faster. acquire using it to This is longer to no are customers also a finished only on We but not allows the goods and to us semiconductors. savings,

our supply production volumes. the still affecting were a are from are year there that has chain While improved we where ago, components

time, is And which We global on shown approximately due remains the farmer XXXX. large Part last healthy. factory a versus XXXX back remain in XXXX. this of cyber in the and of for demand focus depressed event production farmer two experienced production our market the especially quarter inventories, our year XX% of this half by that versus production flat XXXX. production capacity these grew in managing this end encouraging news XXXX Because of are we to Slide with hurdles, The level and is in the we the volumes strong, quarter half and X. shifted production year relatively increase improving. planning to are AGCO's second phasing on two economics hours even is segment. At same

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

for into products quarter large our XXXX boards remains As end very the compared order up remain our ag across last of regions. all have double-digits order the XXXX, and with of to ag strong first small of tractors demand coverage In elevated and down double-digits farmer-focused June year. orders Europe, orders

flexibility. the accepting order America, to September advance pricing to of around coverage South more limit in give continue we our through In we where to XXXX plan ourselves have to begin one We orders quarter and North quarter tractors, orders farm fourth application as market demand In track to our into in in mid-August. XXXX strong. America, Brazil equipment big continues combines be orders extend well in for

limit We on-time remain small have for elected have around orders outlined of last and months we intake order coverage large as year's rates. delivery order below we both quarter, to improve levels As to our nine currently ag. last

Moving to X. Slide

our fit recent Over into and into insight years, tech stack. we our have the where acquisitions last several they been providing

of For those that our event were these cutting-edge to saw have at that accelerate recent many and AGCO. at XXXX technology present companies the you Kentucky, enable helped here advancements in

and the the demonstrated companies With execute opportunity we by on able and integrating them creative technologies to showcased while be AGCO's products been to how leveraging we expertise. go-to-market have and giving at entrepreneurial the we event, scale these

where precision sprayers which event Among testing. the next the industry-leading taking was the green some soil full with and areas And have its perfected technology into our on us leveraged planting acquired Fendt now with was we card, JCA they're a running And their beyond planters, XXXX. technology our to the display of in at starting ago, They year Combine. technology know-how the journey like and they autonomous Momentum to of are have stack. cornerstone the planting planter. highlights,

We to excited are market in this launch XXXX. product into the

business. our Fendt messages Slide technology and precision growing The and business highlighted three from all the our of growing Full-Line, our recent ag Global key recaps event. parts the X event growth levers, service our key

our Farm, to Kentucky number IDEAL demonstrated from a we the combine. of round planter baler to Fendt technology-rich a momentum a On an products

trucks service which We of of ways help XX our services Ag to utilizing want farmer brick-and-mortar telemetry before right Revolution a presence over performing machines mobile model problem. parts with the penetration the we mobile they are it do most our performing on through coming maintenance business model, meeting This where a blends grow service the dealership discuss will off and becomes further our by proactively farm. the us capable data

the to them farmer requiring instead store. parts the We bringing come and always of service dealer are to into

portfolio showcased also precision to ag We our sustainably much how of and our world. feed we're helping

net across their least at the helping also While XX% income crop by farm increase entire farmers cycle.

and sampling is the Our at entire lowering cost. got soil a revolutionizing Days it lab Radicle soil for the lot Agronomics chain attention how value new automated Tech of sampling farmer

the market. of when cutting having we’ll reiterated in also We dates target products be edge the

solutions, full autonomous the we tasks our how the autonomy. in to we of have demonstrated on many For automated path cab

and harvest XXXX We’ll We’ll operator the from ideal the autonomous grain any applications. fatigue tractor, less The with examples planter solutions the to crop industry, and pulling feature the supporting by resulting tillage XXXX. the full in yield. fully for that solutions on ideal the automates cleaner more cycle cycle of have across the improved demonstrated drive on tasks momentum autonomous crop than the retrofit the combine. with Headland cart follow a other combine by in We TeachIn

emissions, will demonstrated with that OEM targeted eXXX electric Symphony Vision, which reduce of we’re to we model For in a follow Precision Planting’s We’ll for XXXX. investing follow. retrofit XXXX be solution And equipment solution, for launching XXXX. taking clean available any by in electrified in and the we by up brand platforms the an tractors with to paths highlighted more starting emissions spraying,

our some of exploring paths and like highlighted other we’re hydrogen. biomethane also We

be just in When ag you exciting to the space. time more been all, it there’s look at a never

with AGCO. saw of driving are you attendance at you us, We for and that how the solutions improve want your interest are your on farmer’s hope thank to helping event we innovative profitability. were those our that you For that we in focused

with it over hand I’ll that Damon. And to

XXXX, which of of Net quarter. quarter sales Thank negatively second quarter in sales. translation. XXXX excluding morning, to will our experienced, were negative an over good in year-over-year currency contributed you, to influenced partially Slide the the overview Pricing was approximately the second performance start lower affected of quarter, compared in regional for that by were North second XX% quarter in with net was higher sales The Eric, operations. X the up the performance when the I particularly everyone. on and by XX% the and American of cyber-attack we European effect the sales strong

an high the in excluding pricing XX%, sales driven region, of quarter by in by of of as horsepower excluding and translation segment South By America, sales of most second sales along Argentina. in grew year-over-year, reported In pricing Brazil, actions. compared and sales well growth approximately translation net XX% favorable net Europe/Middle second effects approximately with partially increase strong increased driven combines offset in lower currency mid the quarter The by the as Higher and increase. improvement tractors currency negative favorable prior East the the planters drove was negative year. effect tractors to momentum the the sales continued sales of effects

from about increased in offset in to On pressures. a Net tractors, the currency XX% pricing back inflationary The Delayed unfavorable quarter, increased of the of sales than shipments primarily equipment, XXXX. North the along currency the more effects increased China. quarter, with XXXX our up of sales our late compared the net caught Asia-Pacific/Africa higher America quarter the European that constant second Australia impact in positive in approximately factories combines sales XX%. sales growth second and high segment cost resulted in of basis, and resulting in excluding in translation horsepower from application

translation. replacement quarter X% Finally, or the parts second year-over-year XX% currency the of for approximately million effects consolidated $XXX were up negative excluding over sales

Slide to Turning X.

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

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

of compared in By region, pricing XXXX, margins the increase improvement. of an to and improved East the $XXX and a contributed million basis second mix stronger Europe/Middle XXX products net the sales, healthy segment over approximately reported quarter operating points. income to Higher

improved favorable American mix on XXX from increase income the income period the approximately in XXXX. benefited increased production, in points. margins for pricing basis in and quarter, margins year-over-year, XXX operating by while North based year-over-year. Fendt Operating the XX% a $XX in same quarter basis significant America products growth higher and a exceeded over Operating point South million approximately positive net sales the

as the quarter higher production quarter, strength as strong has price in a very resulted The The benefit reflect continued second in last once almost favorable South income results sales continued Operating market the versus Brazil deliver improved in the American helping results and year. of improved well sales $XX mix. resiliency million again.

our and the primarily the in effects quarter, products cost. negative imported logistics segment, due declined higher of approximately in million a mix transactional operating to weaker sales, Finally, $XX Asia-Pacific/Africa of income

margin South to we pricing, execution more expansion last years strategy, the in discipline AGCO’s profile two be in regions across ahead. the margin our and our from American years the the With North balanced in globe and expect American

Slide Precision Ag XX summarizes business. our

our to portfolio, machinery mid-teens just effectively investments on as which percentage or to in targets highlighted are addressable believe With of ag is being in are precision XX% well around helping that while in low established, We focused it a spend. major sites impact profitability. their all we our set our the areas. us non-land traditional a improve before, global As the the our agricultural farm role simultaneously market are as we today expanding ag from total precision plays that achieving positions farmers spend, sustainability

recorded revenue, growth We we in strong $XXX target $XXX XXXX. the June back XX% Through of to which a precision from increase year-to-date, sales. previously our XXXX, of takes million to approximately continued communicated in $XXX us ag million million same period in the in anticipate half

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

free year-to-date cash XXXX XX flow XXXX. Slide for details our and

and sell first have as was XX% operating have flow or free cash the cyber-attack. less $XXX cash of as use free of conversion by for the of the flow quarter, in selling supply chains seasonal and activities, by cash back the is reminder, June than follows a used affected inventory income. XXXX represents in As adjusted flow cash divided year used are of cash The defined in spring the provided second year. half season by cash, expenditures over Through build capital the improved the down last the less year free net we year-to-date, million half

million offset earnings, higher reflects year-to-date. expenditures partially improvement in by capital year-over-year The increased almost $XXX

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

cash We conversion from to range to with from XXX% expect increase a outlook. of our financial to improved significant income, XX% free our adjusted XXXX flow net consistent continue

per quarterly regular outlook. capital increased share generation, as needs, opportunities, dividend cash to special of per a to will quarter well and flow We expenditures as payment returns with XX% our our the last based our investment shareholders dividend share. market which to of $X by cash include be Future on $X.XX XXXX acquisition variable that returns during remain a direct focused of investors on we and

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

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

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

In to industry expect to South sales X%. America, we up flat be still

the announced markets, of program is farm stimulate loan recently for subsidized increasing. XXXX. the half funding one for the the remains stronger to especially Brazil in equipment demand, expect This especially end second footprint the where in region smaller of We

We profitability, ag healthy large expect for we demand another drive equipment to farmer XXXX. year which of expected beyond

For grain outpace to Meanwhile, Western prices Europe, relatively the healthy generally replacement. to years to continue with constraints over to inflation. we input extending expect XXXX. chain supply flat Farm in be are the industry region are last equipment compared two continuing the fundamentals

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

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

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

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

productivity, Given driven to favorable as engineering well initiatives XX.X% our by half, our outlook XX.X%, our performance second partially of increased to for and and investments we cost sales, of first our pricing expect material as versus the inflationary half our operating outlook costs around offset net pressures. margins digital prior improve and improved by now factory in

volume forecasting. sales which this increase was affected million approximately sale of compared the we’ve Half to to Finance. and tied We rates AGCO been the half to expenses of that increase XXXX by incurred first were of is year-over-year, to $XX higher other receivables interest in expect now higher most XXXX. being We of

and the to is volatility lira related in the peso. half Argentinian increased other Turkish the The

XX% of to XXXX. tax to XX% continuing rate target We’re for effective

prior of We our to and be the Turning our target Slide additional and our earnings per in euro, $XX.XX CVT share now $XX.X precision on from shared $XX.XX. first increased and earnings XXXX enable ag expect include now capacity sales our be target net should $XXX in investments the we first highlighted further based our quarter XX. also raised to stronger to per targets sales growth. versus CapEx on approximately adjusted million range to in to We call. half what We’ve performance modestly billion our

should net with improved As I conversion consistent million long-term of additional should based cash free cash to mentioned income And million in of our target. on adjusted $XXX flow earlier, XXX% free to XX% range in an be deliver outlook, the our flow. $XX

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

Q&A Thanks, limit today, one Gary, to question we’re maximize ahead with Damon. and follow-up. To session yourselves to start Q&A. we’ll in one ask go that the participation you to and ready

session. begin The now question-and-answer Credit [Operator will We go ahead. with question first Suisse. the Jamie from Cook Instructions] Please is

on nice congratulations and quarter. Good Hi. morning a

first the half particular, performance think just nice I’m in I conservative to we’ve my margin of the half back the guidance the but up in raise first a question, a seems the obviously margin guidance, operating put given trying, the assumption quarter, nice what in year.

I basis implied margins from think are XXX the about first the points back half in down half.

retail why the trying deteriorate understand is understanding your drivers Thank the orders just the for And and you. are first what’s a versus second where then to for half approach conservatism going just question you dealer? XXXX. And visibility my or second margins into the there? XXXX? book some What’s So order that half strong the have of versus order would to of book there,

Sure.

I’ll board. half. margins I’ll half, with about order Eric start the maybe the Jamie, second So let Then talk first

we a alluded first I had you here we to. performance the again, very think strong think if about half, as

about the spend. really For half. the a There’s couple One change. engineering the that drivers is sequential influencing think second half, second I

$XXX as over we’ve this talking our are we year, So increasing million been year-over-year. about engineering spend

going If at increasing. to half you second you’re my that look first engineering half, versus see

second of will little the So a detractor that half. a be bit on

we we’re fundamentals underlying material material cost. are in the cost. seeing down, like still even Again, though seeing increase steel is come of Second sequential things

driver. So biggest the that would be second

little a versus of Third first I would say would half half. pricing bit be, second

about Lower to talk the there, some incentives the retail in South potentially incentives America again, as think the half we We we some first that delivery didn’t segment You’ve of some use have America. to Horsepower further heard in in us see about do South the spur there.

would are say, I three So those big the drivers.

second maybe little versus half, a well. of First as bit mix half

are for of as than second rich half planters a negative a half Brazilian product which first in American ramp be mix know, first us, you first lower that’s second American a the back the mix That’ll half. South As tractors, the horsepower margins half or half. to in is South and versus up low were the they big then sort which expectations

expect America, time effective be manage That’s board where is we been Jamie, pricing we’re one most to on to plan board, the retail tightly order think into the the XX% continue books We’ve to at got we volatility. books XX% order your – that orders. strong over well to order and really retail next we’ll today, year. question roll order continue remaining a and quantity, in but of we for we’re also able out order a both year, us and market already to loaded quarter managing those place to percent and next It’s handle South keep of we bank. continue order, percentage with retail – probably over strengthen high that’ll terms think that in are into to

you. appreciate Okay. color. I the Thank

question go is with Please next The ahead. from Tim Thein Citigroup.

which on counter the so were the this is guys but perfect can around sentiment have pickup from conveyed don’t in Eric, morning points is record to in of question of maybe And always what that you you’ve some concern some indicators Good track message –which there softened. and one the some raised Europe I their first some seeing. of inventory, predictability, morning. Maybe to of Hi. just a speak the you terms have

about in of it’s and different maybe feedback a speak Europe just maybe to a you’re the and and move thinking to speak I lot So you’re know can whole just as dealer trajectory. not hearing XXXX? a which how there’s what base? that countries from into But the uniform

have it more inflation some was a dynamics Okay. bad Europe, other for stoppage world there’s little the They But as XX% we up than markets, somewhere the most for prices ways to negative. commodities. a some the in wheat. going you the so Ukrainian just good on. for couple XX% have was expect substitution, that’s in the not range that going drive as because most farmers a that’s Because to Ukrainian, grain of it’s

You have across grains. substitution all

helps profitability Europe. that farmers, in especially for So the

although it’s So that the more towards – little concern sentiment this still a strong from indicator hot. us relatively, came down pretty neutral bit, a red little doesn’t trending towards it’s But moment. at

Europe. still coming most share We’re we’re growing in seeing our order across strong in and brands of rates

So industry And healthy. the grow healthy remain we to this pretty business we – grain share. continue restriction, think with and the is it’ll

fourth Global in for straight primary which year, stocks wheat are is the down crop the Europe.

So overall pushes that commodity’s up. just gives that sense further you really price restrictions an tight, as for

Yes.

up little historically of still you kind perspective, from quarterly has the here year plan and typically kind this historically, you quarter recently. a gotten just expect fourth that Okay. mixed laid the out? is have highest. Do a seasonality then bit And of earnings mechanically the way But

Yes.

the unfolds. I the about half think seasonality we’ll business, we how the again, see think, as of second Tim,

the at a mix fourth XX.X% forward fourth last the we If bit the that for very very we do strongest question, quarter, about rich look and to on has the supply as QX front quarters. reasons we Jamie half QX of a all a chain call. quarter saw given QX strong back we here think here I I be tend the portfolio and wise, had the and If – revenue margin think our the sort challenges with asked year been we product to that an exceptionally year. quarter the last articulated of wise have little the strong

of between quarters increasing not be our still it’ll as margin necessarily have think half two about the bit we’ll I quarter. top spend as one it for think little sure sure. the mix, strongest So I a of engineering But our second I’m

last aim But a at through far. running of last and and building surge much design, end be the the we’re course catch by doing design, so more that demand up year, we of were we this the to had all By year we year big year year. the through the to

building want catch a want be the supply and don’t we to end customer with kind chain years. spike to up So We of that that’s way the a year year doing this of this – job easing, have of than better other mode. demand, we’re at is to that

Thanks time. for the

question Blair. Maria next The De is with from go ahead. William Please Larry

two Thanks. had interrelated questions. I

Can up First, second on discern on of fill the IDEAL, building I between think you talked retail growth that’s more the of for years? little that’s it’s out materiality important and sort kind distribution, of a small of us needle And the a bit perspective sell-through? is understand put But a you’ve you’re base that? of of a how Because that’s help terms part in highlighted couple you. just bit in now obviously ongoing from Can the obviously there. moving channel strength Fendt there? small base if about. little think that much and Thank know you a in XX%. nice to going I sales or just Because which from I to fill channel versus

Yes.

ahead. Go

I market, Larry, it If year-over-year very sales. think, if us, for about think American was North of alluded to, in several strong it as units about hundred performance we I here. Fendt up think the you again,

a XXX% actually of percentage tell in I you America. is would about So that over I up we’re North retail. high think

So up well. our as right was XXX% retail around

concentration and as on you’re retail So you’re we a high seeing channel fill as a but that little bring new talking bit of seeing we’re about that dealers, well there. expansion

out it getting the mouth, farms. talked to to good of building momentum the as So we And word farmers. the

mouth on heard his of farmer, Day, that saw about Tech word you had one. that As Fendt as Field and he neighbor

Fendt there would of it’s it part point, to numbers. So tell grow recognition IDEAL and you into I out helping lower experience farmers. that your brand ultimate the really again, getting the

off building but here still good So IDEAL growth, of good the we percentage, are combine. smaller it we’re is that seeing numbers on

And behind just few a numbers to that. put

Fendt we we had it’s If In back XX%. something we now market we’re South essentially Fendt, you that to XX% the at had zero. – in to really XXXX with XX%. America when America, weren’t up North in started globalizing range, now and coverage go business, We just we the

grow the the But covered. where lot we’ve important. market good got both in We gotten got areas to about we’ve it’s to in a much point to still of where important cases. XX% dealers we’ve the of So want that

And at so inventory of a retail want channel said. it’s as those to we Damon lot fill we still lower isn’t right – dealers, I than have but going mean, through

you Okay. very Thank Very good much. color.

The next is go with from JPMorgan. Tammy question Please Zakaria ahead.

morning. Thank for you so taking Good my Hi. much questions.

So look flat get color ag? to hour to the some I hoping growth could it is If you outlook details. was small for is – What large production what expected back like to half. expected give on versus the more for

Yes.

on the in to the think the production. Tammy, again, Again, recover. cyber quarter, second had we’re really a half out. I in comments a forecasting increased year reminder, couple event the of or last as took flat We just year-over-year. production which reflecting second production And relatively our production we

If would European of part still some related ag be at ag, relatively as normal shutdowns, is ag running it, down on holiday. on the where demand. a periods, So capacity higher we I didn’t higher large the smaller that the we there. CBT the based year, again, coming the ag maintenance are business capacity, trying coming recover to preventative large large more is the Probably of production. do to these seeing strong. of seeing on implementing of some I But you production, are preventative look production the loss we you tell small you’re going summer maintenance versus capacity, This were flat off

Got it.

So hour half. in ag large be production positive should the back

Yes. And that somewhat is flat.

the large Got you small I ask again it half, like low what’s But Thank could it. seems is much. for pricing back is That’s the It small? ag? mid-single embedded. if half more, one what’s similar to helpful. so to versus back pricing And be large versus for for going for expectation the

it that break down way, really Yes, I Tammy. don’t – we don’t

for it’s and break to half is your really product ag. be out product think the right, second versus but going ag I we it assessment the large by don’t low-single-digits small in

Thank much. you fair. That’s so Okay.

Weber with next The is from go Fargo Securities. Please Seth Wells question ahead.

about sits? us? for of backlog. basis nine good just on kind better worse it guys, North you frame or number coverage that to the versus nine wanted year? even typically for Is it month that than just your Is comment that of average? any American historical? versus Thanks. like for average, I where Just relative months Hey last Can a framework ask about than that morning. Is

would Well, have. it’s it’s twice typical we be what interesting If COVID normally decide to say what COVID, anymore. is less, we it’s probably prior during to would it but

we’d and So we the on and backlog to we’re have them as that right to down able their we’re to demand. wait of products bringing thirst seeing get get lot waiting technology the would faster. they’re There’s not to is that’s have new to that farmers out what actually a still like now like be long for as for

have been. So as probably it’s twice like and still to historically we’d it be high as

the And as revenue then on Thanks. I X%, parts up assume parts pushing just on pricing Okay. you’re well.

I’m up parts volume understand volume is Was it or So up? – was is parts in down? to trying quarter the just

about the you’re much goods pricing isn’t Yes. different too Seth, or whether talking whole parts.

it typically much goods having we’re volume but stable Probably that we half. first the not the full was growth year, the extent parts on as the for digits X% double over mean, normal. not do have that’s are And in year-over-year, the to so cycle. whole more saying side, modest growth parts now. We’re I the

through for when times when typically is to you steadier. big or demand equipment Similarly, equipment general, same stay in parts for see equipment on in pull parts softens So or that more they’re stronger, stable. don’t demand tend

So it’s just of the kind the beast. of nature

Helpful.

appreciate you Okay. I guys, Thank it.

Good.

The Stephen go is ahead. next with from Volkmann Please Jefferies. question

gains are be year is the thoughts, a given some of for and Good just just question Great. going my market And the biofuels. curious room thoughts question, cycle answered, of And you maybe share try XXXX here? so about morning, where broad has the industry? I an right? tell? been on we guess, Eric. Or cycle the forward it to early up Most I’m I think you the if Can on and you’ve guess, precision is any updated sort too elephant everybody. have big I’ll in qualitative brush,

it of early just good but that We – are average too year. couple you. lot still a give tailwind a more very It's to can indicators tell, row, a to a but a be had see We've the years indicators. of couple in good

horsepower of is age high the that, a is the based area high We've off. the in historical look but and about The if years number U.S. is horsepower X.X If norm, U.S. still look Small high said The that's growing. ag over like more still of the on data. is you you cooling growing. X.X. our tractor on horsepower in average years

they productivity new if there's to ROI. still are that XX% bringing artificial of what good about rate or it's pool out products Not a new levels farmers a which the still on below still intelligence the new that features have give technology, refreshment. refresh, Used needs they features the mention bringing on technology in – and to enhancements it's them all didn't is XXXX. equipment equipment the So the that products at XXXX we're of were to those even

does kind So still look machinery be things those market you the have are at like this year, good say, when market that to a are they watching next we're look they of room and that

already starting all up especially wheat that, will grain blockade wheat, to it, see grains and impact moved the prices Ukraine, I've lot. we've we're Russian seen talked at on look you about go because XX% of indicators of up say a the the XX% of to When on about

the much growing crops potential Europe. although there's been coming and world, seeing an for We're get we've It of a heat month, is to that. portions North got waves not downside of on August record important America, the through has And going through that. good

a XXXX could So indicators still say year. be lots of very good that

Great.

then Okay. Thank question. maybe And a Damon you.

productivity productivity Or is again? talked we've But already? are been finally come some some improving. past supply think through normal seeing. chains the due to there about of we challenges the in I I still supply as we've kind sort guess chain to that get that's of And that volatility

Yes.

last that supply we are that that last mean, seen a by were a last look We're lot here. challenges better perspective, lot sort just and supply in to that a chain what in I year-over-year with about year. it the due we if of we've Again, chain experiencing now spike we quarter of alluded at still product. of semifinished I year. And our Steve, Eric fourth than semi-finished it end to year at and had put reduced you've XX% So ago. our QX inventory, But is the improvements. to that performance,

QX sales a as in in QX. said, get and in our QX, you cadence trying saw And – QX better to Eric of and

seeing So we're significant improvement.

We tell we with to would I year were last dealing yet. are per two. this time, be not want What with where you, are if we or dealing XX still suppliers we factory one

And tractors for to the the they so still when we on rework have things up factory, we flow the still have the disruption show get combines. the in in to

further productivity, continues normalize, further but So volume the there's chain still for supply output it's as getting to better. opportunity

guys. thank Great, you

Kristen from with go is ahead. Owen Oppenheimer. question Please next The

to about horsepower but tractor up you offset Thank the America. for back an an that in you I coming there, outlook like I good for the specifically small Hi, election call question. around mean there's previously the the some ask out of in South you taking the some incentives morning. region. of wanted headwinds, being did half specifically Argentina financing

any ground could you're the influence hearing sense year. half back deliveries what the in Just that of on the of

Yes.

in seeing of the for provide our of demand dealers. allowed they team – discounts quarters on really traditional we've the the to the or been us, I our think, Kristen, we've very here, alluded some that has more incentives couple pricing and hold been to with last as to strong that would we've

discounts As have up. just again, of see the of about the here, market to horsepower the changes start the year. would getting we conditions sent overall we the that to that to here the traditional of back back there, half come level optimistic the within they we at teams out think pick that sort financing more dealers tractors back expect plan the have small that with we're But look will

we here, we the the continues market. the at definitely back a But a It's It's bit probably into being still weaker more our half the good XXXX as look still more a offset Argentina strongest market perspective move overall, from little to bit South but a feel strength as little challenging be about than year. in American by we of margin Brazil. of market.

up coverage And in could then nine helpful. follow months That's horsepower. really the I higher if on

sort you're bit indication of much Just that normalized of you. a in of pricing any to if to level, is Thank book? able book? X% in than see How X%? that that order that little the better resuming Or order something

Yes.

are Kristen, XXXX of So most orders. those

about implies of the year. talked in for we've of pricing this year, back this So kind half of mid-single-digit that kind of pricing the year. level the And

we'll then the get new So that pricing, based next likely from going under we'll the some on and orders market conditions will on XXXX into have back-half order the for carryover that program. some year, add pricing incremental

so you much. thank Right,

from is Please Steven go question next UBS. Fisher with The ahead.

Thanks. Good morning.

on South Just America. follow-up to

the seen in because Brazil, second financing you pickup you quarter Now you seems clarified there activity the been ag impact uncertainty smaller was financing on ag than that in that the already And expected? have big still only the a situation like it piece more equipment has there? in

Right.

purchased roughly a the FINAME that heavy ran very tend they're January. of way of the of couple use that users towards equipment of goes through by that Steve, So farmers – is One so program. in smaller guys of – money pieces that farmers out program. those to geared program, different the there's small XX% And that

got definitely So we first and quarter into they quarter. in really second waited as here the

And seen up. pick we have

help locally things Brazil folks in Finance the Brazil in the process that our the with sales been AGCO process is administrative those because folks doing to smooth. not One is of have applications

things loans. the do of rapid fulfilling one of those facilitate we're to the is So trying

stuff. so And going as on some to that's speak. for as our said, improvement Damon we expectation, see the But is small

sales gross million the of about threshold bigger for is caps $X the about farmers. Now or the – out bigger farmers at stuff

that's through use it's the guys about go for still happen program bigger big. XX% program, farmers. the somewhat the that those FINAME the that or purchases So only But XX% of to

continue So guys in funding. using kind still of of have were And of still region, are and bank get lot use the to will you – the lot program. megafarms those the the if commercial guys into bigger a a those or Montegrosso used not then

So they've order. to continued

a we it's So about Brazil. bag mixed really as think

we half as on I to, are, And dilutive now which horsepower alluded it to, first the up with Part volume-wise, think, alluded margins. second Yes. was the versus the of Steve, first Greg we question, think what this available, of half margin expectations I South strength the lower pick Jamie's our little bit these American saw region, here a in given the is for should as funding tractors half.

much. you very thank Okay,

The next ahead. question from Jerry go Please Goldman is Sachs. with Revich

production lines capacity Clay Jerry. in on is then moving in ag on Precision how Hi, the should on I this product now sales for here the the curious target? Ag strong think about Thanks. just the forward was Congrats quarter. XXXX and we and precision towards

acquired will in be after it it we those and into consolidate XXX,XXX we right The is and can need fantastic, more Yes. way We're at other it's order feet. Planting. short-term, now. building into it It looks but companies we coming expect Precision to be the It's square in the – than it. to six done. into putting We've online grow going factory equipment huge got short a

that's we So The don't online terms and chips, capacity issue fall, capacity. significantly. years the couple that's in moderated internal had semiconductor of coming we've see this of our big and there constraints that last of in

for we ahead relative runway a ag, growth. So to good precision have

million be And Yes. of to range expect in $XXX million up us, just $XXX sales still in we year. like, to I for the this think,

year last $XXX were million we on our ag. precision So

million is $XXX Our million. $XXX goal to right now

XXXX. deliver So we feel on we're target by path $X well to billion that

sooner. even Or maybe

Great, thanks.

Dillard go from Please Chad Bernstein. Our today with comes question ahead. last

question for Hi, good guys I you morning, small just Thanks had a guys. me squeezing ag. in. for on

you done can what And then to the expect business the be represents? quantify you it just of whether talk and where year? on are by your First all, can of share destock you the about just you of end

sub between a business bit and new the small dairy and U.S. ag typically of bigger of small is the to compact that into different lot third globally, small in not we a and It's tied business. XX-horsepower closer back a our from much probably somewhat shifted is kind on say small of you a the is go is outside a and product if – farms. the ag say of the to But of away with of XX kind X but definition, our of tractors, focus are category But it's But very the not introductions – a little to technology, Chad, little tractors mix, the kind XX% in I'd lot of America, the So there's ag. we've distinct globally, a especially South has which America, livestock. would stuff a flexible, midsized of of there ag-related part over down XX%. the times lot globally, come years, number that time. number was but North

tractors. we Tim And inventory here. on what Chad, as I slowing produce question production of levels the we're those we inventory think the watching know levels what destocking, to up would closely asked around talked, world we inventory the is, optimal the to I very that are And level. One we've again, more consider had the the Two think, the doing here. your things dealer that we're question, for we are low-horsepower

of in you particular of buy down we tractors are I third-party And segment. from horsepower think low that lot make that dealer stock also manufacturers. these know just inventory that slowing a build up sure we to We sort don't

keep So to board to we adjust while level. We've optimal slowed inflow we inventory the that but don't those source them. here the order of as for actually produce to the helping at product them, continue try dealer

thinking spend? on your that year, That's should should basis? about of the go-forward level be second I like guess the like think be a expense rate medium-term. appropriate a helpful. over And on last of how we we question the just the about half engineering Should one good run

here. as annually we mean our the I expense we continue increasing on to Yes. engineering technology development increase focused are

year, As million. this be to I going said earlier we're $XXX up

thumb trending think little X% forward of going last We've a sales. years. I of been is rule of around than the couple lower that the bit

is to for But as that of of years been But thumb the fast trying everyone, we no top-tier rule as to but could. tell we've it's hard surprise, Given you I hire of ramping outer these X%. a would sort around engineers, lot get as we're up.

Great, thanks.

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

on another And you of really call I'll higher your your the confidence commitments a have and deliver quarter as or execution success that many First year. we're to We're the last support participation going close we're again to this It trajectory of deliver all very record was that started ourselves setting day we've for in we today. the a continued thank we've over a and XXXX higher Farmer very our of to on you two. AGCO. made record saying of and to ways, good by much strategy. our how is key year The proud

Fendt, years, few service on Our parts like the investing last smart our focus Damon like in Precision and margin-rich business. was heavily businesses Ag and about. just machine We've our been talking is growing

we precision more and farmers And see on a really see farm short of solutions development of these critical was live farming lot only farming, at and helping efforts technology those these the more investments putting XXXX, many being and with and more – sustainability, more are using the very were you solving more paybacks. bigger in We to data products demonstrated transition in on continue our sustainable that to action. ag to also And technology we're making capturing I glad strategy our many engage but able in to of strongly farming. not our there, event even of to productive overall problems, farmer-focused them tools the the make and

markets healthy Farm investments. large the fundamentals continue ag farmer be are supporting Lastly, to strong globally. and

and populations, on Over commodity levels, low healthy stock-to-use the diets, last growing prices more. few factors changing supporting quarters, our many we've markets, touched including

confidence a trends you us our All strong session of Farm forward to meeting many time. Thanks for today. Illinois. that seeing We industry August look for could Progress in in of again stay at good some give XX these Decatur, the

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

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