AGCO (AGCO) 30 Jul 242024 Q2 Earnings call transcript

Good day, and welcome to the AGCO Second Quarter 2024 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.

Thanks, and good morning. you for of XXXX Second those Call. Earnings to joining AGCO's us Quarter Welcome refer slide to on we'll morning, This a at our presentation www.agcocorp.com. website posted that's GAAP slide The presentation. are in measures the that non-GAAP reconciled of used to measures the in appendix presentation make this morning as initiatives well strategic and about forward-looking statements also financial impacts. our their as We'll plans those of concerning We'll those plans of benefits. plans, and the and discuss costs timing demand, timing product development and plans benefits of our those expenditure expectations and capital and

Future levels, income as other revenue, engineering will also well as and production, and crop farm operating flow, be production margins, cash rates, metrics. discussed levels, income, tax price expense, financial earnings,

sale our to expectation Protein respect Our Grain of with business the & discussed. will be

subject results risks the suggested to cause those from are to materially those could actual statements. by that of All differ these

improved in by supply farming manner expected adverse the budget and technology with business These benefits, difficulties our in and by in customer interruptions war adverse in weather, prices, in financial and of by businesses; include, Ukraine; on new of in changes rate the developments those integrating Trimble's produces approvals pricing introduction and replacement in disruption, to premium modernization the and the business; time, obtaining and foreign that the improved the by of exchange them; smart in transactions, & develop customers need reactions at closing results; PTx in joint and integrating the expected the products expansion the solutions competitors that in financial competitors or OEM new PTx including the Trimble of performance agricultural changes purchases the markets. parts limited results, are the and required demand, inflation, on not conditions, supply Trimble completing the sales; rate the chain in possible and failure governmental with our the commodity manner Grain PTx of difficulties largest including connection but product the Protein reduces to and venture of acquired expected including within price reductions a and to products, and equipment plans which to, fulfill a industry, produces sale in and time products financial

subsequent results AGCO statements. Further concerning December these could for suggested ended any included disclaims these by other filings. including AGCO's XX-K and as year Form Actual and obligation SEC, risks as materially XX-Q from differ to statements any with law. filings the in Form those in the update required is its XXXX, XX, information except forward-looking

replay corporate We call of website. available will this make on a our

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

Thanks, Greg, and morning. good

Before that doing about for I to I at the things to and wanted go things into feeling industry to moment the I'm AGCO, the quarterly happening success. a on how we details and reflect AGCO the position are take exciting

spend big reduce year. transitional that equipment. a industry where correction there's farmers year slows prior in As always rapidly be big on XXXX cycle known as their to going downturns, the was We've new

for are stock-to-use and and the a the influenced duration of trough The commodity industry ramping weather, to prices, year, ratios, around time make which downturn will decline a like After tends little things transitional by float before up. many demand levels of different. back severity every period the

and to are working dynamics challenges we position for AGCO, aggressively understand address the ourselves and the success. For industry

production year and dealer XXXX. faster are in inventory that We levels are the rapidly past year hopes in more rightsize cutting production in demand than retail this balanced this to

workforce our the made we several been the costs further addressing the have quarters. In quarter, restructure demand. second weakening to actively decision due market for We to

our still deliver lower-cost are ability XXXX sustainable come these operating We alternatives. throughout margins savings and Much in to differently higher also operating cycle. of other our challenged further think improve to to the and technologies beyond, with teams helping to

are farmer-focused company on most down better in role our helping being be we serve to how farmer With addition, we core, the our In want farmers the they are doubling continued industry. at served.

company their our profitability and profitable. With and we mindset, more this helping fleet a mindset that backdrop. and to retrofit addition are In more mixed farmer-focused, resilient the are productivity industry unique we despite farmers different focus, more is improve

are are correction levels cover will the big levels. well in Damon planning and even operating well we where best below at these delivering financials we dropping mid-cycle, and historical the of margins on outlook our year still the in above industry a Now history later, but one

a into Slide let's as approximately quarter, where can X, were see jump you AGCO's that the With that XX%. backdrop, second down sales

softer Our our demand both cuts. results reflect industry-wide and from the impacts resulting production

better align our environment. market Our of the cost with identify team all to is analyzing operations and the aspects savings current business

share the balancing and are well continue commitment to for customer support need with our We as ambitions. to reduction desire growth market cost farmer-focused innovation our as our

an margin We of a this AGCO's we Simultaneously, Divesting business Last higher allows divestiture ag point businesses. technology sharpen and portfolio raise and us free cycle cash will PTx higher-margin business through of the our joint in business. believe for and Protein growth us by divest machinery our our products. this it accelerated will Protein historically the agricultural to & precision flow-generating better definitive as this inflection for Grain award-winning to announced profitability been The on supports long-term below-average a focus Trimble sale position agreement strategic transformation, the streamline business. week, & AGCO. the and our venture recently Grain is has

take Protein we the of the job on the moment to teams their thank Grain commitments customers around have world serving done delivering to through & want while the who do and staying a the strategic I on work excellent focused business. an review

XX.X% the factors leverage our in was Consolidated Now on margins. margin reduced our second an basis. cuts, operating production to operating sales, adjusted getting major were back Lower results. and quarter

most the XXXX second Due of in with than second remains demand, second In cuts America quarter XX% saw of South to industry of more the XXXX. second our continues as XXXX, X.X% we of operating falling contract. the by production quarter XX% approximately quarter region, to around region challenged that in to margins of compared the for the quarter in we planned the additional cut to compared XXXX. balance

fundamentals despite We confident that commodity downturn long-term the positive remain agricultural markets. in remain

for technology, while and investment enhanced helping demand Farmer-First Our our strategy products optimism is to farming world. sustainably feed capabilities long-term for in solutions, smart support to the driving our continued premium digital the

industry larger XXXX. of than for first sales were farm of compared half second the most markets. equipment all of sales retail of the of the Western lower retail in sales more retail decreased the retail in first of Global region X smaller for categories. months X industry the unit during industry details North X Europe, Slide equipment first to X first the XXXX X% key in were by X% AGCO's American industry sales significant XXXX. of In declines months Sales equipment months XXXX. quarter dropped

continuing across compared The of during decreased XXXX. retail months Strong were Brazil, magnified the American government-subsidized half a markets. shortfalls consistent while loan the Cerrado Argentina, of be to Brazil was first XXXX weakening American of by South in X Rio harvest challenging the tractor South negatively in the the period and affected smaller to floods Grande and program demand first the by funding XX% same do sales region. declines also in industry Sul

of all months through XXXX. to tractors, significantly the first down X in Similar the regions was combine industry

remain conditions the Stocks-to-use positive market still the fundamentals, Although recent strong continue the the in than but soften grain. supporting the downturn years, levels. about prior underlying ag drive are the over increase to for demand. long-term additional below growth are conditions industry few lows need will from levels class we Population extremely middle last higher and

fuel profitability. dampen the for diesel has will are input need of As our vegetable oil-based solutions for driving are fertilizer strongly, and effect aviation demand commodity on prices. the prices such as their commodity in demand helped and support like farmers from costs peaks farmers' Also, having for which the sustainable XXXX, grows, down grow that lower will clean further fuel energy

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

quarter regions in as us South in with the and biggest we being inventory Asia company inventory decreased to for by second all rightsize key to this reductions The reductions XX%. market America and Significant production the made soften, levels were unit Pacific. management priority approximately a year. in the continues Our remains pushed

share our targeted to in a XXXX cuts growth reduction XXXX prior year demand retail XX% we versus on and significant we a more align which As assumptions, XX% for all forecasts, through XXXX dealer outlook, is regions targeting a expect to inventory. Currently, reductions XXXX. market basis, market are than given our current full XXXX, to production result, lower to expecting further with production

board order in is our relatively consistent good and with general, quarter. position In last

of part we between to that X dealer will tractors However, on to year. there X inventory have are need of in gains of of with balance dealer and inventories due lower approximately Europe, share months bit rightsizing supply Dealer the X in In the inventories orders. strong pockets on Massey focus Valtra line higher than of are in to average months and are levels. targeted our a Fendt. the Fendt Ferguson bit a

our advance approximately continue have all aggressive pressures. to across we weaken. due cuts, X months of to inventory America, our products South we still in limit have XXXX, where quarter coverage inflationary to September continue through orders In conditions Despite the we order production X industry to as dealer

year we product. the approximately is to the of coverage reduce while further equipment goal Our bigger order is higher. it months rural America, lifestyle X North currently depending In equipment have order has on coverage, lowest Smaller end. by

and increased X conditions month supply. is approximately last by just X weakened further to quarter as dealer inventory compared industry of now over months Our

America depending product. to for range inventory X targets North dealer months, from on X Our the

with We targeted execution demand on with dealer continue in coupled range. market retail focus bring inventories retail line to underproducing will our to share

Slide to growth the to X% annually. you'll X our high-margin levers X, outgrowing industry where X% and by mid-cycle XX% at operating Moving our aimed to improving margins see

of global line brand; globalization market Fendt Ag business parts reiterate, of growth AGCO and share accelerating Now to product X these increasing genuine our our business. on are: focusing our and and Precision levers the growing the full parts; rollout

we'll held recently Ag XXXX We today. and Kansas. business Westminster, Salina, Colorado near Days is Precision where in focus our Our Technology

were display attendance. on Ag stack and full Our products to technology in those Precision growing

PTx some and business the and the side solutions we recaps X home solutions aftermarket OEM of mixed our our retrofit messages Westminster, business. strategy from differentiated of our to of the for discussed key PTx In how side the of venture, fleet. Slide go-to-market committed event AGCO that is and joint farmer-focused our Trimble for the

Our aftermarket and of almost any new capabilities machines and retrofit existing to adding dealers focus make on vintage.

AGCO's to Valtra Our PTx technology Massey to over provide services Ferguson, and OEMs addition and from solutions the in Fendt, XXX OEM factory brands.

is profitability, PTx for act retrofit take recommending OEM AGCO cases. as solutions with expensive and major sales the equipment. pain This existing the dealers primarily separate as traditional in focused points, to with world address leveraging on-farm only in products farmers, We retrofit whose the incremental approach in a productivity consultants on best tend can a the unique more channel. improve and contrast be a independent their farmer's selling to These new, are dealer, for specific focus piece farmer use dealer to of to would selling is completely machines.

partner farming of has farmer-focused company trusted Because to and industry are the in satisfaction. the AGCO it types most ensuring farmers' smart allows critical be for the dealers both farmer most solutions. to us industry-leading Now both,

As us the farm. the help of to our I trucks the presence it becomes our This will performing This coming most the mobile comments, machines with on we're problem. farmer core the and mobile performing my parts capable data also maintenance bringing by services touched a we initiative. blends further off our how dealer penetration revolutionary proactively right in model farmer utilizing through industry brick-and-mortar in grow discussed on approach before opening telemetry

people's customer shift we to the like to experience and by improve be that AGCO believe to lives, taking of where Just business help want many strongly e-commerce the the daily them farm will served. FarmerCore

than optimize that demonstrations forward our leap from a technology illustrated venture. taken showed product farmer PTx testing saw across the is All agronomic Planting's better the with water make management, products help soil Precision solutions the AGCO big stack has how We the Lastly, PTx advanced exchange Trimble and we profitable. carbon productive and farms how to portfolio guidance, our like platform, solution. able joint more new radical with ever these connected

for OEM milestones Slide Also covers AGCO launch solutions solutions solution X cycle retrofit retrofit having key terms the solutions. Targeted of XXXX. autonomous autonomous in We by XXXX. for in our in cart across launching some XXXX with come. of an parts be has cycle all to grain autonomy crop applications committed will the of basis we spring smart on the XXXX, crop anticipate with in a later will more to

cloud our showed insights operations. farmers advancements allowing also We and in control actionable more over data connectivity and their management,

the highlighted We to models farm Our the in available maximize Furthermore, at their Precision the solutions office across PTx participate aim our customers Exchange. agnostic requires crop ag Connected allow platform data to farm and for mixed machinery. farmers Ag allow manage, program data. will of in to and investments technology. collect, agronomic deliver Carbon Utilizing and benefits level sustainability data numerous any AGCO's make across most almost to the like the technology fleets. data management makes and stack cycle tech machine

now grain partner utilization of output autonomous farmers their of grain next the An crop helps the cart which to enables combine. X harvested highlighted the yields. We substantial with X ensure combine cart, maximum autonomous to grain preserving carts earlier, and our get evolution

Additionally, flexible our it the fleet in brands by can highlighting and X equipment, ease deployment mindset up mixed across installed was farmer-focused enable grain the a cart. easily kit of from adaptability different The driver autonomy shown freeing retrofit the labor of brands. of the of

tillage Autonomous locations across enhances diverse tillage ideal increased next planting efficiency operational crop of same the sensors cycle be for farmers. and can retrofit throughput, extending labor more more of hours Autonomous operational it we we crop flexible phases phase the AGCO's that and windows, for across major are benefit less the is sizes productivity by farm autonomy boosting crop used of the timely and as ensuring within tackling. cycle, hardware through and enable making kit A is management. convenient costly

also accuracy. timing farmers' compaction features profitability. accurate fertilizer more system pockets a dry on Our usage and seed Momentum's Momentum's options solve a has Ag, automated Momentum an fertilizer and impact is agronomic placement leading shown to flexibility offer fertilizer opportunity planter. placements, planter offers for and and Precision the and were fertilizer big in on farmers. also farmers dollars problems of Controlling

the with This our Trimble WeedSeeker only already needed. showed targeted offers sensors PTx solutions. spray and in market retrofit a applies solution weeds which we where proven is Lastly, herbicide infrared today, X. detects

and is detect identify where our also Symphony Precision spray of only showed allows fields We utilizes scouting to Planting and Vision farmers' which highest. system, to weeds pressure the cameras weed

be There's a in the more space. never been ag to time exciting

With of annual these our other remain several technologies, we sales and to Ag XXXX. committed Precision goal in achieving $X by billion

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

it our not piqued did that For we I'll those that, we Damon. who hope With and of you hand attend your you'll in attend, interest over events. future to

Spain other performance second was regional favorable positive of the sales the sales down lower X% and Net offset the other Thank Germany, of offset European and the to translation impact impact in down in nearly the Increased compared in XX% by the horsepower reported of of East acquisitions. an especially you, translation the France, Growth the sales approximately Slide products, currency period sales of Fendt By roughly acquisitions. region, of was unfavorable quarter for in across of products. Europe/Middle declines provides quarter quarter effect everyone. and excluding second impact XXXX, same compared tractors, by sales high excluding were all net Eric, and to markets. XXXX morning, when X overview good of currency segment negative quarter. the second

the unfavorable impact translation XX% drove the other markets. demand and accounted the decline. Lower of and in currency approximately softer offset was decrease. quarter, favorable acquisitions, Argentina of sales and The in of excluding in higher combines decreased South most sales impact of modestly and of sales Brazil decrease net of the industry American sales most American sales, significantly tractors South slightly by for underproduction retail substantial

translation Net impact the favorable acquisitions. North quarter, unfavorable excluding XX% and currency impact in of in region of approximately sales American decreased the

sales sales high The and in Softer all to declines occurred horsepower lower midrange sales. tractor demand the end industry significant lower categories. most market and contributed

second end the impacts currency and to demand favorable translation XX%, and lower in impacts due the quarter Asia/Pacific/Africa sales negative sales Australia market of acquisitions Net decline. of in decreased Lower volumes. and excluding weaker China production drove most in the

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

Turning to Slide XX.

margins second second strong affected significant reflective declined discounts. industry same quarter driven decline Europe/Middle versus East by sales compared segment the XX along mainly under increasingly production, the the by The in decreased weak in quarter from the basis to points adjusted product conditions region, period XXX related the primarily The favorable was of Fendt just improvement points XXXX. quarter XXXX. very tractors. were by in basis By while operating of higher of income $X million, high-horsepower operations operating quarter the Margins margin mix a in improved the to margin of with

American lower increased income a as were volumes $XX as margins America year. well and for increased decrease of $XXX the and margins lower by in and result The decreased million of from versus year-over-year, operations QX approximately lower Operating in X.X%. operating expenses. from was warranty well significantly North XXXX decreased South year-over-year. prior sales primarily as discounts QX decrease as production production million sales The resulted approximately

of in from due operations and sales to Finally, in decreased Asia/Pacific/Africa segment, production our lower volumes. million income XXXX $X.X by QX

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

provided of or lower conversion equipment. is million We XX% same free income. improved less approximately $XXX capital net by represents June XXXX, As and And expenditures. free and cash of as period purchases cash property, primarily flow activities XXXX, defined of through capital a operating flow cash adjusted related plant divided in to cash than of free less cash used reminder, used flow the working by

year, be XXX% For of continue the to we of half net flow to range XX% long-term to expect our the of our in upper full income. cash free targeted adjusted

also We with rewarding returns. remain investors focused direct on

with dividend the second is fourth quarterly closing per special of in a of special we the with paying we This focused to also associated addition deploying paid of the per in $X.XX dividend transformed consecutive sign and venture, year for debt most PTx special variable another remain the now us our long-term variable dividend. the on confidence share $X.XX how of Even have quarter. dividend effective increased In regular share, the the is our joint variable the the Trimble capital our ways shareholders. in of profitability

highlights major XX market our X our XXXX regions. Slide forecast for

several high segment segment of slowing market years For after America, XXXX, to lower expect fueled by although has the years. decline farm crop decrease horsepower levels now to high expected demand equipment the expected XX% the be The XX% compared to row was we weaken, to strong in compared North is rate and income. continued XXXX. of is in decrease levels to The of is growth prior that tractor also smaller to to

to For down months trough hovering be have the near to industry Western input XX% now reduced costs. XXXX. to to settlement a compared other higher for and and we few due to prices levels Farmer indices commodity Europe, continue expect X% been

compared for continue sales and are postpone region, in onto greater previous The higher and Rio approximately financing industry also planters increasing now have guidance a estimate subsidized combines do tractors program to Sul in XX% the We XXX-horsepower weakness had reduction. more the sentiment. to and America for our to expect Flooding purchases. the farmers to deteriorate holding we than caused down industry our XXXX Farmers in of to South their XX% reflect in are updating weighed prices, anticipated. longer Grande awaiting on grain shortfalls than XX% even

in South this of may markets, long-term is Although where footprint the affect America short farm increasing. attractive the in one Brazil especially demand term, the more end remains

volatile. dampen XXXX, While farm levels in Precision business to our to brand-agnostic making the help margins less cycle, from our AGCO's income retrofit and is should decline strong Ag elevated expected parts approach

Trimble share highlights outlook, also Grain which weakening includes sales the Protein venture. XX of XXXX includes key Despite joint conditions, few is Slide underlying the the assumptions gains. our results inclusive of market PTx a business and & plan the our still market consolidated

expected In full addition, be now to effectively year-on-year. pricing year is X%

stabilized expect pricing still level and to pricing we savings will As on of a our pursue raw material be us actions, cost approximately net we further costs this allow breakeven have basis.

a weakening have primarily including due flat X% compared to be We Engineering XXXX, a Trimble. to year-over-year expect currency expenses in translation PTx the XXXX effect are to of to expected euro. adverse

have Excluding investments, would some look PTx Trimble, industry given moderate engineering softening been down we expense outlook. X% around as the to

from margins XXXX. With we to our our near to would around declining record the industry in expect in down X% of expectations XX% of in to approximately XX% XXXX, mid-cycle adjusted come XXXX in XXX% around XX% XXXX from operating

Given announcements, believe several have under-absorption additional the the near the assuming margin of enhancements operating production, current restructuring of be cut patterns, forecast to demonstrate downturn we X% operating we trough adjusted the years. and significant which margin with our savings over reflected our our should traditional rate last business as improvements made significant margin, the levels the Grain with associated we the & with business coupled Protein pending associated the run in our financials sale

account the Meeting our We'll & performance of divestiture operating provide our Grain PTx December announced at an of updated XXXX target to and long-term margin business. mid-cycle Analyst Trimble for Protein

XXXX, now percentage to Our which for than guidance. be effective of higher our roughly for is a increase tax tax income is due to higher rate reason in is higher approximately The proportion jurisdictions. XX% previous points the anticipated X.X

June, along divest On to Slide the XX, few Protein in agreement we the recently details of terms with restructuring signed Grain our we the of a & highlight details late announced in plan business.

enhance by centers leveraging reduce continued demand The better technology industry structural and structurally announced global plan operations. excellence. our long-term agriculture Our workforce, costs, global change of in streamline efforts response AGCO's to in and the weakening efficiencies was is of program to and restructuring objective to the

a plan, of the approximately salaried X% planned reduction announced workforce. of our part of we As

actions, $XXX This expenses, onetime be million restructuring to will the second of result first XXXX with XXXX to in a we $XX anticipated related in recorded incur between and $XXX the million half the is quarter. in million mainly expense As and incurred termination of benefits.

million More annual majority savings, the will which program result XXXX, $XXX rate importantly, run between in the start of help $XXX will to will in profitability. million in which year-over-year

As have definitive a sell Protein entered Grain mentioned business. earlier, we agreement into our to &

As of the not Protein held June the results criteria on the business represent to XX, of effect a results determined the The business & classified major discontinued therefore, classified this company have XXXX, sale. were strategic as for be operations. that not does met of will of and the intended Grain a shift consolidated sale as operations, business

The segments. reported the Protein regional results Grain are business of within included & our

$XXX customary of at be customary time expected $XXX operations held working the to the of end based the capital to approvals that statement conditions the receive year. of in the transaction a will proceeds completed subject the We current of company million for company's and on and from projected of of before is subject regulatory estimate adjustments. adjusted to approximately recognized Upon approximately be is the and to million expect other loss closing the closing sale, the The closing. sale, consolidated classification of

for our to outlook. Slide XXXX XX Turning

forecast now is down seen billion, $X. down $XX.X our is approximately outlook per sales net share previous year in and from the record 'XX levels Adjusted outlook. full from earnings Our

million, XXXX. than to lower in capital spent be approximately slightly what we expenditures continue expect We to $XXX

XX% be consistent should the range net upper at conversion flow adjusted of target. income, cash XXX% free of to long-term Our with our of end our

share the approximately that, adjusted and of adjusted retail to the margins relative to over turn I'll about quarter, range, in operator billion demand With the $X.XX. underproduction we continued sales Q&A. With X%, $X.X third per operating earnings back in for project it of

Jerry Instructions] comes of [Operator Sachs. from The question Goldman Revich first

prior if for about margin delivering that are folks wonder the XX%. to What's you the margins you just for implied year. that inventory Decremental impact in to you the talk the closer that's folks of I have of the back outlook decremental reduction cycles? could been half

should So low as have 'XX, half the wondering in of after we that inventories posted to being XXs we 'XX you I'm down, thinking company that think about margins decremental be historically? first the closer folks have come

Yes.

cut I year the here we've a think, XXXX, doing you inventories the to we go really XX% half this is rightsize in to cuts dealer decade, back with again, trying as production in the level the as over a Jerry, of highest significant this year. of XX% saw through reduction, reductions level

So as expect that year we think to XXs would mid- industry, to reduction that the you at a we but about comments decrementals we XXXX floating seen. about you be not likely level, listen to assuming trough would high Eric's expect, this would significant and next should our closer have that

in the is being that And range you an XX% XX%, well standpoint here decrementals of as pricing of operational factor again, magnified just effect that see because pricing in well. as decrease back in the as are I think high the if the having the half of year, from would in you

Ag about whole it, seeing business if back Precision business, of just don't goods versus Got I in performing Ag Precision what the year developments your talk the ask How the the on the market? on mind? can seeing clear. the that's And then near-term half can side? in performance, aftermarket that you Can is you you you're double-click you're on

Yes, one. I'll take that

lost sales Precision multiplied. created Both we retrofit combination them Trimble, sales. have -- The now what mix of Technologies of and is bit JV Precision industry, industry. OEM Planting. of our business the we with customers. like we even there's much maybe destocking some But channel little OEMs. with OEM It's any because down are just some a sales OEM they're the key more haven't of That's the and our a So PTx, the moving PTx call the

Retrofit has cooling. been but up it's

maybe and sign-ups on plan. The of little seeing where ramp-up CNH retrofit we've little got not a now terms engineers like organization maybe dealer ahead that. talent customers, not are bit of even any our our OEM areas is of bit lost again, right we've things we're a from of on any But in track, so plan. going track, some And ahead lost down. even the And AGCO

is So we being just movements. performing It's industry the the by would expect. business hit like

comes with from Tami question Next JPMorgan. Zakaria

hoping you numbers. So I some was could me with help

of half So I'm expectation back your the expectation sales versus outlook, understand is this sales? year. production implied as retail exit that how growth we production much versus trying retail to

in Tami, the more is it, little quarterly quarter, in mid-XXs, third mainly on to the America going a guidance. the fourth pronounced above we're fourth call the the in down, annual lapping would easier mid because in the And half in say -- of, here to say, to I'd bit XX%, South I be of XXs production XX% sort the upper basis, the quarter. then in a range quarter. back that comp

So to levels here be XXXX. we and as go to seeing in of low going in mid-XXs the in the into QX QX down you're production sort --

Got it, okay.

as you mid-cycle the year, going production then is to much exit volume? So how of your versus expectation this be your

volume, So -- is, guess I would were Tami way I the at last would of mid-cycle look the I mid-cycle. about XXX% we year, at

If that very we or filling there strong a dealer inventory channel a of you replacement last started channel XXXX low also year, was as remember fairly with level.

an fill, little a for XXX% view now sort it's at of of bit coming of incremental to So industry that around you plus production, would XX%. down some incremental dealer production that

probably levels you sort are the XX% where to delta getting are the so can the mid-cycle we overproduction, say, of and when is to you XX% to back factor between I in it percent production to that range this about back see we're to XX-plus sort call So think down would get mid-cycle. of,

Steven UBS. from Fisher Next question with comes

happen? do The spread the what year? Was to actual regional pricing expectations of from of about think change pricing pricing? higher sort Was that incentives prior in where down that to make the reductions how that? the drove for happened trades And we X%, it

I incremental think Steve, Yes, the -- reduction really is the generally outlook the incremental in retail speaking, sales. price our of to spur discounts more trying reflective

we've picking As a Europe, South here, seen the we've products seen incentives America and, non-Fendt-branded in North certain the degree, definitely weaken up. industries to even in America, the

relative would I to lesser has and America, I change the America. quarter. I biggest North the been Europe that we would America that and, X the to a say South were or changes think saw outlook, relative But declines degree, the really our to probably last say South Europe focused prior

And to you there? put are taking the future of think other you're still that manufacturing ideal for Or you place will business. you there kind years? structure next will the I'm think for XX the this think to Great. kind curious undertaking that over you get this business of you steps the you relative see you next leave couple restructuring. where might Do the years structure in of manufacturing the be and then the of that

Yes.

Eric maybe then back-office restructuring a start orientated. the comments longer I we're more So more say add to, want that term, and may I'll to activities few alluded SG&A but we would

technologies, really we've deeper in group trying in much generative at or have history and lower centers teams them a we overall up skeleton. our a trying things the not this reduction as during at things trying the But that really can same to is leveraging excellence same workforce AI, the shrink about to centralize our potentially us talked cost cost commonize X% have mentioned had more here. and, Day, how So Technology reflective and really in look of the cooling versus time, industry challenging of areas of creating in common time, the that I at the is of where to may manner acquisitions AGCO do built efficient been to

where it but to further sort as So stay looked we the at to take us shrink needed we opportunity be, down the same at through of it that to reduce simplicity. time, or gave workforce the industry,

that's probably as we more you to million, look think that to So million in at alluded we're to, that add? start if But that want what to technology. about But about I anything build to learn operations, we the $XXX numbers $XXX to on these more more as rate we hopefully leverage when else run talking our That's 'XX opportunities come I about, not see as alluded look you reflective learn in better footprint, we savings. we'll think I again, there's Eric, technology. and Eric and

right. countries, locations. differently for using we exactly in there's I business. really of we don't but that's of about it's seeing. how action a deeper about leverage much so that to the chapter covered high-cost hiring Damon We're we're cost routine we're countries. on thinking low-cost industry and higher about the largely in our repeat, run automating some But a facing. ourselves And that net number X already actually that is Then tasks that's need and intelligence The artificial demand of so have lower the X% cutting and fast the rightsizing No, back getting we're some taking rightsized reflecting

Mig next The Baird. with Dobre from RW question comes

on properly I dealer this. go just and to the that I want to to want sure discussion production I make inventories. back understand

can year XX% Is happening So XX%. for your your a you dealer we for the So X being XXXX? it that they stocking the exited down like unit of perspective the XX% or relative of in is year. is forecast to amount destocking your the talked you to us in of before the a industry channel, between from sense inventories full so, think this if fair dynamic kind And to to understand where and had give down gap be channel? last you going that about are production underproduction where year

Yes.

now, keeping Fendt's that the which at production inventory do we and Right we're industry cut we at go standpoint, been a on. inventory. that's capture And the think destocking is of but the levels part follow-up, and half of production to we'll get XXXX in that get we couple the is bit We still level. well about better North decline, don't maybe maybe last that. probably months the I continues inventory. your year. Europe industry can now, comments, second of again, of the so brands think here to think we're about in do in right want that's back my comment here That's in taking again, more to production a to around months. And the quarters I inventory has America. South work have doing rightsize despite volume-orientated as couple decline on dealer Greg want talking more cuts And of back inventory, planned on large you optimal that have sitting that there more look decline the months a versus as down X share try at probably that of But our spot And around So so handy the quite have from we of have quarter, of we're levels to we at Massey to the little take down. Valtra. America staying America, cuts said some in access XX%. production we flat X to the a then last quarter, the South in the I

And so there. a cut significant

we see relatively dealer inventory, the that though, industry As stayed cool, flat.

market. So of months that production half back into more to probably end in again, improvement see down as around that X cuts XXXX we we more the hope of now the some going by year, have year get X the in months trying to the we

going a through year. XXX% this and our is where said the to down they as correction big big And from XX%. correction, And X is in And there's big X year this comments, cycles, we go most have cycles much -- that aggressive of system be we get we very it out historical being to than can closer production, aggressive demand in retail cut so other more 'XX. to we're in would much the

guys given that a more mid-cycle. terms on standpoint is you volume that had. have reminder a of wondering, productive, in could have is the days? guess an that demand mid-cycle follow-up My fact impact mid-cycle much comment where these And on become I so from actually machines Maybe truly sense. the Makes I how frame here you am

Well, in we certain markets. it's a trends and for XX-year average, watch

a more It increasing long-term still but it, example, production. to acres into Brazil for like So the they're putting because is is cyclicality trend has an marketplace. increasing

watch we And intention the is a that that expect our trends, model. industry average basis. is factored should So that and global the on through got XXX% the we've overall into business we cycle

numbers are the about we're perspective. so global And talking

year. XX%. that move doesn't dramatically we And correction we're a up so X what And this is We happen. Then did industry believe like while, there's and little so starts for working it correction the it like back That's said the earlier, I hovers to it oftentimes, believing then big its this expect around again. year, year. but about we're way big

next with question from Citigroup. comes Menges The Kyle

love and deeper last I'd into follow just dive on mid-cycle. up question to that

range? by then America maybe parse could Europe closer So the North XXX% kind America a if you where like you're and are at is South of mid-cycle you you XX% more of of region are as out mid-cycle, think to XX% percent in actually

the tends XX% would volatile farmers. to think, that least Usually of Europe for way range, I be the look I the the in regions. the so XXX% it, level at major fluctuates given Kyle, subsidies to the EU of our provides

little years go were then bit in So it off America you it's range of we're some coming a XX%-ish talking mids, below strong and now, coming America, right move the correction tell it, a little North to it's you to I South so high then with And exceptionally 'XX. put back South probably corrections, bit what would as closer And I'd below, about. steep that. But the the in it's XXs. down, that again, call the further America's is remember,

about was it think XXX% mid-cycle. I of

Europe the right again, over a would but Europe your the below significant so years change XX% of is maybe percent-wise, North -- last quite bit of couple America, And America that put right or around little in sort XXX% the I below now. South

to starting to recovering in bottom even Australia finding maybe and market. ones the see of we're bit. them our first Interesting, They little starting signs down. to some and New a recovery go early Zealand see are already We're

from there. and where place based we would see So its each region in come on they've in But like the different prior dynamics behaving is they're cycles. all farmer own normally

quarter? bit Got margins for a the Trimble the outlook in XXs? you. curious, That's to Trimble is you year the could really that change And any about talk high little there And I helpful. was performance in full margin then

I Yes. industry quarter The bit you're think more industry, the overall with challenged. a Kyle the are Trimble were is little reflection Trimble Again, what sales of as a levels dropping. our in seeing

a putting from of significant in us, of in there pre-acquisition channel. a we've As was purchases inventory lot the amount past, talked the

slowed, has thought outlook. reflected industry you're obviously, what seeing inventory is maybe moving now quarter in had a industry ago, the slower and that our the that out As than in we channel

Obviously, our the expectations. bit to so And translates margin were little issue. the that sales below a

the our business we PTx be you was quarter last Given million. going that outlook high to margin gave $XXX-plus was the Trimble of business, when

OE think $XXX below sales, I you so that's down a outlook about tell not little a million, would little industry materially bit, bit the different. right I lower As a bit now, probably little lower

of which million churn would the this is coming of the more industry was as in But $XXX all be about what a proposition, it's levels moving the maybe to has million-plus, going you the the XXXX. of all and tell decline going slowed. in slower at dealers, look $XXX was growth a that with negative that think the PTx we CNH channel off aspects reflection was we line would the family, prospects. industry with just to AGCO all CNH of to what Trimble, our dealers, industry operational I about moving the of what customers be and their themselves is into of this the instead XXXX the in connecting again, of So good dropping churn way through from to working out signing churn, that. But Trimble selling was value knew feeling plan, very It's letting create up

changing is itself the So just quarter-to-quarter sort in here. of out working It's long-term nothing again, prospects.

The comes with Kristen from Oppenheimer. next question Owen

about assumption that something consistently gains. I through ask to cycles. share wanted I X held last the for you've market mean, the that's guidance

you You bit where by if is could Help talked that gain line coming from. product share the maybe about or in Fendt wanted Europe to understand by geography. a see but us unpack little share assumptions market just

Yes.

all we've but a the new that's share launched, not that mean, I market we've as to the perspective, is in portfolio, great quarters, Kristen, Fendt, specifics, put the Europe, into overall Fendt doing the -- up year-to-date. driving couple whether Gen exceptionally result think, of of X, XXX going are lot in those for an of new said product just performance. XXX, actually of as been has last I a well

at up the sales when Fendt actually look So or so, globally you and environment, give X% or this market are despite take.

in of depending some about original And seeing other growth think there, lower again, are the are regions, we're I in extent like given here share for competitive on North America, as environment again, but horsepower, we there. other markets. looking pockets, America. share example, then selective plan, But different at quite we that you're or doing South the whether the Europe. If by seeing growth driven of our share horsepower, the were areas, The hoping to some growth more performance strong So seeing combines in the in team part some well. it's not we is

So it's and beyond that the little America mix Fendt those a and bit match a touched X of South Europe I on.

of your America, recall balanced how up up some regions, longer kind Great. a strong the And to follow-up just margin given I of were bit is the portfolio efforts during the cycle there. of prolonged getting South a goal little was across more those in cycle, term. my

during that downtime in environment in the do resetting in can are improvement production, that Brazil, you we of margin Now there particularly that support are things to this region? sustainably this

Yes.

Cerrado growers professional the you region, Fendt P&L burden think that But Kristen. much here. has things on a too in again, mean, quarter. the and here, couple That of a America XX% there's in on tremendous the those down was I South wouldn't caters production to you lose think you're that I portfolio. if think I about seeing So sleep America, South about the

some there. And consistent We've buying are by with going opened a growers the the Hopefully, up more relatively subsidized growers to share their several funding. share are who more growing so behaviors versus be stores, Fendt's influenced those smaller professional still of low there.

hopefully share. grow So that the we should Fendt help as market

still Precision PTx again, X had a relatively good you And America, is the growing that but Planting businesses small as we growth in there significant which in then market. a PTx again is the layer see Precision, with there, on total. you know, second in growing, potential that The the footprint Trimble, business that's which both business, South

And margins spend Massey and increased next down again, there So penetration business bolster business, as as growth America rate businesses. margin, the we penetration, down see bottom fill in parts and the Fendt over the we've the with that again, margins years. those parts South coupled and being more higher end grows, there, in stable, grows high then in improving there. And amount specialty underlying the of again growing the several will hopefully the stabilize Valtra

moved one company industry-leading of full improving comments, on is from crop in have focused change America a Damon of a small, dealer to spot-on. got cycle a than said region. of he of in of on the that's -- whole that just low-tech any in We probably products South capability. our more Brazil set And that's south couple focused other everything solutions the tractors said was channel region We've terms

product, a channel. for those, in it's good of think, we Both in shift long-term big prospects and the So health business. are that big shift of

comes Jefferies. Stephen question Our next with from Volkmann

to the full Or we Great. the the does get the and way was. think done, the to Most it amount? you've of cadence at get Do of $XXX million my we cost-cutting questions rate answered, but in sort have been full year program wanted of about $XXX I I run end the think that sort 'XX? of that right ask the about it that maybe Is don't it? million,

amount. full the get likely won't we Steve, Yes,

like time. we of up. in the again, but we'll consultation quarter, maybe As into footprint, when able I some our in I But exact half. first hopefully, I exactly with year, predict to half will first go you wrap the be to take don't know, councils European will the workers' think, That given can't first Europe. timing large know would that

$XXX is If of work in rate have As sooner. the we we that well, to it but the $XXX year. -- to the that assumed it getting course start as of million, sort some definitely the moves through of I the million exit half. through see through, sort those would run in But second a maybe of consultations little bit goes then all

some non-workers' of have But those taken. of been some taken. actions the been areas, In have already actions already council those

it's So a mixture.

should How of sort what about you benefits on about we What side? what think might side? And direct on there? come are Understood. doing that labor the

the a been direct of labor reducing industry our we've Steve, result as environment. Yes, overall

And year-to-date, and think rightsizing about direct over when feeling we XXXX. ourselves taking out think probably should us about trough talk catalysts nature. heard XXXX, time, for to there we've use this around I for that is and time, production I XXXX look of associates down, see base trying positive Eric things both I X% the mean, flex near a position I go are as 'XX. or generally taken X,XXX talk for levels, me us let into into labor corresponding as level. And we hours be the again, we you several the that inventory more that to

year, on the that run numbers. of my coming restructuring. to million $XXX in million big a we've the of production in range savings in XX% last have look production plus. And in back $XXX over last subsequent rate touched XX%. decade, XX% down the be embedded we cut that's down You somewhere We been cut My years any less. not would decade than have more is ever that time to significantly the

year about And this similar of the so trending think a if versus said, next as industry the sort follows, should Eric in be year, if you areas. positive that absorption again, that retail the

at restructuring better of know not to a it's retail we the it again, this versus Trimble, is be. a So savings, want said margins we year PTx better absorption. churn. production We

dilutive on inventories, layer & it Protein you we in expect As has then been see accretive the XXXX. And business, margin through works to this the year. Grain which dealer margin that

accretive eliminate be well. As year margin should or that we as sell that that business, next

higher if the a there's next significant opportunity very don't uplift they historical material we if So we change good the that patterns, could industry feel does margins even that or were this year, in industry. be year the an see than

right to And our more period. reporting last in time, our we're we're the now, X% time, for This this X% were margins X% -- trough range.

So Damon we've hitting upcoming changes even have just into that a embedded been lot mentioned. of not the got structural the ones that company,

today from Bernstein. last with Dillard Our question comes Chad

on price is question cost. So my

half point Just then that trying the what for you are like 'XX? second year the of what in of data and half the understand looked first embedding to

Yes.

include what discounts, are costs versus was little net. So in neutral sort slightly net full X bit year maybe gap Chad, well for The to positive. closes in was be down X, half sort the to net of at material price the the cost as the the the of all a the on back you will to positive year, year. the slightly first When it of here slightly negative half of coming a us keep Price here.

And then a helpful. about just that's second question you, Got America. is South

you you production, get we are production that actually second XX% the in to guys of if quarter, absolute plus in troughs? I Do operating prior second think business? margins that, you can given of margins the the terms just we I about So guess operating there? like like where in like And thinking do compare should down the is positive then terms does production maintain how about think part versus guess, of trough

Yes.

still levels. -- to that Chad, again, we numbers in production the I operating But delivered historical for positive margin. production quarter of have at the and at cut think think look the pull if XX% I -- South us, again, we're America we'll

to, the have America at we're moving group going remember, delivering communicate structurally Planting trying there. Ideally, PTx bringing with was this we business. that the speed that year business margin what I pricing to year. to been we've the was there, Fendt expanding against horsepower double-digit were around factors year on as low Combine a ago production. South X that the cutting unsustainable. would cycle to expect here the which we with the IDEAL And for business now planter, have that One from of our Eric a think Momentum a knew us. the now, Again, happens to of Precision business be tractors to second, tractors, The this we changed is alluded with in Trimble crop structural into top medium the changes

giving that we weren't the given so strength And of discounts market. really any

coming was And that so we knew down.

changed despite top sentiment the on the still structurally absorption, discounting term positive a here, that way which delivering of put team margins you margins, a the putting statement the down, the are when of long good in was really margins that, or what there. driving So they again we've a is situation. And it's challenged business really

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

operations to control align the the environment. market by and The with to our I'll you. better Thank today close reduce executing in we're aggressively is key inventory plan just short strategy. our to saying our of continued long-term on costs, execution the weak current our term, focused Farmer-First success

Our service Ag years and businesses over heavily focus and to on should we've Precision our parts and margin-rich an business, like innovation growing been in Fendt leader. The investing is few the become our which strategic forming launching FarmerCore, joint Farmer-First PTx and divesting and enhance the the Trimble venture, Protein the actions the like taken Grain accelerate strategy. last months last benefits we've of over business X our &

stocks-to-use prices. diets, on markets, factors supporting increased biofuels, relatively touched Over populations, changing the and commodity levels, many demand we've growing healthy for last quarters, including few low our

And top cycle participation late the the Farm cycle. confidence trends are we in high-performing surely in the will in cycles and and while we industry. And how bottom of you All meeting to closer business market of industry, Progress at than are recognize our react a look our for us how better, structurally give thanks that regardless typical at of of of upcoming changing be AGCO the weather we're these illustrate Show seeing the August, to ag health we today. at long-term to the We them conditions. are we your forward

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