DULUTH, GEORGIA, US — AGCO suffered a drop in net sales and net income for the second quarter as the company dealt with the impacts of the coronavirus (COVID-19).
Net sales for the quarter ended June 30 were $2 billion, while reported net income was 93 per share compared with $1.82 per share a year ago.
Net sales for the first six months of 2020 were approximately $3.9 billion, a decrease of approximately 10.9% compared to the same period in 2019. For the first six months of 2020, reported net income was $1.78 per share, and adjusted net income, excluding a non-cash impairment charge and restructuring expenses was $1.97 per share. These results compare to reported net income of $2.66 per share, and adjusted net income, excluding restructuring expenses, of $2.68 per share for the first six months of 2019.
“Our second-quarter results demonstrated strong execution as we overcame COVID-19 related production disruptions in Europe and South America in order to deliver a solidly profitable quarter,” said Martin Richenhagen, chairman, president and chief executive officer of AGCO. “Margin improvement in our North American, South American and Asia/Pacific/Africa regions highlighted our results. While all our factories are now open with strong order boards heading into second half of 2020, we still face a demanding environment to manage our manufacturing, supply chain and aftermarket operations.
“In addition, end-market demand has been negatively impacted by the pandemic, but is proving to be resilient as farmers look to replace their aged fleet. Despite these challenging conditions, we are focused on delivering strong profitability and healthy cash flow in 2020.”
Net sales in the North American region were flat in the first six months of 2020 compared to the same period of 2019. Increased sales of hay equipment, Precision Planting equipment and high horsepower tractors were mostly offset by lower sprayer and grain and protein sales.
AGCO’s South American net sales increased 17.8% in the first six months of 2020 compared to the first six months of 2019, excluding the impact of unfavorable currency translation. Increased sales in Brazil and Argentina were partially offset by lower sales in the other South American markets.
AGCO’s Europe/Middle East net sales decreased 13.3% in the first six months of 2020 compared to the same period in 2019, excluding unfavorable currency translation impacts. Sales declines were driven primarily by lost production caused by the impacts from COVID-19 crisis.
All of AGCO’s major European production facilities were suspended due to supply availability from late March throughout most of April, with production volumes recovering during the remainder of the quarter. Income from operations dropped approximately $143.2 million for the first six months of 2020, compared to the same period in 2019, due to lower net sales and production volumes, partially offset by expense reductions.
Asia/Pacific/Africa net sales decreased 8.3%, excluding the negative impact of currency translation, in the first six months of 2020 compared to the same period in 2019. Sales declines were most significant in Africa and Asia and were partially offset by growth in Australia and China.
Net sales in 2020 are expected to be approximately $8.3 billion to $8.4 billion reflecting lower end-market demand and the unfavorable impact of currency translation.
Adjusted operating margins are expected to be below 2019 levels with the impact of lower sales and production volumes partially offset by the benefits of pricing and expense reductions. Based on these assumptions, 2020 adjusted net income per share, excluding the impact of restructuring expenses and the goodwill impairment charge, is targeted in the range of $3.50 to $3.75. This outlook does not contemplate any further sales or production disruptions caused by the COVID-19 pandemic.
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