“AGCO achieved sales and earnings improvement in the second quarter in the midst of challenging market conditions,” said Martin Richenhagen, chairman, president and chief executive officer of AGCO. “Higher demand and margins in our Europe/Middle East region are driving our improved results and increased outlook for the full year. AGCO’s sales and earnings growth also reflect the benefit of our efforts to reduce expenses, improve the efficiency of our factories and launch new products.”
Sales for the first six months increased 6.7% to $3.792 billion.
Net income attributable to AGCO and its subsidiaries for the second quarter was $91.5 million, a $41.2 million jump in net income compared to the second quarter in 2016. Total net income for the first six months in 2017 was $81.4 million.
Net sales in AGCO’s North America region decreased 4.4% in the first six months of 2017 compared to the same period of 2016, excluding the negative impact of currency translation. Dealer inventory reduction efforts and softer industry demand contributed to lower sales.
“North America industry sales were down due to ongoing margin pressure for farmers in the row crop sector,” Richenhagen said. “Industry sales of high-horsepower tractors, hay equipment and grain storage and handling equipment remained below last year’s levels.”
Income from the North American operations for the first six months of 2017 improved approximately $2.6 million compared to the same period in 2016. The benefit of improved factory productivity and expense reduction efforts were mostly offset by lower sales and production volumes.
South American net sales increased 23.6% in the first six months of 2017 compared to the first six months of 2016, excluding the impact of favorable currency translation. Significant sales increases in Brazil and Argentina produced most of the growth. Income from operations improved approximately $4.4 million for the first six months of 2017 compared to the same period in 2016.
“The benefits of higher sales and production were mostly offset by material cost inflation and cost associated with transitioning to the new Tier 3 emission technology,” said Andrew Beck, chief financial officer (CFO) and senior vice-president of AGCO, during an earnings call with analysts on July 27.
AGCO’s Europe/Middle East net sales increased 8.8% in the first six months of 2017 compared to the same period in 2016, excluding unfavorable currency translation impacts. Acquisitions benefited sales by approximately 3.3% during the first six months compared to the same period last year. Higher sales in Germany, the U.K. and Italy were partially offset by sales declines in France. Income from operations improved approximately $26.1 million for the first six months of 2017, compared to the same period in 2016, due to the benefit of higher sales and margin improvement.
AGCO expects its net sales for 2017 to reach $8 billion reflecting improved sales volumes, positive pricing and acquisition impacts. Gross and operating margins are expected to improve from 2016 levels due to higher sales along with the benefits resulting from the company’s cost reduction initiatives.
“While there continues to be weakness in our key markets, we will remain focused on improving our competitive position and expanding our margins by investing in new technologies, productivity enhancements and new market development,” Richenhagen said.