AGCO's Third Quarter Net Income Per
Share Increases 10% on Sales of $2.3 Billion
DULUTH, Ga., October 31, 2012 — AGCO, a worldwide manufacturer and distributor of agricultural equipment, reported net sales of approximately $2.3 billion for the third quarter of 2012, an increase of approximately 9.3% compared to net sales of $2.1 billion for the third quarter of 2011. Reported and adjusted net income per share were $0.96 for the third quarter of 2012. These results compare to reported and adjusted net income per share of $0.87 for the third quarter of 2011. Excluding unfavorable currency translation impacts of approximately 11.0%, net sales in the third quarter of 2012 increased approximately 20.3% compared to the same period in 2011.
Net sales for the first nine months of 2012 were approximately $7.3 billion, an increase of approximately 16.0% compared to the same period in 2011. Excluding the unfavorable impact of currency translation of approximately 9.2%, net sales for the first nine months of 2012 increased approximately 25.2% compared to the same period in 2011. For the first nine months of 2012, reported and adjusted net income per share were $4.25. These results compare to reported and adjusted net income per share of $3.04 for the first nine months of 2011.
Third Quarter Highlights
Organic sales growth for Q3 2012 vs Q3 2011 was 9.9%, with the strongest growth coming from North and South America1 — Regional organic sales increases: North America 20.8%; Europe/Africa/ Middle East (EAME) 5.2%; South America 9.6%; and Asia/Pacific 23.5%1
Q3 2012 operating margins improved to 6.1% vs 5.4% in Q3 2011 despite heavy factory start-up costs — North and South American operating margins showed the most improvement
Fendt's new assembly facility opened in Marktoberdorf, Germany in September
"AGCO took advantage of strong global agricultural fundamentals and reported record sales in the third quarter," stated Martin Richenhagen, Chairman, President and Chief Executive Officer. "We also posted improved margins despite the costs associated with the opening of our new assembly facility in Germany and ongoing market development activities in China. The new Fendt assembly facility provides AGCO with the most modern, efficient and technology-advanced agricultural tractor manufacturing facility in the industry. We expect our new assembly process to lower manufacturing costs and significantly increase Fendt's tractor capacity. To ensure that new tractor production meets Fendt's high quality standards, we have slowed the fourth quarter production ramp. The lower build rate will impact Fendt sales for the remainder of the year. Higher sales levels, new product introductions, the execution of efficiency programs in our factories, and lower material costs all contributed to solid operating margin improvement in both North and South America during the third quarter."
"The drought conditions in the U.S. are impacting crop production and contributing to higher global commodity prices," stated Mr. Richenhagen. "Record levels of farm income in the U.S. as a result of the higher prices are supporting farm machinery purchases in North America. While we don't expect any lasting impacts from the drought, we are experiencing softness in demand for grain storage and protein production equipment as a result of lower crop production volumes. In Europe, a mixed weather pattern is partially offsetting attractive crop prices. Industry demand is trending weaker in the weather impacted markets of Southern Europe, Scandinavia and Finland, while demand remains at normal levels in the key Western European markets of Germany and France. After a slow start due to dry weather early in 2012, improved crop conditions, attractive government financing programs in Brazil and favorable grain prices are all sustaining industry demand in South America. Our long-term industry outlook remains very bright. Going forward we expect increased global grain consumption driven by the world's growing population and a shift towards more protein heavy diets in the developing countries. Higher grain consumption and lower inventory levels should support commodity prices and farm income above historical levels and produce healthy demand in our industry."
Regional Results: North America
|AGCO Regional Net Sales (in millions)
Click to enlarge.
The acquisition benefit of GSI and strong industry demand from the professional farming segment produced growth of 66.2% in North American sales in the first nine months of 2012 compared to the same period of 2011, excluding the impact of unfavorable currency translation. North American sales increased 30.8% in the first nine months of 2012 compared to the same period in 2011 excluding the impact of acquisitions and currency translation. The most significant increases were in sprayers, hay equipment and high horsepower tractors. The positive contribution of acquisitions, higher sales and margin improvement initiatives all contributed to growth in income from operations of $157.6 million for the first nine months of 2012 compared to the same period in 2011.
Sales in the first nine months of 2012 increased 10.2% compared to the first nine months of 2011 on a constant currency basis. Excluding the benefit of acquisitions and negative currency translation, South American sales were 4.7% higher in the first nine months of 2012 compared to the same period in 2011. Higher sales in Brazil were offset by declines in Argentina. AGCO's profitability in South America improved during the first nine months of 2012, with operating margins rebounding to 8.2% compared to 7.5% in the same period of 2011. Income from operations increased $3.9 million in the first nine months of 2012 compared to the same period in 2011. Improved margins in the region's core machinery business were partially offset by the negative impact of currency translation.
AGCO's EAME region reported sales growth of approximately 12.5% in the first nine months of 2012 compared to the same period in 2011, exclusive of acquisition benefits and the unfavorable impact of currency translation. AGCO sales growth in Germany, the United Kingdom, France and Russia was partially offset by lower sales in southern Europe and Finland. EAME operating income was negatively impacted by start-up costs related to the opening of the new Fendt assembly facility in Germany. Income from operations grew by $43.1 million in the first nine months of 2012 compared to the same period in 2011. Higher sales and production levels, along with a richer mix of products, were partially offset by the Fendt start-up costs and the negative impact of currency translation.
AGCO's Asia/Pacific region reported a sales increase of approximately 65.9% during the first nine months of 2012 compared to the prior year period, excluding the unfavorable impact of currency translation. Excluding the benefit of acquisitions and negative currency translation, net sales in the Asia/Pacific region were 21.3% higher in the first nine months of 2012 compared to the same period in 2011. Growth in Australia, New Zealand and China produced most of the increase. Income from operations in the Asia/Pacific region decreased $6.1 million in the first nine months of 2012, compared to the same period in 2011, as additional market development costs in China were partially offset by improved gross margins.
"We are lowering our full year sales and net income per share forecast to reflect the negative impacts of lower than anticipated Fendt production, the U.S. drought on grain storage and protein production sales and softer market demand in the Scandinavian and Finnish markets," continued Mr. Richenhagen. "In the fourth quarter, we are focusing on managing our new production schedule, reducing our dealer and company inventories and continuing our margin improvement efforts. In addition, our important and ongoing investments in new product development and market expansion will remain at high levels as we work to meet Tier 4 final emission requirements and refresh and grow our product line."
AGCO is targeting adjusted net income per share of approximately $5.20 for the full year of 2012. The new guidance reflects the Company's improved operating performance which is partially offset by the factors discussed above and the negative impact of currency translation. Net sales are expected to range from $9.8 billion to $10.0 billion for the full year. Gross margin improvement is expected to be partially offset by increased engineering and market expansion expenditures.
AGCO will be hosting a conference call with respect to this earnings announcement at 9:00 a.m. Eastern Time on Wednesday, October 31, 2012. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO's website at www.agcocorp.com in the "Events" section on the "Company/Investors" page of our website. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for twelve months following the call. A copy of this press release will be available on AGCO's website for at least twelve months following the call.
For full financial statements, visit the official company press release here.
1 Excludes unfavorable currency translation and acquisition impacts