In today’s newscast we look at dealers’ outlook for sales in 2015, what changes in dealership valuations mean, the forecast for precision equipment sales next year and the latest earnings report from a number of companies.
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I’m managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
2014 Dealer Outlook Improves; Initial 2015 Outlook Negative
The average dealer outlook for 2014 sales improved to down 4% year-over-year in September, as reported in the October Ag Equipment Intelligence “Dealer Sentiments & Business Conditions Update.” This is improved from an 8% decline forecast last month.
AGCO dealers were the most optimistic, projecting 2% growth in 2014. Case IH dealers, on the other hand, are forecasting the largest sales declines of 7% year-over-year.
Dealers gave their first look into 2015 this month in the report and are expecting a 9% sales decline on average vs. 2014 sales.
Changes in Dealership Valuations
As consolidation continues in the farm equipment industry, dealers should be prepared for valuations that will be less than in recent years, say Tom Owen and Nick Mast.
On the Record did an exclusive interview with the partners of ChannelMASTERS, who recently formed the dealership consulting businesses after long careers with CNH and CNH Capital.
Owen and Mast will be presenting a special workshop entitled “Strategies for Capital Access & Transitional Wealth Management in Equipment Dealerships,” during the dealers-only Dealership Minds Summit. The summit will be held January 13-14 in Cincinnati. You can visit www.DealershipMindsSummit.com for more information.
Dealers Forecast Slight Slowdown for Precision Sales in 2015
For the most part, dealers have a positive outlook for sales of GPS technology in the coming year, and most I’ve talked with throughout 2014, say precision farming presents some of the stronger sales growth opportunities for their business.
But just how much precision growth are dealers anticipating in the coming year? Ag Equipment Intelligence’s recently published 2015 Dealer Business Outlook & Trends Farm Equipment Forecast reveals some interesting year-over-year differences on the pace of precision prosperity.
A smaller percentage of dealers for four mainline equipment suppliers, along with independent equipment dealers, forecast precision growth of at least 2% next year, compared to 2014.
According to the report, John Deere dealers anticipate the highest decline with nearly 48% of dealers forecasting unit sales of precision products to increase at least 2% in the coming year, vs. more than 70% a year ago. Independent dealers followed with more than a 22% drop year-over-year, then New Holland with a 19% decrease and Case IH with an 18% drop.
AGCO dealers had the smallest decline of only 2%, compared to their 2014 forecast.
Does this outlook signal a slowing trend in precision farming sales? GPS and precision products still rank high among dealers’ best bets for improving unit sales in 2015, and more than 92% of Canadian dealers and 86% of U.S. dealers forecast an increase in precision sales, according to the report.
And even though dealers foresee slower precision sales growth in the coming year, the increases still outpace estimates for the majority of other equipment, according to the report.
Manufacturers Report Tough Third Quarter
As we head into the end of the year, a number of companies released their third quarter results over the last week.
On October 28, AGCO reported its 3rd quarter net sales were $2.2 billion, a 13% drop from 3rd quarter sales in 2013. For the first 9 months of 2014 net sales were down 8.7% vs. the same period last year.
AGCO’s North American sales for the first 9 months of the year were down 10.3%, with the most significant decreases in high horsepower tractors and implements. Growth in small tractor sales partially offset the declines in other areas.
On October 30, CNH Industrial announced its third quarter net sales for its Industrial Sales division were down 6% compared to the same quarter in 2013. During the quarter, ag equipment revenues were down 6.5% vs. the third quarter of 2013.
According to the company, tractor demand in North America was up 10%. However, the increase was largely concentrated in the lower horsepower segment due to improved demand in the dairy and livestock as well as hay and forage sectors.
Also on October 30, Trimble announced third quarter revenue was up 5% vs. the same period in 2013. However, sales in the Field Solutions division were down 11% due to weak sales of ag products.
Tire manufacturer Titan International also reported a drop in sales due to a drop in demand for ag equipment. On October 28, the company reported third quarter sales were down 9.6% vs. the third quarter of 2013. For the ag segment, revenues were down 16.7% during the period.
And now from the Ag Equipment Archives…
In 1964, Ace Pump Corp. of Memphis, Tenn., developed the first PTO driven centrifugal pump for applying newly developed wettable chemicals.
The company went on to introduce the first close-coupled hydraulic motor-driven spray pump a few years later in 1969.
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