While the sales environment for ag equipment remained challenging this past year, at least a few of the shortline manufacturers reported increased revenues for the year.
Re-Introducing Legendary Limited Model Improves Buhler’s Revenues
Ag equipment businesses with a rich heritage and an enthusiastic following should milk these assets for all they are worth, judging by the impact of a special run of Versatile tractors that helped Buhler Industries increase sales revenues last year when most manufacturers experienced a decline.
Managers say demand for the Versatile Legendary Limited Edition models, introduced to commemorate 50 years of continuous 4WD tractor production, offset the generally weak demand for ag equipment.
Revenues for the year ended Sept. 30 came in at C$274.1 million (US$207 million), up C$28.4 million (US$21 million) from the prior 12-month period. Even so, a decrease in margin, along with higher interest costs and research and development spending, meant the Canadian concern posted a loss for the second year in succession, albeit reduced from C$5.3 million (US$4 million) in fiscal 2015 to C$2.7 million (US$2 million) this past year.
Buhler’s tractor division made the most of the 50 year anniversary, finishing the commemorative machines in a red, black and yellow livery that harkens back to the brand’s heyday and will spark collector interest in years to come.
Farmers and custom operators in Canada remain the biggest market for Buhler group products, with sales climbing from C$112 million ($85 million) in 2015 to more than C$140 million ($105 million) last year, in contrast to an C$18 million ($13 million) decline in sales revenues from the U.S. at $80 million ($60 million).
Sales in markets within the scope of Buhler’s majority owner, including Russia, Kazakhstan and Ukraine, also improved, growing from C$19 million ($14 million) last year to more than C$32 million ($24 million) in the 2016 financial year. Other markets delivered a C$5 million ($4 million) revenue gain from last year’s figure at over C$20 million ($15 million).
Buhler managers are cautiously confident that they can reap an additional increase in sales during the 2017 fiscal year as they pursue increased market share and introduce new products — Farm King dealers can expect new introductions in nearly every product line in 2017, they say.
Intensive competition will continue to put pressure on sales margins, managers acknowledge, but inventory levels are expected to fall and profitability to improve due to unspecified cost reduction measures.
Claas Revenues Dip; Net Income Takes a Hit
The relatively lackluster market for ag equipment worldwide caused Claas revenues to dip 5% in the group’s 2015-16 fiscal year ended Sept. 30, dropping from the previous year’s totals of €3.83 billion ($4 billion) — a small increase over 2014 revenues — to €3.63 billion ($3.79 billion). Profitability took more of a hit, though, with EBITDA down 19%, income before taxes approaching a 41% drop and net income falling 64%.
Claas group managers expect the global market for ag machinery to shrink further in 2017 as farm income levels and the impacts of political and economic crises result in continued reluctance to invest.
Consequently, they anticipate a slight decline in sales of Claas products but stable pre-tax income. Investment in new products, technologies and facilities is continuing to help maintain the appeal of the Claas portfolio.
The group’s research and development spend reached a record high of almost €214 million ($223 million) in the 2015-16 financial year, up more than 5% or €11 million ($11.5 million) on the prior period. R&D expenditure at Claas has more than doubled over the past decade.
In addition to new mechanical features, Claas increased its R&D spend on electronics architecture for machine control and connectivity, as well as the digitization of agricultural processes — such as a project to forecast corn maturing and yields to help growers plan harvesting logistics more effectively.
Capital projects that consumed €122 million ($127 million) provided improved facilities at a number of production sites and initiated construction of a new electronics R&D facility in Germany. More than 150 engineers will develop control units, terminals and automatic satellite control systems at the new site when it is complete.
The Claas group’s largest ever single investment came to fruition when the new €120 million ($125 million) assembly line for combines was opened at the Krasnodar facility in Russia. This new production space is nearly 9 times larger than the original factory, with capacity to increase production volumes to 2,500 combines and tractors per year.
Thanks to an investment agreement signed with the Russian government, Claas now enjoys official local manufacturer status for combines and is eligible for the same state subsidies as domestic producers.
The agreement makes state-of-the-art agricultural machinery affordable for farming businesses in the country, says Claas, adding that only 178 million acres of the 300 million acres suitable for farming are currently used for agriculture.
Despite Ag Downturn, Krone Increased Sales in FY2016
Sales of Krone forage harvesting equipment in North America kept pace with other markets as the German manufacturer exceeded its revenue forecasts in the 2015-16 financial year ending July 2016.
In contrast to expectations of a drop in group agricultural equipment revenues of about a single digit percentage (Ag Equipment Intelligence, January 2016), Krone actually increased its sales worldwide by €14 million ($14.8 million) or 2.5%.
Over the prior 12 month period, sales revenues increased 1.2% to €554.5 million ($584 million); in the fiscal year just reported, the company hit €568.6 million ($600 million), with North American operations accounting for 20.5% of revenues, about the same level as reported previously.
Those are the highest ag equipment revenues in Krone’s 110 year history, and more than double the amount achieved 10 years ago. “Despite a significant downturn in the farm machinery industry and less than ideal conditions in the commercial trailer market, the Krone Group has continued its positive growth trajectory with sales of €1.6 billion ($1.7 billion),” notes managing partner, Bernard Krone.
“The milk price crisis and the consequences of the Russian-Ukrainian conflict had a significant impact on the performance of all our business segments, so it is an even greater achievement that we were able to increase our sales revenues.”
Krone again adds a cautious note that a slight decline in sales is anticipated for the current financial year while remaining confident about Krone’s long-term future as two megatrends have positive impacts on the company’s business — growth in world population and a globalized economy.
In addition to setting up new sales subsidiaries in France and China, Krone announced last year that it will spend $12.5 million building a more central headquarters base for North American operations, with work at the Shelbyville, Ind., location due to start in spring of this year.
Tommy Jones, president & CEO at Krone North America, said, “As Krone has continued its growth in North America, we realized the need for a larger, specially built facility to bring together our corporate headquarters, distribution center and training staff in a more central location for our growing customer base.”
He anticipates the new location will provide more efficient delivery of parts and wholegoods to customers and dealers, while the Indianapolis area’s well-established agricultural roots and the state’s emphasis on agribusiness will enable Krone to fill the 40 additional professional and warehouse jobs expected to be added over the next 4 years.
— Ag Equipment Intelligence, January 2017