DULUTH, Ga.— AGCO reported net sales of approximately $2.2 billion for the third quarter of 2018, an increase of approximately 11.5% compared to the third quarter of 2017. Excluding unfavorable currency translation impacts of approximately 5.9%, net sales in the third quarter of 2018 increased approximately 17.4% compared to the third quarter of 2017.
Net sales for the first 9 months of 2018 were approximately $6.8 billion, an increase of approximately 17.0% compared to the same period in 2017. Excluding favorable currency translation impacts of approximately 1.8%, net sales for the first 9 months of 2018 increased approximately 15.1% compared to the same period in 2017.
Third Quarter Highlights
- Reported regional sales results(1): North America +12.8%, Europe/Middle East (“EME”) +14.4%, South America +2.8%, Asia/Pacific/Africa (“APA”) +5.7%
- Constant currency regional sales results(1)(2): North America +13.8%, EME +16.5%, South America +33.1%, APA +9.9%
- Regional operating margin performance: North America 6.0%, EME 9.3%, South America 4.5%, APA 7.9%
(1) As compared to third quarter 2017
(2) Excludes currency translation impact. See reconciliation in appendix.
“AGCO’s solid operational performance across our regional business units and constructive market developments are driving sales and earnings growth,” said Martin Richenhagen, AGCO’s chairman, president and chief executive officer. “We delivered sales and operating income improvement across all regions, with the strongest growth in North and South America. Price increases and focused cost control efforts helped to offset most of the trade-related material cost inflation. Equally important, we have delivered operationally while making significant progress on our long-term strategic growth drivers. Our new product launches are resonating with customers, resulting in strong demand across our targeted end-markets.”
“Global crop production for 2018 is expected to be up modestly from healthy levels in 2017,” continued Richenhagen. “Robust harvests in North America are being offset by lower output in the European Union, Argentina and Australia due to dry conditions in those areas. However, increased grain consumption this year is expected to result in lower year-end grain inventories. Global industry sales of farm equipment in the first 9 months of 2018 were mixed across AGCO’s key markets, with future demand dependent on factors such as commodity price development as well as government trade and farm support policy. North American industry retail sales increased in the first 9 months of 2018 compared to the same period in 2017 as replacement demand from row crop farmers is stimulating equipment sales after years of weaker demand. Overall, we project industry retail tractor sales to increase modestly in 2018 with improved retail sales in the row crop segment and flat retail sales of small tractors compared to last year. Industry retail sales in Western Europe were up modestly in the first 9 months of 2018, with improved economics for the dairy segment the primary catalyst.
However, industry sales slowed in the third quarter as the impact of the hot, dry summer and the resulting weak wheat harvest negatively impacted demand. Industry sales growth in the United Kingdom, Scandinavia and Italy was partially offset by declines in Germany and France. For the full year of 2018, industry demand in Western Europe is expected to be approximately flat compared to 2017. Industry retail sales in South America decreased during the first 9 months of 2018. Weak industry demand in Brazil in the first half of 2018 improved in the third quarter after more positive terms for the government financing program were announced. Industry sales declined in Argentina in response to a weak first harvest and the decline of the Peso. Industry demand in South America is expected to be relatively flat for the full year compared to 2017. Higher retail sales in Brazil are expected to be offset by lower sales in Argentina. Our long-term view remains very optimistic for demand in the agricultural equipment industry. We expect elevated grain demand driven by population growth and increased protein consumption to result in favorable income levels for farmers.
AGCO’s North American net sales increased 22.2% in the first 9 months of 2018 compared to the same period of 2017, excluding the positive impact of currency translation. Precision Planting, which was acquired in the fourth quarter of 2017, contributed sales of approximately $97.2 million in the first 9 months of 2018. Excluding the impact of acquisitions and currency translation, sales grew approximately 14.2% compared to the first 9 months of 2017. The largest increases were in sprayers, high horsepower tractors and hay tools. Income from operations for the first 9 months of 2018 improved approximately $42.5 million compared to the same period in 2017. The benefit of the Precision Planting acquisition and higher sales and production volumes contributed to the increase.
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