This morning AGCO Corp. reported net sales of approximately $1.3 billion for the first quarter of 2010, a decrease of approximately 13.3% compared to net sales of approximately $1.5 billion for the first quarter of 2009.
North American region, sales in the first quarter of 2010 declined approximately 30.5% compared to the first quarter of 2009, excluding favorable currency translation impacts. Working capital initiatives to manage dealer inventory levels and lower sales of utility tractors and hay products produced the decline.
AGCO's South American region reported a sales increase of approximately 67.7% in the first quarter of 2010 compared to the first quarter of 2009, excluding favorable currency translation impacts. Stronger industry demand in Brazil and Argentina produced most of the increase. The Europe/Africa/Middle East (EAME) region reported a sales decline of approximately 36.5% in the first quarter of 2010 compared to the first quarter of 2009, excluding favorable currency translation impacts. The sales declines were due to constrained production and weaker industry demand in all of the major markets across Europe.
"We faced contrasting regional industry demand among the major global agricultural markets during the first quarter of 2010," stated Martin Richenhagen, chairman, president and CEO. "In Brazil, market demand was near record levels, and we were very pleased with our sales and margin performance. In Western Europe, industry conditions continued to soften throughout the first quarter and remained below the strong levels that existed in early 2009. Industry demand in North America has stabilized, with the professional producer segment showing the most strength. During the first quarter, we closely managed production, temporarily idled factories and limited working capital usage, which improved our cash position compared to the first quarter of 2009. As expected, these initiatives also curtailed wholesale shipments which put pressure on first quarter sales, lowered factory productivity and reduced margins."
"Margin improvement will continue to be a major focus for AGCO in the remainder of 2010," says Richenhagen. "We will closely manage the seasonal build in our inventory during the second quarter to position the company for stronger second half performance. We also plan to maintain our investments in new product development at a high level in preparation for the Tier 4 emissions requirements. AGCO's focus on cash flow generation and debt reduction over the past four years greatly improved our financial condition. On March 5, 2010, Standard & Poor's recognized AGCO's financial progress by upgrading our debt rating to investment grade."
Sales declines, reduced gross margins and increased engineering expenses contributed to lower income from operations for the first quarter of 2010 compared to the first quarter of 2009. Production cuts associated with inventory reduction efforts and a weaker product mix, partially offset by lower material costs, produced lower gross margins. The Company increased its investment in new product development in order to meet new emission standards, resulting in increased engineering expense in the first quarter of 2010 compared to the same period last year.
— AGCO press release