Sales and margin growth contribute to record second quarter earnings per share.
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and distributor of agricultural equipment, reported net sales of $2.4 billion for the second quarter of 2011, an increase of 35.3% compared to net sales of $1.7 billion for the second quarter of 2010. Reported net income was $1.36 per share and adjusted net income, excluding restructuring and other infrequent income, was $1.35 per share for the second quarter of 2011. These results compare to reported and adjusted net income per share of $0.66 for the second quarter of 2010. Excluding favorable currency translation impacts of 12.9%, net sales in the second quarter of 2011 increased 22.4% compared to the same period in 2010.
Net sales for the first six months of 2011 were $4.2 billion, an increase of approximately 35.3% compared to the same period in 2010. Excluding the favorable impact of currency translation of approximately 8.8%, net sales for the first six months of 2011 increased approximately 26.6% compared to the same period in 2010. For the first six months of 2011, reported and adjusted net income, excluding restructuring and other infrequent income, were $2.17 per share. These results compare to reported net income of $0.76 per share and adjusted net income of $0.78 per share for the first six months of 2010.
"Our record second quarter results reflect healthy farm economics and focused operational execution," stated Martin Richenhagen, Chairman, President and Chief Executive Officer. "We delivered improved margins, leveraging high levels of demand for agricultural equipment. In the second quarter of 2011, AGCO's constant currency sales growth exceeded 20% for the second consecutive quarter, and operating margins rose 300 basis points compared to the second quarter of 2010. The margin increase in the second quarter was led by the Europe/Africa/Middle East (EAME) and North American regions. EAME operating margins rebounded to 12.5% driven by the European market recovery, and North American operating margins improved over 200 basis points from a year ago."
North American Results
Favorable farm economics and improving growing conditions supported industry demand at high levels. AGCO's North American sales increased approximately 13.8% in the first six months of 2011 compared to the first six months of 2010, excluding the impact of favorable currency translation. The most significant increases were in combines, implements and high horsepower tractors. Higher sales, the benefit of increased production, and cost control initiatives all contributed to growth in income from operations of $30 million during the first half of 2011 compared to the same period in 2010.
In the first six months of 2011, industry unit retail sales of tractors were up modestly and combines increased significantly from the high levels experienced in the same period in 2010. Despite unfavorable weather and planting delays, the expectation of record farm income supported the strength in unit retail sales of tractors and combines.
Global demand for farm equipment is expected to strengthen in 2011 compared to 2010. Market recovery in Western and Eastern Europe is expected to drive robust growth in those regions. Modest growth is projected for North America, and the South American market is expected to remain healthy.
AGCO is targeting reported and adjusted earnings per share of $4.00 for the full year of 2011. Net sales are expected to range from $8.5 billion to $8.7 billion. Gross margin improvement is expected to be partially offset by increased engineering and market expansion expenditures.