DULUTH, Ga. — February 4 — AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and distributor of agricultural equipment, reported net sales of approximately $2.9 billion during the fourth quarter of 2013, an increase of approximately 5.8% compared to net sales of $2.7 billion for the fourth quarter of 2012. Reported net income for the fourth quarter of 2013 was $1.40 per share. These results compare to reported and adjusted net income of $1.04 and $0.99 per share, respectively, for the fourth quarter of 2012. Adjusted net income for the fourth quarter of 2012 excluded a non-cash intangible asset impairment charge of approximately $22.4 million as well as a non-cash tax gain of approximately $26.9 million from the recognition of U.S. deferred tax assets. Excluding an unfavorable currency translation impact of approximately 0.3%, net sales in the fourth quarter of 2013 increased approximately 6.1% compared to the fourth quarter of 2012.
Net sales for the full year of 2013 were approximately $10.8 billion, an increase of approximately 8.3% compared to the same period in 2012. For the full year of 2013, reported net income was $6.01 per share. This result compares to reported and adjusted net income of $5.30 and $5.25 per share, respectively, for the full year of 2012. Excluding an unfavorable impact of currency translation of approximately 1.2%, net sales for the full year of 2013 increased approximately 9.5% compared to 2012.
Fourth Quarter and Full Year Highlights
• Fourth quarter regional sales results(1): Europe/Africa/ Middle East (“EAME”)
+10%; Asia/Pacific (“APAC”) +6%; North America +2%; South America +1%;
• Adjusted operating margins in 2013 improved over 160 basis points in the fourth quarter and nearly 120 basis points for the full year vs. comparable 2012 periods
• Full year regional operating margin performance: North America 11.8%, South
America 10.4%, EAME 10.2%, APAC 0.1%
• Announced $500 million share repurchase program in December
• 2014 earnings per share guidance remains at approximately $6.00 per share
(1)Excludes currency translation impact. See reconciliation of non-GAAP measures in Appendix.
“AGCO closed the year with a solid fourth quarter, making 2013 a record year for both sales and earnings,” stated Martin Richenhagen, Chairman, President and Chief Executive Officer. “We continue to take advantage of healthy market conditions by leveraging our global footprint and our well-positioned brands. Strong sales performance and steady progress with our profitability improvement efforts produced margin expansion in 2013. We generated over $400 million of free cash flow in 2013 while making heavy investments in plant productivity, new products and tier 4 emission requirements. Our strong cash generation will allow us to continue making strategic investments in improved technology and production capabilities while returning cash to our shareholders. AGCO’s record earnings and consistent cash flow generation over the last three years has strengthened our balance sheet and positioned the Company for continued success.”
Industry Unit Retail Sales
Change from Change from
Year ended 12/31/13 Prior Year Period Prior Year
North America 9% 8%
South America 17% 5%
Western Europe (1)% (10)%
“Crop production improved to more normal levels and farm income remained strong across most of the developed farm markets during 2013,” stated Mr. Richenhagen. “Improved yields in North America and high levels of farm income supported industry sales. In Western Europe, favorable farm economics in France and Germany supported industry demand, while market conditions remained soft in the weather-impacted regions of the United Kingdom and parts of Northern Europe. Attractive soft commodity prices, improved harvests and supportive government financing programs all contributed to market strength in Brazil. In 2014, industry demand is expected to weaken due to lower commodity prices and reduced farm income. Our long-term view remains positive as increasing global demand for commodities driven by biofuel use, the growing world population and increasing emerging market protein consumption are expected to support elevated farm income and healthy conditions in our industry.”
North American net sales grew 7.0% during the full year of 2013 compared to 2012, excluding the negative impact of currency translation. Sales were strongest in the row crop segment, with the most significant increases in sprayers, high horsepower tractors, grain storage products and implements. Increased sales, a favorable product mix and margin improvement initiatives all contributed to growth in income from operations of $66.0 million for the full year of 2013 compared to the same period in 2012.
AGCO’s South American net sales grew 21.8% in the full year of 2013 compared to the same period in 2012, excluding the negative impact of currency translation. Sales were higher in both Brazil and Argentina, with growth mainly in high horsepower tractors, sprayers and grain storage products. Operating margins improved approximately 170 basis points for the full year of 2013 compared to 2012 due to higher sales, a richer mix of products and the benefit of cost-reduction initiatives. Income from operations increased $51.1 million for the full year of 2013 compared to 2012.
Net sales in AGCO’s EAME region improved by 5.7% in the full year of 2013 compared to the full year of 2012 on a constant currency basis. Improved production capacity at the Fendt facility in Germany generated most of the increase. Higher sales in France and Germany were partially offset by declines in Central and Eastern Europe. EAME’s income from operations increased $83.3 million for the full year of 2013 compared to 2012. The benefit of higher sales and improved production efficiency contributed to the increase.
Net sales in the Asia/Pacific region were 15.4% higher in the full year of 2013 compared to the same period in 2012, excluding the negative impact of currency translation. Growth in China, East Asia and Australia produced most of the increase. Income from operations in the Asia/Pacific region declined by $9.7 million in the full year of 2013 compared to the same period in 2012. The benefit of higher sales was offset by increased market development costs in China.
Lower commodity prices relative to 2013 are expected to result in reduced farm income and softer industry demand across the developed agricultural equipment markets in 2014. AGCO is projecting net sales in a range from $10.8 billion to $11.0 billion, with forecasted pricing benefits and market share improvements offsetting the impact of the expected industry decline. Improved gross margins compared to 2013 levels are expected to be offset by higher engineering and market development costs. Based on these assumptions, AGCO is targeting earnings per share of approximately $6.00 during 2014.
“2014 will be a challenging year for our industry,” stated Mr. Richenhagen. “With modest declines in demand expected across most markets, we will focus on managing working capital while we continue to execute on our strategic initiatives. We expect to continue investing in new products and technology, as well as devoting significant resources to enhance our presence in the CIS region, China and Africa. Our plans in 2014 also include investing in our production facilities to improve efficiency as well as in higher technology products that will make farmers more productive and more profitable.”