AGCO reports 1.2% increased sales over 2020
AGCO, worldwide manufacturer and distributor of agricultural equipment and solutions, reported net sales of approximately $2.7 billion for the fourth quarter of 2020, an increase of approximately 8.1% compared to the fourth quarter of 2019.
Reported net income was $1.78 per share for the fourth quarter of 2020, and adjusted net income (3) , which excludes restructuring expenses and a gain on sale of an investment, was $1.54 per share. These results compare to reported net loss of $1.17 per share and adjusted net income, which excludes non-cash impairment charges, restructuring expenses and a tax gain, of $0.94 per share for the fourth quarter of 2019. Excluding favorable currency translation impacts of approximately 1.4%, net sales in the fourth quarter of 2020 increased approximately 6.7% compared to the fourth quarter of 2019.
Net sales for the full year of 2020 were approximately $9.1 billion, which is an increase of approximately 1.2% compared to 2019. Excluding unfavorable currency translation impacts of approximately 1.8%, net sales for the full year of 2020 increased approximately 3.0% compared to 2019. For the full year of 2020, reported net income was $5.65 per share, and adjusted net income (3) , which excludes non-cash impairment charges, restructuring expenses and a gain on sale of an investment, was $5.61 per share. These results compare to reported net income of $1.63 per share and adjusted net income, which excludes non-cash impairment charges, restructuring expenses and certain tax charges and gains, of $4.44 per share for 2019.
Fourth Quarter Highlights
- Reported fourth quarter regional sales results (1) : Europe/Middle East (“EME”) 13.7%, North America (10.2)%, South America 21.1%, Asia/Pacific/Africa (“APA”) 2.1%
- Constant currency fourth quarter regional sales results (1)(2)(3) : EME 7.7%, North America (10.3)%, South America 52.7%, APA (3.8)%
- Fourth quarter regional operating margin performance: EME 11.9%, North America 2.0%, South America 5.9%, APA 10.6%
- Full-year adjusted operating margins (3) improved to 7.0% in 2020 compared to 5.9% in 2019
- Generated approximately $896.5 million in cash flow from operations and approximately $626.6 million in free cash flow (3) in 2020
- Full-year earnings forecast for 2021 in a range from $7.00 to $7.25 per share
(1) As compared to fourth quarter 2019.
(2) Excludes currency translation impact.
(3) See reconciliation of Non-GAAP measures in appendix.
“The AGCO team delivered strong operational results leveraging improving markets to produce sales and earnings growth in the fourth quarter,” stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. “Our focused execution allowed us to overcome supply chain difficulties and maintain production levels, while reducing company and dealer inventories, which contributed to significant cash flow generation. I would like to thank all our employees for their extraordinary efforts to support our dealers and customers under challenging conditions. Our improved results allowed us to maintain our investments in premium technology, sustainable smart farming solutions and enhanced digital capabilities. AGCO’s exceptional product line continues to be well-received by our customers as evidenced by a strong year-end order board. Looking forward to 2021, we are forecasting sales and earnings growth as industry conditions trend positively and we position AGCO for future success.”
Market Update
| Industry Unit Retail Sales | ||||
| Tractors | Combines | |||
| Year ended December 31, 2020 | Change from Prior Year Period | Change from Prior Year Period | ||
| North America (1) | 10% | —% | ||
| South America | 12% | 20% | ||
| Western Europe (2) | (1)% | 1% | ||
| (1) Excludes compact tractors. (2) Based on Company estimates. |
“Increased grain consumption, driven by economic recovery and higher export demand, helped to offset a solid year of global crop production leaving year-end grain inventories lower than anticipated,” stated Mr. Hansotia. “Reduced grain stocks supported a rally in soft commodity prices, lifted farmer sentiment and supported higher demand for agricultural equipment during the fourth quarter.”
“Full year global industry retail sales of farm equipment in 2020 were mixed across AGCO’s key markets with fourth quarter industry retail sales significantly higher than the prior year across the major regions,” continued Mr. Hansotia. “Industry retail tractor sales in North America increased during the full year of 2020 compared to 2019. Strong growth in the sales of lower horsepower tractors drove most of the increase. The fleet age for large equipment in North America remains extended and stronger replacement demand was evident in the fourth quarter. Higher commodity prices and improved farmer sentiment are also expected to drive higher North American industry sales in 2021. In Western Europe, industry demand improved in the fourth quarter, but remained down for the full year of 2020 compared to 2019. Market demand was weakest in the United Kingdom and Scandinavia, and was partially offset by growth in Germany, which benefited from tax incentives during 2020. We expect 2021 industry demand in Western Europe to be flat to modestly higher from 2020 levels. South America industry retail tractor sales increased during 2020, with robust recovery in Brazil and Argentina partially offset by weaker demand in the smaller South America markets. Healthy crop production and favorable exchange rates in Brazil and Argentina are supporting farm profitability. We expect farm economics to remain supportive in 2021 in South America with replacement demand resulting in higher industry sales compared to 2020. Our long-term global view remains positive. Increasing demand for commodities, driven by the growing world population, rising emerging market protein consumption and biofuel use, are expected to support healthy conditions in our industry.”
Regional Results
AGCO Regional Net Sales (in millions)
| Three Months Ended December 31, | 2020 | 2019 | % change from 2019 | % change from 2019 due to currency translation (1) | % change excluding currency translation | |||||||||
| North America | $ | 485.1 | $ | 540.5 | (10.2)% | 0.1% | (10.3)% | |||||||
| South America | 267.5 | 220.9 | 21.1% | (31.6)% | 52.7% | |||||||||
| EME | 1,722.7 | 1,515.3 | 13.7% | 5.9% | 7.7% | |||||||||
| APA | 241.8 | 236.9 | 2.1% | 5.9% | (3.8)% | |||||||||
| Total | $ | 2,717.1 | $ | 2,513.6 | 8.1% | 1.4% | 6.7% | |||||||
| Year Ended December 31, | 2020 | 2019 | % change from 2019 | % change from 2019 due to currency translation (1) | % change excluding currency translation | |||||||||
| North America | $ | 2,175.0 | $ | 2,191.8 | (0.8)% | (0.5)% | (0.2)% | |||||||
| South America | 873.8 | 802.2 | 8.9% | (27.6)% | 36.6% | |||||||||
| EME | 5,366.9 | 5,328.8 | 0.7% | 1.1% | (0.4)% | |||||||||
| APA | 734.0 | 718.6 | 2.1% | 1.2% | 0.9% | |||||||||
| Total | $ | 9,149.7 | $ | 9,041.4 | 1.2% | (1.8)% | 3.0% | |||||||
| (1) See Footnotes for additional disclosures. |
North America
Net sales in the North American region were flat for the full year of 2020 compared to 2019, excluding the negative impact of currency translation. Increased sales of Precision Planting equipment, high horsepower tractors and parts were offset by lower sales of grain and protein production equipment as well as sprayers. Income from operations for the full year of 2020 improved approximately $72.1 million compared to 2019. The benefit of a richer sales mix and cost control initiatives contributed to operating margin improvement.
South America
AGCO’s South American net sales increased 36.6% for the full year of 2020 compared to 2019, excluding the impact of unfavorable currency translation. Increased sales in Brazil and Argentina were responsible for the growth. Income from operations for the full year of 2020 was improved compared to 2019 by approximately $68.7 million. The improved South America results reflect the benefit of higher sales and production, a richer sales mix, as well as cost reduction initiatives, partially offset by negative currency impacts.
Europe/Middle East
AGCO’s Europe/Middle East net sales were flat for the full year of 2020 compared to 2019, excluding favorable currency translation impacts. Sales improved significantly in the second half of the year compared to 2019, offsetting a weak second quarter which was impacted by COVID-19-related production interruptions. Declines in France, Scandinavia and Central Europe were mostly offset by growth in Germany and Eastern Europe. Income from operations decreased approximately $52.9 million for the full year of 2020 compared to 2019, due to lower net sales and production volumes as well as higher warranty costs.
Asia/Pacific/Africa
Asia/Pacific/Africa net sales increased 0.9%, excluding the positive impact of currency translation, during the full year of 2020 compared to 2019. Higher sales in China and Australia were mostly offset by lower sales in Africa and the smaller Asian markets. Income from operations improved approximately $18.7 million for the full year of 2020 compared to 2019, due to higher sales and a richer product mix.
