AGCO reported its results for the second quarter ended June 30, 2021. Net sales for the second quarter were approximately $2.9 billion, an increase of approximately 43.5% compared to the second quarter of 2020.
Net sales for the first six months of 2021 were approximately $5.3 billion, an increase of approximately 33.6% compared to the same period in 2020. Excluding favorable currency translation impacts of approximately 6.3%, net sales for the first six months of 2021 increased approximately 27.3% compared to the same period in 2020.
Highlights
“Our second quarter results were highlighted by strong margin performance across all regions resulting in the achievement of record earnings per share,” stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer.
“Focused execution and proactive pricing actions by the AGCO team mitigated the impact of the difficult supply chain environment, which was compounded by escalating material cost inflation. Our second quarter sales and production were up significantly from the second quarter of last year when extended COVID-related shutdowns in both Europe and South America interrupted our operations. Favorable farm economics are supporting increases in replacement demand and market response to our technology-focused products remains extremely positive. In particular, strong growth in Fendt high-horsepower tractors, Precision Planting products and our global parts business contributed to the margin expansion. With order boards significantly ahead of last year, we have further increased our net sales and earnings forecast for 2021. AGCO’s focused investments in premium technology, smart farming solutions and enhanced digital capabilities support our farmer-first strategy to profitably grow the business and earn high returns for its stockholders.”
Market Update
“Despite dry weather across parts of North and South America, crop production is expected to be sufficient to meet increased demand and maintain grain inventories at relatively low levels,” stated Mr. Hansotia. “Elevated prices of agricultural commodities are supporting healthy farm economics. These conditions are expected to generate growth in industry demand across all major markets in 2021.”
“Global industry retail sales of farm equipment grew in all of AGCO’s key markets in the first half of 2021 compared to the pandemic-impacted first half of 2020,” continued Mr. Hansotia. “North American industry retail sales of low horsepower tractors improved compared to last year, while demand for high horsepower tractors showed considerable strength. An extended fleet age and favorable commodity prices contributed to industry retail sales growth of North American large agricultural equipment of approximately 24% in the first six months of 2021. Industry retail sales in Western Europe increased approximately 27% in the first half of 2021. COVID-related shutdowns across Europe significantly reduced both industry production and demand in the first half of 2020. Favorable farm economics for arable farmers, as well as dairy and livestock producers in Western Europe, are supporting increased equipment demand in 2021. Industry demand also improved in Brazil and the smaller export markets in South America compared to pandemic-impacted demand in 2020. Healthy commodity prices and favorable exchange rates are supporting farm profitability in South America, resulting in significantly higher industry sales compared to 2020. In addition to our current industry outlook, our long-term view remains optimistic, with expanding demand for grain and new technologies providing significant opportunities for farmers.”
Regional Results
North America
Net sales in the North American region increased 19.3% in the first six months of 2021 compared to the same period of 2020, excluding the positive impact of currency translation. Increased sales of tractors, parts, grain and protein equipment and Precision Planting products generated most of the increase. Income from operations for the first six months of 2021 rose approximately $53.0 million compared to the same period in 2020 and operating margins reached 13.3%. Higher sales and production, a richer mix of products and the benefit of favorable pricing contributed to the improvement, and helped to offset higher material costs.
South America
AGCO’s South American net sales increased 67.3% in the first six months of 2021 compared to the COVID-impacted first half of 2020, excluding the impact of unfavorable currency translation. Sales grew across key markets, driven by improved industry conditions and pricing impacts. Income from operations in the first six months of 2021 increased by approximately $42.6 million compared to the same period in 2020. The improved South America results reflect the benefit of higher sales and production, in addition to a favorable sales mix with improved pricing offsetting material cost inflation.
Europe/Middle East
AGCO’s Europe/Middle East net sales increased 22.6% in the first six months of 2021 compared to the same period in 2020, excluding favorable currency translation impacts. 2020 sales were negatively impacted by extended plant shutdowns during the first half of 2020. Sales growth was achieved in all major markets with high horsepower tractors and parts representing the largest increases. Income from operations increased approximately $152.5 million in the first six months of 2021, compared to the same period in 2020, due to higher net sales and production volumes.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa increased 51.2%, excluding the positive impact of currency translation, in the first six months of 2021 compared to the same period in 2020. Higher sales in China, Africa as well as Australia produced most of the increase. Income from operations improved by approximately $34.9 million in the first six months of 2021 compared to the same period in 2020.
Outlook
Net sales for the full year of 2021 are expected to range from $11.3 billion to $11.5 billion reflecting improved sales volumes, positive pricing and favorable foreign currency translation. Higher sales and production volumes, as well as cost reduction initiatives, are projected to produce improved gross and operating margins. The improved profitability is expected to fund increases in engineering and other technology investments to advance AGCO’s precision agriculture and digital initiatives.
