AGCO reported its results for the first quarter ended March 31, 2022. Net sales for the first quarter were approximately $2.7 billion, an increase of approximately 12.9% compared to the first quarter of 2021. Excluding unfavorable currency translation impacts of approximately 5.0%, net sales in the first quarter of 2022 increased approximately 17.9% compared to the first quarter of 2021.
“AGCO delivered record first quarter sales and earnings as healthy farm economics continue to support robust global demand,” stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. “Despite this elevated demand, supply chain constraints compounded by the impacts of the war in Ukraine continue to negatively influence our operations. Our results reflect substantial price increases to offset rising material costs, higher logistics expenses, and other manufacturing inefficiencies. Favorable farm fundamentals accompanied by heightened interest in AGCO’s precision ag solutions are supporting healthy order boards that remain well ahead of last year’s levels. We remain focused on minimizing the impact of supply chain disruptions and inflationary cost pressures to deliver strong full-year sales and earnings growth. In addition, our increased investments in premium technology, sustainable smart farming solutions and enhanced digital capabilities support our farmer-first strategy and position us for future growth.”
“Crop prices are near record levels and are helping farmers offset inflationary pressures from higher fuel, fertilizer and other input costs. The resulting elevated levels of farm income are expected to extend strong end-market demand,” stated Mr. Hansotia.
“Supply chain constraints limited global industry production and the corresponding retail sales in the first quarter,” continued Mr. Hansotia. “North American industry retail tractor sales were down approximately 1% in the first three months of 2022 compared to last year. Lower sales of smaller tractors, which declined from record levels in 2021, were partially offset by increased sales of high horsepower units. Despite continued strong demand, retail sales of large row-crop agricultural equipment was 11% below the first quarter of 2021 due to supply chain constraints, which limited deliveries. Industry retail tractor sales in Western Europe, which also were restricted by supply chain challenges, decreased approximately 6% in the first three months of 2022 compared to strong levels in the first quarter of 2021. Farmer sentiment has been negatively impacted by the war in Ukraine, as well as input cost inflation, but forecasts for healthy farm income in Western Europe are expected to support solid retail demand for equipment throughout 2022. In South America, industry sales increased during the first three months of 2022 in both Brazil and Argentina. Strong crop production levels as well as elevated commodity prices are supporting positive economic conditions for farmers who continue to replace an aged fleet. Despite the slower than expected start in North America and Europe, we continue to expect full year 2022 industry retail sales to be above 2021 levels in all major regions.”
Net sales in the North American region grew 15.0% in the first three months of 2022 compared to the same period of 2021, excluding the negative impact of currency translation. The increase resulted from the impact of pricing to mitigate inflationary cost pressures, along with increased sales of tractors as well as grain and protein equipment, partially offset by lower sales of Precision Planting products. Income from operations for the first three months of 2022 decreased approximately $20.1 million compared to the same period in 2021. A weaker sales mix primarily caused by chip-related supply constraints related to the Precision Planting business as well as higher operating expenses resulted in lower first quarter operating income.
AGCO’s South American net sales increased 41.8% in the first three months of 2022 compared to the same period of 2021, excluding the impact of favorable currency translation. Sales grew strongly across all markets, driven by the continued strength in industry demand and positive pricing impacts. Income from operations in the first three months of 2022 increased by approximately $29.9 million compared to the same period in 2021 and operating margins reached 12.9%. The improved South America results reflect the benefit of higher sales and production, a favorable sales mix, and pricing that offset material cost inflation.
Net sales in Europe/Middle East increased 15.0% in the first three months of 2022 compared to the same period in 2021, excluding unfavorable currency translation impacts. Higher sales of tractors and replacement parts along with favorable pricing impacts resulted in the increase. Income from operations grew approximately $18.0 million in the first three months of 2022, compared to the same period in 2021, while operating margins expanded to 11.6%. The improvements were the result of higher net sales and production volumes.
AGCO’s Asia/Pacific/Africa net sales increased 17.5%, excluding the negative impact of currency translation, in the first three months of 2022 compared to the same period in 2021. Higher sales in Australia, Japan and Africa were partially offset by lower sales in China. Income from operations improved by approximately $13.0 million in the first three months of 2022 and operating margins expanded by approximately 4.5% compared to the same period in 2021 due to higher sales and a richer sales mix.
The health, safety and well-being of all AGCO employees, dealers and farmer customers continue to be AGCO’s top priority. The ability of the Company’s supply chain to deliver parts and components on schedule is currently difficult to predict. The following outlook is based on AGCO’s current estimates of component deliveries. AGCO’s results will be impacted if the actual supply chain delivery performance differs from these estimates.
AGCO’s net sales for 2022 are expected to range from $12.5 billion to $12.7 billion, reflecting increased sales volumes and pricing partially offset by negative foreign currency translation. Gross and operating margins are projected to improve from 2021 levels, reflecting the impact of higher sales and production volumes as well as favorable pricing to offset material and labor cost inflation. These improvements are planned to fund increases in engineering and other technology investments to support AGCO’s precision ag and digital initiatives. Based on these assumptions, 2022 earnings per share are targeted in a range from $11.70 to $11.90.