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AGCO REPORTS 1Q 2019 RESULTS
Source: AGCO news release

AGCO reported it sales during the first quarter of 2019 were down 0.6% compared to the first quarter of 2018. Excluding unfavorable currency translation impacts of approximately 7.1%, net sales in the first quarter of 2019 increased approximately 6.5% vs. the same period of 2018.

On a regional basis, AGCO's first quarter sales were down 1.3% in North American, up 4% in its Europe/Middle East region, down 14.3% in South America and down 16.3% in its Asia/Pacific region.

The company improved its operating margin by 190 basis points vs. first quarter of 2018. Regionally, operating margins were +6.2% in North America, +10.5% in EME, -5.4% in South America and +2.6% in the APA region.

"Focused operational performance across our regional business units and supportive market conditions are driving sales and earnings growth," said Martin Richenhagen, AGCO's chairman, president and CEO. "AGCO's first quarter results demonstrated solid progress toward our margin improvement goals for 2019. Led by our Europe/Middle East region, AGCO's first quarter 2019 adjusted operating margins improved over 190 basis points compared to the first quarter of 2018. Our margin expansion resulted from organic sales growth, an improved pricing environment and initiatives aimed at lowering material costs and improving productivity. We have raised our outlook for the full year to reflect our confidence in our continued strong performance and in the market recovery."

North America

AGCO's North American net sales decreased 0.6% in the first 3 months of 2019 compared to the same period of 2018, excluding the negative impact of currency translation. Lower sales of tractors and grain and protein production equipment were mostly offset by growth in the sales of application equipment as well as hay and forage equipment. Income from operations for the first 3 months of 2019 improved approximately $3.8 million compared to the same period in 2018. The benefit of improved pricing and sales mix contributed most of the increase.

South America

Net sales in the South American region decreased 2.6% in the first 3 months of 2019 compared to the first 3 months of 2018, excluding the impact of unfavorable currency translation. Income from operations improved approximately $8.1 million in the first quarter compared to the same period in 2018. The South America results in the first quarter reflect seasonally low levels of industry demand and company production, as well as cost impacts associated with the transition of newer product technology into our Brazilian factories.

Europe/Middle East

Europe/Middle East net sales increased 13.2% in the first 3 months of 2019 compared to the same period in 2018, excluding unfavorable currency translation impacts. Sales growth was strongest in France, the United Kingdom and Spain. Income from operations improved approximately $28.7 million for the first 3 months of 2019, compared to the same period in 2018, due to the benefit of higher sales and production, pricing and the timing of engineering costs compared to the prior year.

Asia/Pacific/Africa

Net sales in AGCO's Asia/Pacific/Africa region decreased 9.6%, excluding the negative impact of currency translation, in the first 3 months of 2019 compared to the same period in 2018. Lower sales in Asia and Australia produced most of the decrease. Income from operations declined approximately $1.3 million in the first 3 months of 2019, compared to the same period in 2018, due to lower sales levels.

Outlook

Global industry demand is projected to improve modestly in 2019. AGCO's net sales for 2019 are expected to reach approximately $9.5 billion reflecting improved sales volumes and positive pricing, offset by unfavorable foreign currency translation impacts. Gross and operating margins are expected to improve from 2018 levels, reflecting the positive impact of pricing and cost reduction efforts.