1ST HALF: AGCO'S SALES DOWN 3%, NET INCOME DOUBLES
Aug. 12, 2019
Source: AGCO news release
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AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide manufacturer and distributor of agricultural equipment and solutions, reported net sales of approximately $2.4 billion for the second quarter of 2019, a decrease of approximately 4.5% compared to the second quarter of 2018. Reported and adjusted net income was $1.82 per share for the second quarter of 2019. These results compare to a reported net income of $1.14 per share and adjusted net income, excluding restructuring expenses and costs associated with an early retirement of debt, of $1.32 per share for the second quarter of 2018. Excluding unfavorable currency translation impacts of approximately 4.6%, net sales in the second quarter of 2019 increased 0.1% compared to the second quarter of 2018.
Net sales for the first six months of 2019 were approximately $4.4 billion, a decrease of approximately 2.8% compared to the same period in 2018. Excluding unfavorable currency translation impacts of approximately 5.7%, net sales for the first six months of 2019 increased approximately 2.9% compared to the same period in 2018. For the first six months of 2019, reported net income was $2.66 per share, and adjusted net income, excluding restructuring expenses was $2.68 per share. These results compare to reported net income of $1.44 per share and adjusted net income, excluding restructuring expenses and costs associated with an early retirement of debt, of $1.68 per share for the first six months of 2018.
Second Quarter Highlights
*Reported regional sales results(1): North America 3.1%, Europe/Middle East ("EME") (5.7)%, South America (15.4)%, Asia/Pacific/Africa ("APA") (6.7)%
*Constant currency regional sales results: North America 3.6%, EME 0.2%, South America (9.7)%, APA (0.8)%
Operating margin improvement of over 160 basis points vs. second quarter of 2018
*Regional operating margin performance: North America 8.3%, EME 14.3%, South America (3.8)%, APA 4.3%
Full-year net sales projection decreased to reflect reduced market outlook
*Full-year outlook for net income per share increased
Dividend increased approximately 7% to $0.16 per share, effective second quarter 2019
*Repurchases reduced outstanding shares by approximately 0.9 million in the first half of 2019
"Our second quarter results were highlighted by margin expansion across all regions and significant growth in earnings per share," stated Martin Richenhagen, AGCO's Chairman, President and Chief Executive Officer.
"Continued progress on our margin initiatives allowed us to overcome increasingly challenging market conditions in our key markets and improve earnings per share on relatively flat revenues. Increased price realization and initiatives aimed at lowering material costs and raising productivity contributed to the improved profitability in the second quarter. While we have lowered our production schedule to align with market demand, we have raised our earnings outlook for the full year to reflect our confidence in our continued strong margin performance."
"Wet weather and flooding in the U.S. have delayed planting, curtailed planted acreage and reduced 2019 crop production estimates," continued Mr. Richenhagen. "Hot, dry conditions across much of Western Europe are also impacting crop production in that region. Increased harvests in Brazil and Argentina should provide some offset to lower production in North America.
"While negative in the short-term for farm income and farm equipment demand, forecasts for lower crop production and lower ending inventories of grain have moved commodity prices higher, which could be positive for global farm income in the future. Concerns over delayed crop development and lower harvest forecasts negatively impacted North American industry retail sales in the first six months of 2019 compared to the same period in 2018.
"We expect North American industry retail tractor sales to be relatively flat in 2019 compared to last year. Modestly higher sales of small tractors and hay and forage equipment are expected to offset lower retail sales in the row crop segment compared to last year.
"Continued warm, dry growing conditions across much of Europe have stressed the development of the winter wheat crop, while milk prices remain supportive of the dairy sector. Industry retail sales in Western Europe increased in the first six months of 2019, following a year of mixed results in 2018 for the arable farming segment. Industry sales growth in France and Germany was partially offset by declines in the United Kingdom and Italy. For the full year of 2019, industry demand in Western Europe is expected to be flat compared to 2018.
"Industry retail sales in South America decreased during the first six months of 2019. The benefits of improved grain production in Brazil and Argentina were offset by interruptions in the government subsidized finance program in Brazil and weak macro-economic conditions in Argentina. For the full year of 2019, industry demand in South America is expected to be flat compared to 2018. Longer term, we are optimistic about the fundamentals supporting commodity prices and farm income as well as healthy growth in our industry."