AGCO Jefferies Industrials Conference Notes
Date: Sept 4, 2024
Topic: AGCO Jefferies Industrials Conference Notes
Author: Handzalah
- Regions act differently
- Europe region above 10 year average
- Not normal to see two correction years with similar magnitude
- Implying 2025 to potentially better in sales and demand
- Europe region tends to be the least volatile due to government subsidies
- South America tends to be the most volatile due to lower farmer qualified for government subsidies, lower government subsidies, and foreign exchange affects on exports and profitability
- North America tends to be the middle of the two when it comes to volatility
- Made aggressive adjustments in production for optimal dealer level
- MF and Valtra are volume oriented brands
- Faces the most problem in NA when it comes to reducing production
- Small Ag -> Agco do not control as they buy from 3rd party
- Large Ag -> Agco controls
- In 2023, Agco had an abnormal price-material cost arbitrage from locked sales and lower end year material costs
- Coming to 2024 pricing is being normalized
- Expects positive pricing in NA, flat pricing in Europe, and negative pricing in SA
- Fendt line is not targeted to be cheap but marketed as premium and value for owners by having benefits of efficiency and other benefits
- Significant penetration in market share for the Fendt line in NA and SA, however now the growth slowed down as the industry is in a down cycle
- Fendt leverages Farmercore
- Farmercore has been seeing great success
- Building the Fendt presence using Farmercore
- Past downturns, Agco provided S.T. leases, this downturn they do not
- 2021-2023 Agco mentions on how they could’ve sold more but was limited by supply chain constraints
- Pent up demand from this supply disruption
- No early order program for Precision Ag
- Good demand for retrofit segment relative to OEM ( great option for cash constraint farmers)
- Mentions on retrofit autonomous grain cart (benefits the labor constraint farms) and will start beta testing sales later this year
- Talk more about the acquisitions in December’s Investor Day
- Machines + Equipment costs make up 10-15% of farmers’ cost
- Agco products may reduce 60-70% of farmers’ usage for sprays and fertilizers, which is a meaningful amount
- Agco trying to educate farmers on their products investment payback period of 1-2 years
- Q4 is usually Agco’s best quarter
- Agco focus in reducing opex by debottlenecking rather than spend massive investments in expansion
- This debottlenecking resulted in highest production of the Fendt line
- To reduce SG&A they restructured and lay-off employees
- They also implement generative AI to improve overall SG&A efficiency
- Mid-cycle operating margin of 12% target will be discussed in the December Investor Day meeting