AGCO CORP /DE Q1 FY2025 earnings call

• AGCO delivered solid results in Q1 amidst challenging industry and trade environment. - Continued soft demand in ag market led to sales decline, but efforts to destock dealer inventories and restructuring actions were in progress. - Production hours down ~33% in Q1 2025 vs Q1 2024. - Europe sentiment on upward trend, South America has potential growth due to trade policies, North America demand soft. - Fendt, Valtra, Massey Ferguson performance varied by region. - Products like PTx Trimble OutRun, Valtra S Series, Massey Ferguson 5M Series won awards for innovation and design.

AGCO achieved over $2 billion in net sales in the first quarter, down approximately 30% compared to Q1 2024. Excluding the Grain & Protein divestiture, sales declined by about 25%. Consolidated operating margins were 2.4% reported and 4.1% adjusted. Regional breakdown: Europe/Middle East segment sales down ~23%, South America down ~6%, North America down ~34%, Asia Pacific/Africa down ~38%. Replacement part sales were approximately $433 million, flat year-over-year reported and up ~3% excluding currency translation.

• Projecting 2025 production hours 15%-20% lower than 2024, with North America showing biggest decline. - Adjusted operating margin expected to be between 7% and 7.5% in 2025. - Full year net sales outlook is $9.6 billion. - 2025 earnings per share remain in the $4 to $4.50 range. - Q2 2025 net sales expected to be approximately $2.5 billion, with EPS in the $1 to $1.10 range. - Effective tax rate anticipated to be ~35% for 2025.

• Adverse developments in agricultural industry. - Supply chain disruption. - Inflation, tariffs, weather, commodity prices. - Changes in product demand. - Possible failure to develop new products on time. - Difficulties in integrating PTx Trimble business. - Introduction of new/improved products by competitors. - War in Ukraine. - Difficulties in integrating acquired businesses. - Adverse changes in financial and foreign exchange markets.

Q: The first quarter came in better than expected. Any color on where performance was better versus expectations? And about tariffs and order book?

A: Operationally, price, mix, and cost were better. Price and mix were about $0.25 positive, below-the-line items about $0.20. On tariffs, assumed modest price increases, some in effect for parts, contemplating equipment pricing with potential incremental slowdown in North America. Order boards in North America are 4-5 months depending on product.

Q: Sustainability of EME margins and mix shift from Fendt?

A: EME market is stable. Fendt is gaining market share with new products, and mix shift to volume-oriented brands may have little impact on EME margins.

Q: Trimble top line and margins in the quarter and dealer inventories?

A: PTx Trimble sales ~$60 million in Q1, profitable. Dealer inventories: AGCO dealers tripled industry coverage, PTx take rate on AGCO products at ~90%, CNH dealer stock headwind nearing exhaustion.

Q: Mechanics of full year guide and capital allocation strategy?

A: Full year guide considers current tariffs and mitigation actions. Capital allocation discussions with TAFE ongoing, aiming to do share buybacks once constraints are lifted.

Q: Fendt production in US contingency plan?

A: Evaluated production footprint annually, but current environment lacks sustainable assumptions. Waiting for stabilization, working with suppliers on component production.

Q: Precision Ag reorganization and competitive landscape?

A: Launched new NAV-960 technology, PTx marketing strong. Pricing has mix of upfront and subscription models.

Q: Cost cut programs and margins on upswing?

A: Cost cut program on track, run rate savings $100-$125 million. Structured cost cuts should lead to higher incremental margins on market upswing.

Q: Fendt tariff plan in EU?

A: Tariff strategy is strategic, not just on one product, likely spread across portfolio.

Q: Tariff sources and Brazil outlook?

A: Largest tariff headwind from EU, second from China components. Full speed ahead in Brazil, sales sentiment positive, engaging with market vigorously.

Q: Brazil subsidies and pricing change?

A: No specific news on Brazil subsidies. Pricing change mainly due to North American market dynamics.