AGCO Corporation Q3 FY2025 earnings call

• Delivered strong third quarter performance with EME leading. - Macro conditions volatile, but benefited from favorable regional mix. - Focused on production and cost management, supported dealers and customers, invested in growth technologies. - Monitored tariffs, adjusted supply chain, implemented price increases. - Inventory management: Europe dealer inventory below target, South America slightly above target, North America dealer inventory reduced from 9 to 8 months. - Strategic shifts: Sale of TAFE ownership, creation of PTx business, Project Reimagine restructuring, FarmerCore strategy. - Precision Ag: Launched FarmENGAGE mixed fleet digital platform, accelerated autonomous technology development.

Net sales were $2.5 billion, down approximately 5% year-over-year or up nearly 6% when excluding Grain & Protein business divested last year. EME led the quarter, being the largest, most stable and most profitable region. Europe, Middle East posted a 20% increase in net sales compared to the same period in 2024 (excluding favorable currency effects). South America declined close to 10% (excluding favorable currency impact). North America was down 32% (excluding unfavorable currency effects). Asia Pacific/Africa declined 5% (excluding unfavorable currency translation impacts). Third quarter adjusted operating margin was 7.5%, 200 basis points higher than the prior year. Europe/Middle East income from operations increased around $163 million with operating margins approaching 16%. North American operating income declined approximately $56 million year-over-year with margins remaining negative. South America operating income declined $23 million with margins down to around 6%. Asia Pacific Africa posted a slight increase in operating income of $1 million.

• Expect full year 2025 net sales of approximately $9.8 billion. - Revised earnings per share forecast to approximately $5. - Free cash flow expected to be within 75% to 100% of adjusted net income. - Capital expenditures expected to be around $300 million. - Effective tax rate revised to 33% to 35%. - 2026 global industry likely relatively flat, North American large ag down, Europe and South America modestly up.

• Macro environment volatility. - Tariff policy changes. - Geopolitical tension. - Farm economic difficulties. - Elevated input costs.

Q: Wondering if we can start here with the strong Europe results. And maybe just ask a simple question, how Europe performed relative to your expectations?

A: Yes. Sure, Kristen. So I think Europe, I would say, performed modestly better than what we had expected more on the top line. So volumes were a little bit stronger than what we had originally anticipated. The production, what you saw with the margins heavily influenced by the production schedule, I would say, was relatively in line with what we had expected. So overall, we feel good. I think the key point for us as we look at Europe right now, the dealer inventory levels are sitting below the optimal level for us. So we feel very good as we go into the fourth quarter and into '26 here that we're sitting in a relatively strong position from producing in line with retail or hopefully, if the markets were to pick up. And again, we haven't given a full outlook for '26 yet, but the dealer inventory levels are positioned well there for '26.

Q: Kristen Owen: And then my follow-up, understanding it's very early days to digest, but any initial thoughts on the China trade agreement that was announced yesterday and how that might complement some of the government support that's been floated out there. Just early thoughts on what that could do for your North American outlook next year.

A: Yes. We see this as clearly net positive. There's a combination of the soybean purchases that are more clear now for this year and the next few years. So farmers can -- that's really the core of what farmers look to is market stability and predictability. But then there's also the government support that's been strengthened. And so it's a dual positive outlook. Having said that, we think this is going to be a little bit of a show-me situation where the farmers are going to need to have this -- have the trades actually happen, the deal actually finalized, the beans actually being purchased, which will then drive real pricing in the market. So our phones weren't ringing off the hook yesterday with all kinds of purchasing orders coming in. But it's net positive. That will just take some time to play out in the market. It's probably more of a 2026 effect.