Net sales of $3.2 billion, down 15.1% year-over-year Reported earnings per share of $(4.92) and adjusted earnings per share(1) of $2.53 2024 sales and earnings outlook lowered in response to further softening market conditions Agreement to divest the Grain & Protein business announced on July 25, 2024 DULUTH, Ga., July 30, 2024 /PRNewswire/ -- AGCO (NYSE:AGCO), a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology, reported net sales of $3.2 billion for the second quarter ended June 30, 2024, a decrease of 15.1% compared to the second quarter of 2023. Reported net loss was $(4.92) per share for the second quarter of 2024, which includes the estimated loss on the Grain & Protein business held for sale, and adjusted net income(1) was $2.53 per share. These results compare to reported net income of $4.26 per share and adjusted net income(1) of $4.29 per share, for the second quarter of 2023. Excluding unfavorable foreign currency translation of 0.9%, net sales in the second quarter of 2024 decreased 14.2% compared to the second quarter of 2023. Net sales for the first six months of 2024 were approximately $6.2 billion, which is a decrease of 13.7% compared to 2023. For the first six months of 2024, reported net loss was $(2.67) per share, which includes the estimated loss on the Grain & Protein business held for sale, and adjusted net income(1) was $4.85 per share. These results compare to reported net income of $7.36 per share and adjusted net income(1) of $7.80 per share for the same period in 2023. Currency translation impacts were flat for the first six months of 2024 compared to the same period in 2023. "While we continue to successfully execute our Farmer-first strategy, second quarter results were influenced by weakening market conditions and significant production cuts aimed at reducing our Company and dealer inventories," said Eric Hansotia, AGCO's Chairman, President and Chief Executive Officer. "Declines in commodity prices and lower projected farm income in 2024 have negatively affected farmer sentiment, further dampening global industry demand. Given the current environment, we are taking aggressive actions, including our recently announced restructuring program, to control expenses, reduce production levels and lower investments in working capital. We are balancing these near-term cost reductions with continued investment in our longer-term high-margin growth initiatives that will help deliver more sustainable results through the economic cycles." "On July 25, we announced an agreement to divest the Grain & Protein business," continued Hansotia. "The divestiture of this business supports our strategic transformation, recently accelerated by the PTx Trimble joint venture. Divesting allows us to streamline and sharpen our focus on AGCO's portfolio of award-winning agricultural machinery and precision ag technology products. Going forward, we will be better positioned for long-term growth in our higher margin and higher free cash flow generating businesses. Simultaneously, it will raise our profitability through the cycle as Grain & Protein has historically been a below average margin business." Second Quarter Highlights Reported regional sales results(2): Europe/Middle East ("EME") (4.4)%, North America (16.0)%, South America (41.7)%, Asia/Pacific/Africa ("APA") (33.6)% Constant currency regional sales results(1)(2)(3): EME (3.7)%, North America (15.8)%, South America (39.2)%, APA (32.6)% Regional operating margin performance: EME 15.2%, North America 9.2%, South America 3.6%, APA 7.9% Paid a variable special dividend of $2.50 per share in addition to the $0.29 quarterly dividend (1) See reconciliation of non-GAAP measures in appendix. (2) As compared to second quarter 2023. (3) Excludes currency translation impact. Market Update Industry Unit Retail Sales Tractors Combines Six Months Ended June 30, 2024 Change from Prior Year Period Change from Prior Year Period North America(4) (8) % (11) % South America(5) (14) % (35) % Western Europe(5) (5) % (20) % (4) Excludes compact tractors. (5) Based on Company estimates. "Crop production forecasts are predicting healthy harvests across most major agricultural production regions," said Hansotia. "Commodity prices have trended down as we've moved through the planting season and into summer, further pressuring farm income. We continue to expect increased adoption of precision technology, but more challenging farm economics are resulting in weaker global industry demand across most equipment categories. In the first half of 2024, retail tractor industry demand fell by an average of 8% across the three major regions." North American industry retail tractor sales decreased 8% during the first six months of 2024 compared to the first six months of 2023. Sales declines in smaller equipment were more significant than most of the larger equipment categories. Combine unit sales were down 11% in the first half of 2024 compared to the same period in 2023. Lower projected farm income and a refreshed fleet are expected to continue to pressure industry demand for the remainder of 2024, resulting in weaker North American industry sales compared to 2023. South American industry retail tractor sales decreased 14% during the first six months of 2024 compared to the first six months of 2023. Strong declines were consistent across Brazil, Argentina and the smaller South American markets. Demand in Brazil was negatively magnified by the floods in Rio Grande do Sul while also continuing to be affected by funding shortfalls of the government-subsidized loan program and a challenging first harvest in the Cerrado region. Following three strong years, retail demand in South America is expected to further soften in 2024 as a result of lower commodity prices and farm income. In Western Europe, industry retail tractor sales decreased 5% during the first six months of 2024 compared to the first six months of 2023 with the weakest conditions in Italy, the United Kingdom and Scandinavia. Industry demand is expected to soften for the remainder of 2024 as lower income levels pressure demand from arable farmers, while healthy demand from dairy and livestock producers is expected to mitigate some of the decline. Regional Results AGCO Regional Net Sales (in millions) Three Months Ended June 30, 2024 2023 % change from 2023 % change from 2023 due to currency translation(6) % change from 2023 due to acquisition of a business(6) % change excluding currency translation and acquisitions North America $         837.8 $         996.8 (16.0) % (0.2) % 2.5 % (18.3) % South America 348.9 598.6 (41.7) % (2.5) % 0.5 % (39.7) % EME 1,902.9 1,990.8 (4.4) % (0.7) % 1.7 % (5.4) % APA 157.0 236.5 (33.6) % (1.0) % 2.2 % (34.8) % Total $      3,246.6 $      3,822.7 (15.1) % (0.9) % 1.8 % (16.0) % Six Months Ended June 30, 2024 2023 % change from 2023 % change from 2023 due to currency translation(6) % change from 2023 due to acquisition of a business(6) % change excluding currency translation and acquisitions North America $      1,567.4 $      1,919.9 (18.4) % 0.1 % 1.3 % (19.8) % South America 652.3 1,102.4 (40.8) % (0.3) % 0.3 % (40.8) % EME 3,631.9 3,694.6 (1.7) % 0.2 % 0.9 % (2.8) % APA 323.7 439.3 (26.3) % (1.6) % 1.2 % (25.9) % Total $      6,175.3 $      7,156.2 (13.7) % — % 0.9 % (14.6) % (6) See footnotes for additional disclosures. North America North American net sales decreased 19.8% in the first six months of 2024 compared to the same period in 2023, excluding the impact of favorable currency translation and favorable impact of an acquisition. Softer industry sales, lower end-market demand and de-stocking efforts all contributed to lower sales. The most significant sales declines occurred in the hay equipment, mid-range and high-horsepower tractor categories. Income from operations for the first six months of 2024 decreased $119.9 million compared to the same period in 2023 and operating margins were 7.6%. The decrease resulted from lower sales and production, as well as higher warranty expenses and selling, general, and administrative expenses ("SG&A expenses"). South America Net sales in AGCO's South American region decreased 40.8% in the first six months of 2024 compared to the same period in 2023, excluding the impact of unfavorable currency translation and favorable impact of an acquisition. Softer industry sales and under-production of retail demand drove most of the decrease. Lower sales of tractors and combines accounted for most of the decline. Income from operations in the first six months of 2024 decreased by $192.1 million compared to the same period in 2023. This decrease was primarily a result of lower sales and production volumes as well as negative pricing. Europe/Middle East Europe/Middle East region net sales decreased 2.8% in the first six months of 2024 compared to the same period in 2023, excluding the impact of favorable currency translation and favorable impact of an acquisition. Growth in Germany, Turkey and France was offset by lower sales across nearly all the other European markets. Declines across nearly all equipment categories were mostly offset by increased sales of high-horsepower tractors. Income from operations increased $36.8 million and operating margins improved 120 basis points in the first six months of 2024, compared to the same period in 2023. The improvement was driven by a favorable sales mix related to high-horsepower tractors. Asia/Pacific/Africa Net sales in Asia/Pacific/Africa decreased 25.9%, excluding unfavorable currency translation impacts and favorable impact of an acquisition, in the first six months of 2024 compared to the same period in 2023 due to weaker end market demand and lower production volumes. Lower sales in China, Australia and Africa drove most of the decline. Income from operations decreased by $18.6 million in the first six months of 2024 compared to the same period in 2023 due to lower sales volumes. Outlook On April 1, 2024, AGCO acquired an 85% stake in PTx Trimble, and Trimble holds a 15% stake. AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on April 1, 2024. In addition, on July 25, 2024, AGCO announced the entry into a definitive agreement to sell its Grain & Protein business, which is expected to be completed prior to year-end. AGCO's net sales for 2024, including the positive impact of PTx Trimble, are expected to be approximately $12.5 billion, reflecting lower sales volumes and adverse foreign currency translation. Adjusted operating margins are projected to be approximately 9%, reflecting the consolidation of PTx Trimble as well as the impacts of lower sales, lower production volumes, increased cost controls and modestly lower investments in engineering. Based on these assumptions, 2024 adjusted earnings per share are targeted at approximately $8.00. * * * * * AGCO will host a conference call with respect to this earnings announcement at 10 a.m. Eastern Time on Tuesday, July 30. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO's website at www.agcocorp.com under the "Investors" Section. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for 12 months following the call. A copy of this press release will be available on AGCO's website for at least 12 months following the call. * * * * * Safe Harbor Statement Statements that are not historical facts, including the projections of earnings per share, production levels, sales, industry demand, market conditions, commodity prices, currency translation, farm income levels, margin levels, strategy, investments in product and technology development, new product introductions, restructuring and other cost reduction initiatives, production volumes, tax rates and general economic conditions, are forward-looking and subject to risks that could cause actual results to differ materially from those suggested by the statements. The following are among the factors that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements. Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, adverse weather, tariffs, increases in farm input costs, lower commodity prices, lower farm income and changes in the availability of credit for our retail customers, will adversely affect us. We maintain an independent dealer and distribution network in the markets where we sell products. The financial and operational capabilities of our dealers and distributors are critical to our ability to compete in these markets. Higher inventory levels at our dealers and high utilization of dealer credit limits as well as the financial health of our dealers could negatively impact future sales and adversely impact our performance. On April 1, 2024, we completed the acquisition of the ag assets and technologies of Trimble through the formation of a joint venture, PTx Trimble, of which we own 85%. Financing the PTx Trimble transaction significantly increased our indebtedness and interest expense. We also have made various assumptions relating to the acquisition that may not prove to be correct and we may fail to realize all of the anticipated benefits of the acquisition. All acquisitions involve risk, and there is no certainty that the acquired business will operate as expected. Each of these items, as well as similar acquisition-related items, would adversely impact our performance. A majority of our sales and manufacturing takes place outside the United States, and many of our sales involve products that are manufactured in one country and sold in a different country. As a result, we are exposed to risks related to foreign laws, taxes and tariffs, trade restrictions, economic conditions, labor supply and relations, political conditions and governmental policies. These risks may delay or reduce our realization of value from our international operations. Among these risks are the uncertain consequences of Brexit and tariffs imposed on exports to and imports from China. We cannot predict or control the impact of the conflict in Ukraine on our business. Already it has resulted in reduced sales in Ukraine as farmers have experienced economic distress, difficulties in harvesting and delivering their products, as well as general uncertainty. There is a potential for natural gas shortages, as well as shortages in other energy sources, throughout Europe, which could negatively impact our production in Europe both directly and through interrupting the supply of parts and components that we use. It is unclear how long these conditions will continue, or whether they will worsen, and what the ultimate impact on our performance will be. In addition, AGCO sells products in, and purchases parts and components from, other regions where there could be hostilities. Any hostilities likely would adversely impact our performance. Most retail sales of the products that we manufacture are financed, either by our joint ventures with Rabobank or by a bank or other private lender. Our joint ventures with Rabobank, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate. Any difficulty by Rabobank to continue to provide that financing, or any business decision by Rabobank as the controlling member not to fund the business or particular aspects of it (for example, a particular country or region), would require the joint ventures to find other sources of financing (which may be difficult to obtain), or us to find another source of retail financing for our customers, or our customers would be required to utilize other retail financing providers. As a result of the recent economic downturn, financing for capital equipment purchases generally has become more difficult in certain regions and in some cases, can be expensive to obtain. To the extent that financing is not available or available only at unattractive prices, our sales would be negatively impacted. In addition, Rabobank also is the lead lender in our revolving credit facility and term loans and for many years has been an important financing partner for us. Any interruption or other challenges in that relationship would require us to obtain alternative financing, which could be difficult. Both AGCO and our finance joint ventures have substantial accounts receivable from dealers and end customers, and we would be adversely impacted if the collectability of these receivables was less than optimal; this collectability is dependent upon the financial strength of the farm industry, which in turn is dependent upon the general economy and commodity prices, as well as several of the other factors listed in this section. We have experienced substantial and sustained volatility with respect to currency exchange rate and interest rate changes, which can adversely affect our reported results of operations and the competitiveness of our products. Our success depends on the introduction of new products, particularly engines that comply with emission requirements and sustainable smart farming technology, which require substantial expenditures; there is no certainty that we can develop the necessary technology or that the technology that we develop will be attractive to farmers or available at competitive prices. Our expansion plans in emerging markets, including establishing a greater manufacturing and marketing presence and growing our use of component suppliers, could entail significant risks. Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations, or otherwise are the victim of a cyberattack, we could be subject to significant claims, penalties and damages. Cybersecurity breaches including ransomware attacks and other means are rapidly increasing. We continue to review and improve our safeguards to minimize our exposure to future attacks. However, there always will be the potential of the risk that a cyberattack will be successful and will disrupt our business, either through shutting down our operations, destroying data, exfiltrating data or otherwise. We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. In addition, the potential of future natural gas shortages in Europe, as well as predicted overall shortages in other energy sources, could also negatively impact our production and that of our supply chain in the future. There can be no assurance that there will not be future disruptions. Any resurgence of COVID-19, or other future pandemics, could negatively impact our business through reduced sales, facilities closures, higher absentee rates, and reduced production at both our plants and the plants that supply us with parts and components. In addition, logistical and transportation-related issues and similar problems may also arise. We recently have experienced significant inflation in a range of costs, including for parts and components, shipping, and energy. While we have been able to pass along most of those costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will adversely impact our performance. We face significant competition, and if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose customers and our net sales and performance would decline. We have a substantial amount of indebtedness (and have incurred additional indebtedness as part of the PTx Trimble joint venture transaction), and, as a result, we are subject to certain restrictive covenants and payment obligations, as well as increased leverage generally, that may adversely affect our ability to operate and expand our business. Further information concerning these and other factors is included in AGCO's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2023, and subsequent Form 10-Qs. AGCO disclaims any obligation to update any forward-looking statements except as required by law. * * * * * About AGCO AGCO (NYSE:AGCO) is a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology. AGCO delivers value to farmers and OEM customers through its differentiated brand portfolio including core brands like Fendt®, GSI®, Massey Ferguson®, PTx and Valtra®. AGCO's full line of equipment, smart farming solutions and services helps farmers sustainably feed our world. Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales of approximately $14.4 billion in 2023. For more information, visit www.agcocorp.com. For company news, information, and events, please follow us on X: For financial news on X, please follow the hashtag #AGCOIR. Please visit our website at www.agcocorp.com AGCO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in millions) June 30, 2024 December 31, 2023 ASSETS Current Assets: Cash and cash equivalents $                        657.3 $                        595.5 Accounts and notes receivable, net 1,465.9 1,605.3 Inventories, net 3,499.4 3,440.7 Other current assets 583.1 699.3 Current assets held for sale 433.0 —   Total current assets 6,638.7 6,340.8 Property, plant and equipment, net 1,802.1 1,920.9 Right-of-use lease assets 168.4 176.2 Investments in affiliates 518.3 512.7 Deferred tax assets 499.0 481.6 Other assets 442.3 346.8 Noncurrent assets held for sale 448.3 — Intangible assets, net 689.9 308.8 Goodwill 2,451.5 1,333.4   Total assets $                   13,658.5 $                   11,421.2 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY Current Liabilities: Borrowings due within one year $                        320.2 $                           15.0 Accounts payable 1,075.7 1,207.3 Accrued expenses 2,543.1 2,903.8 Other current liabilities 154.2 217.5 Current liabilities held for sale 270.3 —   Total current liabilities 4,363.5 4,343.6 Long-term debt, less current portion and debt issuance costs 3,595.2 1,377.2 Operating lease liabilities 127.4 134.4 Pension and postretirement ...