AGCO Sales Decline, Cuts Production

AGCO is reporting net sales of $3.2 billion for the second quarter ended June 30, 2024. That is a decrease of 15.1% compared to the second quarter of 2023. Net sales in the second quarter of 2024 decreased 14.2% compared to the second quarter of 2023.

AGCO also is reporting $6.2 billion in net sales for the first six months of 2024. That represents a 13.7% decline from the first six months of 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 CEO, in a press release. "Declines in commodity prices and lower projected farm income in 2024 have negatively affected farmer sentiment, further dampening global industry demand."

With current economic conditions, the manufacturer of the Fendt and Massey Ferguson lines says it is taking aggressive actions to control expenses, reduce production levels and lower investments in working capital.

For example, on July 25, AGCO announced it was selling its underperforming Grain & Protein business. "Divesting allows us to streamline and sharpen our focus on AGCO's portfolio of award-winning agricultural machinery and precision ag technology products," Hansotia said.

AGCO is maintaining its investments in three high margin growth areas--precision ag, global Fendt (full line) and Parts & Service. "Our investments would take into account our three high margin growth levers, new product development, modernizing and upgrading factories (among others)," AGCO told DTN/Progressive Farmer via email. The new PTx unit, "is a piece of the spend and would be considered within that Precision Ag high margin growth lever, but there are also many other areas we're investing in."

AGCO's capital expenditure is expected to be about $475M in 2024 and engineering, technology spending is expected to be about $545M in 2024, the last flat compared to 2023 including PTx Trimble, or down 7% excluding PTx Trimble.

For AGCO, North American net sales decreased 19.8% in the first six months of 2024 compared to the same period in 2023. The most significant sales declines occurred in the hay equipment, mid-range and high-horsepower tractor categories.

ACGO is tackling dealer inventories, which it judges are too high. To bring its measure of inventory back into line, AGCO is producing product at a rate that is below retail demand in an effort to reduce dealer inventories.

AGCO's second quarter production level was 23% lower than same quarter, 2023. On a full-year basis, AGCO expects production to be down 20-25%.

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. For all of 2023, AGCO reported net sales of $14.4 billion -- at the time a record result.

"As in prior cycle downturns, there is always a big correction year where the industry slows rapidly as farmers reduce their spend on new equipment," AGCO told DTN/Progressive Farmer. "We've known 2024 was going to be that big transitional year. After the transitional year, industry demand tends to float around trough levels for a period of time before ramping back up." The duration is influenced by factors such as commodity prices, weather and stock-to-use ratios.

"We are rapidly cutting production this year, faster than in the past, to right size dealer inventory levels this year in hopes that production and retail demand are more balanced in 2025, AGCO told DTN/Progressive Farmer. "In the second quarter, we made the decision to further restructure our workforce due to the weakening market demand."

AGCO also is addressing personnel costs. AGCO's workforce restructuring program includes an up to 6% reduction in its salaried workforce.

Dan Miller can be reached at dan.miller@dtn.com

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