Duluth, Ga.-- AGCO, Your Agriculture Company, a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology, reported net sales of $3.8 billion for the fourth quarter of 2023, a decrease of 2.5 percent compared to the fourth quarter of 2022.
Reported net income was $4.53 per share for the fourth quarter of 2023, and adjusted net income(3) was $3.78 per share. These results compare to reported net income of $4.29 per share and adjusted net income(3) of $4.47 per share, for the fourth quarter of 2022. Excluding favorable currency translation impacts of 1.8 percent, net sales in the fourth quarter of 2023 decreased 4.3 percent compared to the fourth quarter of 2022.
Net sales for the full year of 2023 were approximately $14.4 billion, which is an increase of 13.9 percent compared to 2022. Excluding favorable currency translation impacts of 0.1 percent, net sales for the full year of 2023 increased 13.8 percent compared to 2022. For the full year of 2023, reported net income was $15.63 per share, and adjusted net income(3) was $15.55 per share. These results compare to reported net income of $11.87 per share and adjusted net income(3) of $12.42 per share in 2022.
“AGCO delivered record results in 2023 highlighted by significantly higher net sales and operating margins due to the continued execution of our Farmer-First strategy and healthy global industry demand,” said Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. “Driven by our high margin growth initiatives of globalizing a full-line of our Fendt branded products, precision ag business and expanding our parts and service business, net sales outgrew the market and full year adjusted operating margins reached a record high at 12.0 percent of net sales. We also continued to increase our technology development efforts with engineering expense up over 23 percent in 2023 compared to 2022 and up over 60 percent compared to 2020. These levels of higher investments are producing increased technology patents for AGCO, award-winning value-enhancing products for our farmers and record financial results for our shareholders.”
Hansotia continued, “For 2024, we will remain focused on our primary growth initiatives as well as driving further operational efficiencies. We expect these efforts to mitigate some of the softening industry demand. More challenging global market conditions are expected in 2024 due to reduced commodity prices and modestly lower farm income expectations. Despite a lower sales forecast, we expect higher and more resilient margins compared to past cycles due to structural improvements in our business. We will continue to accelerate investments in premium technology, smart farming solutions and enhanced digital capabilities to support our Farmer-First strategy while helping to sustainably feed the world.”
Highlights
- Reported fourth-quarter regional sales results(1): Europe/Middle East (“EME”) +3.3 percent, North America +8.3 percent, South America (38.9) percent, Asia/Pacific/Africa (“APA”) +11.3 percent
- Constant currency fourth-quarter regional sales results(1)(2)(3): EME +1.4 percent, North America +7.1 percent, South America (42.0) percent, APA +11.5 percent
- Fourth quarter regional operating margin performance: EME 16.2 percent, North America 9.0 percent, South America 3.8 percent, APA 8.0 percent
- Full-year reported operating margins and adjusted operating margins(3) improved to 11.8 percent and 12.0 percent respectively, in 2023 compared to 10.0 percent and 10.3 percent in 2022
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(1)As compared to fourth quarter 2022.
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(2)Excludes currency translation impact.
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(3)See reconciliation of Non-GAAP measures in appendix.
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Market Update
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Industry Unit Retail Sales
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Tractors
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Combines
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Year ended December 31, 2023
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Change from
Prior Year
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Change from
Prior Year
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North America(4)
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(3)%
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2%
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South America(5)
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(8)%
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(17)%
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Western Europe(5)
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(4)%
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2%
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(4) Excludes compact tractors.
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(5) Based on Company estimates.
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“Near record global crop production in 2023 has resulted in increased grain inventories and commodity prices have correspondingly retreated from the very high levels seen over the last 24 months,” stated Hansotia. “Although still strong by historical levels, farm income was down modestly across the major regions in 2023 and another modest decline is projected for 2024. Much of the industry fleet has been refreshed over the last three years and dealer inventories have been re-stocked. Full-year global industry retail sales of farm equipment in 2023 were lower in AGCO’s key markets, with weaker sales of smaller equipment being partially offset by higher sales of larger machines.”
North American full-year industry retail tractor sales declined 3 percent compared to the previous year. Lower sales of smaller equipment, more closely tied to the general economy, were partially offset by strong growth of high-horsepower tractors and combines. Relatively favorable commodity prices, extended fleet age and precision ag technology stimulated demand from row crop farmers. Lower projected farm income and a refreshed fleet is expected to pressure industry demand in 2024, resulting in weaker North American industry sales compared to 2023.
South American industry retail tractor sales decreased 8 percent during 2023 compared to the previous year. Retail demand in Brazil was negatively affected by funding shortfalls of the government-subsidized loan program. Healthy farm income, supportive exchange rates and continued expansion in planted acreage drove increases in high-tech farm equipment, which partially offset weaker smaller equipment demand due to financing delays. 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.
Industry retail tractor sales in Western Europe decreased 4 percent for the full year of 2023 compared to high levels in 2022. Farmer sentiment in the region has continued to be negatively impacted by the conflict in Ukraine and higher input cost inflation. Further declines in industry demand are expected in 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)
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Three Months Ended December 31
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2023
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2022
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% change
from 2022
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% change from
2022 due to
currency
translation(1)
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% change
excluding
currency
translation
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North America
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$
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891.7
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$
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823.7
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8.3%
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1.2%
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7.1%
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South America
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412.0
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674.8
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(38.9)%
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3.1%
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(42.0)%
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EME
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2,259.0
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2,186.5
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3.3%
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1.9%
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1.4%
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APA
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238.0
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213.9
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11.3%
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(0.2)%
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11.5%
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Total
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$
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3,800.7
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$
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3,898.9
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(2.5)%
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1.8%
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(4.3)%
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Year Ended December 31,
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2023
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2022
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% change
from 2022
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% change from
2022 due to
currency
translation(1)
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% change
excluding
currency
translation
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North America
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$
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3,752.7
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$
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3,175.1
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18.2%
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0.2%
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18.0%
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South America
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2,234.2
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2,121.6
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5.3%
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2.7%
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2.6%
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EME
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7,540.5
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6,447.3
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17.0%
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(0.3)%
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17.3%
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APA
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885.0
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907.4
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(2.5)%
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(3.4)%
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0.9%
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Total
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$
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14,412.4
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$
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12,651.4
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13.9%
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0.1%
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13.8%
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(1) See Footnotes for additional disclosures.
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North America
AGCO’s North American net sales increased 18.0% for the full year of 2023 compared to 2022, excluding the impact of favorable currency translation. Positive pricing and increased sales of high-horsepower tractors, application equipment as well as combines represented the largest increases. Income from operations for the full year of 2023 increased $180.5 million compared to 2022 and operating margins were 12.2%. The improvement was the result of positive net pricing and favorable product mix, partially offset by higher selling, general, and administrative expenses (“SG&A expenses”) and engineering expenses.
South America
Net sales in the South American region increased 2.6% for the full year of 2023 compared to 2022, excluding the impact of favorable currency translation, despite significant declines in the fourth quarter. Positive pricing impacts and favorable product mix of high-horsepower tractors accounted for most of the increase. Sales increases in Brazil were partially offset by lower sales in Argentina. Despite significant discounting in the fourth quarter, income from operations for the full year of 2023 increased by $12.5 million compared to 2022. This increase was primarily a result of positive net pricing, partially offset by lower sales volume and considerable dealer termination charges.
Europe/Middle East
Net sales in the Europe/Middle East region increased 17.3% for the full year of 2023 compared to 2022, excluding negative currency translation impacts. Healthy growth across the major European markets contributed to the improvement. Positive pricing and increased sales of mid-range and high-horsepower tractors as well as replacement parts produced most of the growth. Income from operations increased $316.5 million for the full year of 2023 compared to 2022 and operating margins improved 240 basis points. The improvement was driven by positive net pricing, partially offset by higher SG&A expenses and engineering expenses.
Asia/Pacific/Africa
Asia/Pacific/Africa’s net sales were approximately flat, excluding the negative impact of currency translation, during the full year of 2023 compared to 2022 due to positive pricing offset by lower tractor and combine sales volumes. Higher sales in Australia were mostly offset by lower sales in Japan. Income from operations decreased $39.6 million for the full year of 2023 compared to 2022 due to higher material and labor costs and higher SG&A expenses.
Outlook
AGCO’s net sales for 2024 are expected to be approximately $13.6 billion, reflecting lower sales volumes, modest positive pricing as well as favorable foreign currency translation. Operating margins are projected to be approximately 11 percent, reflecting the impact of lower sales, lower production volumes and relatively flat investments in engineering and other technology efforts to support AGCO’s precision agriculture and digital initiatives. Based on these assumptions, 2024 earnings per share are targeted at approximately $13.15.
For more information, visit http://www.agcocorp.com.