AGCO at JPMorgan Conference: Precision Ag Strategy and Growth Outlook

On Wednesday, 14 May 2025, AGCO Corporation (NYSE:AGCO) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company emphasized its strategic focus on precision agriculture and outlined both growth prospects and challenges, such as tariff impacts and a recent impairment charge. Despite these challenges, AGCO remains optimistic about its future growth, particularly through its PTX Trimble joint venture.

Key Takeaways

• AGCO aims to grow PTX Trimble revenue from $850 million to $2 billion by 2029.
• A $350 million impairment was recorded due to industry cyclicality and market decline.
• The company targets a mid-cycle EBIT margin of 14-15%, with current projections at 7-7.5%.
• AGCO is focusing on retrofit solutions, geographic expansion, and product innovation.
• Cost savings initiatives are expected to generate around $200 million by 2026.

Financial Results

• Impairment Charge: AGCO recorded a $350 million impairment for the PTX Trimble JV, mainly due to industry changes and a significant OEM "last time buy."
• Revenue Growth: The company targets PTX Trimble revenue growth to $2 billion by 2029, leveraging geographic expansion and new products.
• Synergies: Approximately $100 million in synergies from the PTX Trimble acquisition is expected, with two-thirds from revenue synergies.
• EBIT Margin: AGCO’s mid-cycle EBIT margin target is 14-15%, with current projections at 7-7.5%.
• Cost Savings: Restructuring actions are set to generate $100-125 million in savings by year-end, with an additional $75 million by 2026.

Operational Updates

• PTX Trimble JV: This joint venture combines precision planting with Trimble’s guidance capabilities, signing over 200 CNH dealers as PTX Trimble dealers.
• Retrofit First Approach: AGCO focuses on retrofitting existing machinery with new technologies to expand its market reach.
• Distribution Channels: The company utilizes full-line technology dealers and base dealers for its retrofit market.
• Data Management: AGCO is developing a comprehensive data management portfolio, integrating telematics and agronomic tools.
• Geographic Expansion: Efforts are focused on expanding in North America, South America, and Asia.
• New Products: Innovations like the autonomous grain cart and Symphony Vision System are key growth drivers.

Future Outlook

• Growth Drivers: AGCO’s growth is expected from geographic expansion, new product launches, and cross-selling opportunities.
• Market Share: The $2 billion revenue target for PTX Trimble suggests a significant presence in the precision ag market.
• Competition: AGCO faces competition from traditional equipment manufacturers and tech-specific firms like Topcon and Raven.
• Data Strategy: The company is integrating data management solutions to enhance farm operations.
• Regional Differences: AGCO is adapting its products and strategies to meet varying regional needs.

Q&A Highlights

• Channel Differentiator: AGCO’s full-line technology channel offers brand-agnostic solutions and specialized expertise.
• Customer Stickiness: The company addresses customer loyalty through superior support and education-based sales.
• Margin Expansion: AGCO expects to achieve its EBIT margin target through portfolio rationalization and cost savings.
• Regional Focus: Engineering efforts are focused on non-core areas to meet specific regional demands.

For more details, please refer to the full transcript below.

Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Alright, good morning. This is Tammy Zakaria, US machinery engineering and construction analyst here at JP Morgan. It is my pleasure to introduce to you the team of AGCO. We have CFO Damon Audia and we have Andrew Sunderman who’s the head of PTX Trimble.

I will get started with some questions but we will also take questions from the audience toward the end. So if you have a question, raise your hand, we’ll get a mic to you. And if anyone wants to quest, submit a question online, you can also do that. You can submit it via the questions tab and then we, I can pose the question to the team for you. So with that Damon and Andrew, welcome.

Considering the tech and media focus of the investors here, could you provide a brief introduction to the company and specifically your goals around precision ag so we can get the conversation started?

Andrew Sunderman, Head of PTX Trimble, AGCO: Sure. Yeah. I’d be happy to. First of all, thanks for for having us here. So maybe a little bit about AGCO.

AGCO is a global leader in manufacturing, engineering and distribution of agriculture equipment and precision ag technologies. So we are a business that focuses on serving farmers around the world with the latest in machinery technology as well as precision ag technologies that are distributed through a couple of our core brands being Fent, Massey Ferguson and Vultra on the equipment side and our leading brands on the technology side of PTX Trimble and Precision Planting. We are a multi brand company that really looks to serve farmers with industry leading smart farming solutions for all types of farmers and all phases of what we would call the crop cycle. AGCO plays in the major markets around the world with our predominant markets in Europe, North America and South America and really look to utilize a strong dealer channel in those markets to distribute our products both from the sales and the support side for farmers that we enjoy a nice business with working to really transform the food production and the crop cycle from an automation standpoint and be more efficient, more effective in the agriculture practices that farmers partake in around the world.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Awesome. Since tariffs are still top of mind, believe it or not. How does tariffs impact the PTX Trimble side of the business? Do you outsource manufacturing of some of the hardware and retrofit kits to, to some other countries like maybe China or somewhere else? Basically where do these hardware components come from?

Andrew Sunderman, Head of PTX Trimble, AGCO: Sure. Maybe if I could, maybe I can speak a little bit to the technology business first and I can then talk about how we get those products, how we source those products. So our technologies business really focuses around the precision agriculture technologies that automate the functions that the machinery does and or the decisions that the people operating those machines need to make. Automating is a key part of the task for production agriculture today as there’s thousands and thousands of decisions that our farmers must make as they’re operating in the field and planning to operate in the field. So our technology solutions consist of both hardware solutions that go on the machine to automate either manual adjustments or automate on the go adjustments that happen in real time as those infield operations are completed.

It also includes a series of software capabilities either on the machine or what we would call back office solutions that allow our farmers to plan, monitor and analyze all aspects of the operations. And so our precision ag portfolio is quite broad in its offering for both hardware and software as well as for those familiar with the ag space, our precision ag technologies are arguably the broadest portfolio around the crop cycle. So from planting, planting, the fertilizer application, spraying and ultimately then the harvest processes that our farmers partake in. As we speak to tariffs, certainly tariffs have had an impact on our business as we operate around the world. We do a good bit of our own manufacturing.

That’s part of one of the things that we think is important to us is not only do we develop and design the products, but we also take on different levels of manufacturing, in some cases making everything down to building the ECUs that we use in our products, the sensors and certainly some of the harnessing that go into our products. Even though we do a portion of the manufacturing ourselves, there’s still a large portion that we outsource. And from what we outsource, we do bring those in. We have a number of U. S.-based suppliers, but we also bring those in from some major supply countries of Canada, Mexico, Thailand, Taiwan and some of our products coming from China as well.

As we look at the impact that we have, we certainly do have some exposure because of these tariffs, although it’s something that we continue to monitor every day. Our team has done a really nice job working on ways to mitigate these tariffs as we navigate these changing times. I mean, one of the things that we have an advantages is with our precision ag portfolio. We have a broad distribution footprint both for ourselves and for our dealers. And so we’ve been able to mitigate some of these impacts of tariff by working with our suppliers to distribute these to our different operation centers around the world and getting those products to the end point of sale rather than routing through The U.

S. Specifically. We also have done some in sourcing or resourcing, bringing some of the products, especially around harnessing and some ECUs in house for our own development as well as looking at some of our resourcing or dual sourcing with our suppliers here in North America. And lastly, we have taken certain pricing actions where necessary and we’ll continue to do so as needed. But one of our key goals is that we do look to minimize the risk to both the business and to our farmer customers as we know that farmers are also experiencing the impact of tariffs.

And so farmers certainly more on the distribution of their products and sale of their products as they look to get those into a very global market themselves. So in summary, we certainly see an impact but I think our team has done a really nice job to mitigate those through a number of different avenues that we have at our disposal.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Understood. So let’s talk about PTX Trimble, the recent JV you formed. Just to level set, who are the main competitors? And more importantly, how do you define the TAM for PTX Trimble? Because I know one of your bigger competitors came out with a TAM number a couple of years ago, a few years ago.

So how do you approach the TAM of PTX Trimble?

Andrew Sunderman, Head of PTX Trimble, AGCO: Yeah, so maybe just to speak to our competitors, there’s maybe kind of two different types of competitors that we could look at. The first would be your large traditional equipment companies similar to what AGCO’s traditional business has been with the core brands of Fent, Massey and Vultra. And these are competitors that their primary business is in the sale of equipment, but certainly as farmers look to have a more technology enhanced business, these equipment manufacturers have added more technology into the design of their original equipment. There’s also then this whole range of technology specific companies. The ag tech market has been really a hotbed over the past couple of years with early stage startups, new entrants into the market, working to solve different individual challenges that farmers face.

And so we kind of have these two competitive markets that we work with. As we speak specifically to some of the technology side, competitors would range from the likes of folks such as Topcon, There’s Raven is a business that has been acquired by CNH that’s certainly one that we compete with. And there’s some of these other smaller marketplaces. And on the equipment side, certainly the likes of Case New Holland and John Deere are key competitors in our business. As we look at our overall technology business and from a TAM perspective, we have a different go to market approach than what I think you’ll find from most companies in the market.

And we call this a retrofit first approach. And what we mean by this is we look to get our technologies into the hands of farmers in a rapid way to use with the existing machines that they already have in their farm. Retrofitting for us means that we make an existing machine as good or better than what could be purchased new with new technology and new value adding capabilities. This retrofit market really increases our addressable market in the fact that not only do we look at the number of machines that are sold in any given year, but we also look at generally how many machines have been sold over the past ten, maybe twenty years. Those machines that are already in the market today plus the new machines that are being produced each year really touches the addressable market that we can go out and capture with our farmer customers.

The second part to our addressable market is as we look at what a farmer spends their money on, there’s really only one section of that spend that we cannot touch and that’s the amount of money that they spend on their land itself. Everything else from their fertilizer, their seed, their machinery, even down to the fuel that they use, our precision ag technologies have the ability to impact, have an impact, a positive impact for farmers in their areas. And so this combination of serving all customers regardless of their use of a new machine or an existing machine as well as touching all phases of the crop cycle really provides an interesting business for us and I think one that you’ll find to be differentiated than what most other competitors are offering in this space.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: So I wanted to go back to the PTX Trimble JV. I think you had to record a write down one year into the deal. What did you not foresee? And related to that, can you walk us the bridge from the $850,000,000 of sales for that JV this year all the way to 2,000,000,000 by 2029?

Damon Audia, CFO, AGCO: Yeah, sure. Let me take that one, Tammy. So if I look at the impairment that we took at the end of the year, it’s really of two variables that affected that. One is the biggest one was the speed of the industry change. So when we formulated the joint venture with Trimble, again, was a bilateral negotiation, so it wasn’t up for auction.

You know, they were planning to their own distribution channel. We decided to partner with them as we thought we’d be better together as the two companies. So happened to be doing that at the peak of the cycle. We know our industry is cyclical. Unfortunately, the industry declined sooner and probably more severely than what we had anticipated.

And so that was the biggest variable that affected that is that 2024 decline relative to what we had thought. And now we sit here in 2025 with the North American market being down again and had a big effect on the discounted cash flow. The second variable that compounded that was really the last time buy that one of the large OEMs did who was selling that product to their CNH dealers. We have signed up over 200 of those dealers to be PTX Trimble dealers, but given the size of that purchase and coupled with the industry decline, what we thought would be a shorter period of that finding its way into the market got elongated to the downturn. And so when you layer on really no sales going into that C and H channel in 2024 coupled with the industry decline in 2024 and again in 2025, it really impacted the discounted cash flow model resulted in us having to do an impairment of around $350,000,000 for the goodwill.

No change to the technology, no change to what we bought, why we bought it, the excitement that you’ve heard from Andrew and what you’ll hear from us in building the portfolio around it, it just so happened that the timing of the cycle really affected the discounted cash flows. Flows. If I think about the growth, our target is to grow the PTX revenue, not just PTX Trimble, but PTX as a whole from around $8.50 this year to around $2,000,000,000 by 2029 really comes into a couple of different facets. Again, if we look at what Andrew talked about with the Precision Planting Group, focus historically on planting, very strong in North America and growing in Europe and Asia. And we look at Trimble, which was predominantly focused on guidance, but having portfolio expanding into water management, farm management systems, targeted spraying, they were very strong in Europe.

So when we brought these two together under now what we call the PTX Trimble brand and we create these full line tech dealers, that was part of the synergies that we talked about at the timing of the acquisition. We said that by the first by the third full year of the acquisition, we expected about 100,000,000 of synergies between the two companies, around two thirds of that coming from revenue synergies. So that’s taking that precision planting dealer and giving him or her the ability to sell the Trimble related products and taking those Trimble dealers where they’re strong and giving them the precision planting products. So that’s part of the that’s the initial lever of growth that we see is that cross selling opportunity. Now to go from this $8.50 up to the 2,000,000,000, it’s really going to be driven by geographic expansion.

So again, if I look at where Trimble was strong in Europe, undersized in North America, South America and Asia, so good growth potential internationally there. And if we look at precision planting, strong in North America, but growing in South America, Europe and Asia. So you have the growth geographically and then it’s the new product introduction. So bringing these two retrofit powerhouses together has really accelerated the innovation. Andrew will talk about the autonomous grain cart, the outrun product that we have first in the market with autonomy, the Symphony Vision System, so targeted spring, identifying a crop versus a weed, radical agronomics.

So really driving the innovation engine even faster as these two companies come together and that’s a significant growth lever for us as we think between now and 2029 is the new products.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Just from a numbers perspective, that 2,000,000,000, what is it in terms of market share? The reason I ask, let’s say North America, your large equipment share is probably, call it 10. In Europe, you know, maybe twenty, twenty five. South America, probably similar or higher. What does that 2,000,000,000 mean from the precision ag market share perspective?

Damon Audia, CFO, AGCO: Yeah, it’s going to be hard to break it down by market share because there’s so many different products in that retrofit channel. If you think about the targeted spring, again, it’s hard to describe a market share to the Symphony Vision system versus the water management system. If I think about the $2,000,000,000 if I look at the $8.50 today, I would tell you around half of that. So there’s a piece that we sell to AGCO. That will continue to grow as AGCO continues to gain market share.

If I strip that out, about 50% of that remaining revenue is to the other 100 plus OEMs that we sell and the other 50% is more of that retrofit channel. If I think about the 2,000,000,000, I would say that retrofit channel will be the higher growth portion of that revenue versus the other OEM or the AGCO channel.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: So let’s talk about retrofit. Recently one of your peers you know, spoke with investors and came out with some targets autonomous solutions. Your other peer has some fully autonomous crop care solution target by 02/1930. And they recently launched a very affordable priced retrofit kit. And so things are heating up.

And, and so how do you differentiate versus your competitor competitors? Is it price point? Is it how far back the models can go? Is it distribution? What is it that differentiates you?

Andrew Sunderman, Head of PTX Trimble, AGCO: So I think there’s a couple of things that provide differentiation for us. Of all, I would say it’s important to understand what retrofit means. And for us retrofit refers to the ability to use our products on any brand in any age of products. Some others in the industry use the retrofit term very differently. And oftentimes they’re looking at maybe making their own products better back to an older generation.

And so that’s a key differentiator is we focus our technology products to be able to work on any brand regardless of that age while others focus on their own brands. As we look at some of the other pieces to it, one of the things that has been very valuable for us is our speed of innovation. We’ve oftentimes been known for really bringing farmer focused solutions to the market. One of our key measures of success in our own product developments and our own decision making for what we spend our engineering dollars on is the payback to the farmer. We generally target a one or maximum two year payback to the farmer in the technology products that we offer in the market.

There’s a lot of variability in the farming practice and so when farmers can manage those costs, when they can drive for better profitability themselves, we found that they’re oftentimes very excited to engage with those products. A couple of other things that are key differentiators for us in addition to the speed of our innovations is the breadth of our product portfolio. By bringing these two businesses together, PTX Trimble and Precision Planting, we really provide solutions, as we would call it solutions for every season. Every seasons of that growing phase and of that harvesting cycle for the farmers. And so as we build on this, we now have a product portfolio that farmers know, trust and can utilize beyond where our business has started.

Precision Planting starting strong in planting space, PTX Trimble starting strong in the guidance and steering space, now being able to offer the same trusted products in broader phases of the crop cycle that our farmers work in. And the last part that I’d really focus on from a differentiation standpoint is how we go to market. We have, as Damon mentioned, we’ve developed kind of a well, we distribute our products in couple of different ways. One, we serve OEM customers and I’ll come back to that in a moment. But within our retrofit channel, we’ve developed two different kind of channel partners.

The first of that being what we call a full line technology dealer. This is really the I would say the core and the key differentiator in our distribution approach. But these full line technology dealers are dedicated precision ag dealers that really have come to know and are trusted by our customers in their local markets for value adding solutions in their farms. These full line tech dealers oftentimes do not sell agriculture equipment. They’re oftentimes highly specialized in those precision ag sales.

They may sell some periphery products such as maybe some seeds, some chemical fertilizer, other inputs that are critical in the farming operation, But they themselves are oftentimes highly ingrained in the farming process either as agronomists, farmers themselves, or other industries that are very close to the farming practice. And so their knowledge, their skill set, their capabilities to sell and support these products is really second to none. As Damon talked about the growing geographies, as we look at the market today we have a couple of very strong full line technology dealers. But as we look out over the next year to two years we really see that coverage of our full line technology dealers growing drastically specifically in North America and South America so that we can get more products into the hands of more customers. We complement this channel with what we call our base dealers.

And these base dealers are oftentimes the equipment dealers that we provide a portion of our product portfolio generally around this idea of connecting the mixed fleet. We know that farmers oftentimes use equipment from multiple brands in their farming operations And so our base dealers have access to small portion of the PTX portfolio that allows them to provide that consistent technology experience across the mixed fleet of equipment that our farmer customers are oftentimes using. So these two channels that make up our retrofit market are really the key differentiators. And the last thing I’ll say from a distribution standpoint is at the time a customer does look to go buy a new piece of equipment and they want our technology, we supply to over 100 OEM customers as what we look to be as the trusted provider for precision ag technologies. This means that regardless of a customer’s purchasing behavior, whether it’s a new machine or making their existing machine better, we have the ability to serve them through PTX with a pretty broad and very value adding set of products from our business alone.

Damon Audia, CFO, AGCO: Yeah, I think Tammy and you know this, but for the broader audience AGCO is the only OEM that has that unique retrofit channel, which is brand agnostic. Again, are not generally speaking new equipment salespeople. These are seed salespeople, agronomists, technologists who are working to maximize or optimize things on the farm regardless of the color of tractor or combine or sprayer that that farmer is using. And so we’re the only ones that bring our technology in that channel. So when people start to use the term retrofit, generally that retrofit is being sold through a new equipment channel in other companies.

And so that salesperson, she’s deciding do I sell a brand new planter or do I sell at $400,000 or do I sell a retrofit kit at 50,000 or $100,000 And so given their experiences, they tend to lean one way. This retrofit channel, they’re not usually selling the new equipment. So they’re on the farm looking to optimize. And again, it’s one of those unique differentiators that the other two don’t really have and likely won’t invest in.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: So I wanted to focus on data. I think it won’t be too much to say that data these days is knowledge and knowledge is power. So when we speak to farmers, a lot of them have moved everything to JD Up Center and they collect all the data from various sources and it helps them to make better decisions about their farming practices. So where does AGCO stand in that regard?

Andrew Sunderman, Head of PTX Trimble, AGCO: Yeah, so I mean you referenced there’s a couple of strong tools out there that farmers utilize today. And one of those tools luckily does come from us with our Trimble Ag software portfolio which is a very capable tool that connects that allows our farmers with a mixed fleet to plan, monitor and analyze the different aspects of that farming operation from deciding what to go do in the fields to how that’s actually being completed. And then ultimately after that task is completed, how was the performance of what I actually went and did. This is also an area you talked about data as a growing area for farmers to really make better decisions. And so this is something that we are focused on.

We’ve talked about in other forums kind of a three year plan that we are in the earlier stages of. We’re in the kind of coming to the end of phase one here where we’re looking to bring together a couple of our technology solutions in this data management space. We have strong telematics products that allow us to really make sure that our uptime remains strong in the field. We have some very strong agronomic tools to make sure that what we applied or what we put into the ground is really being developed for maximum yield. And then we have some, I’ll call it operations management tools that are very strong.

But what we haven’t done is we’ve never put these tools together. And so right now we have a great team of folks that are working to bring these four different solutions together into one strong portfolio that really provides probably the most capable toolset for managing, planning and analyzing the operation. We’re in the first stage of that right now where we look to bring these solutions together through common accesses for the customer. We’re expanding that to bring the feature set together and ultimately then we’ll be working to really make sure that the usability, that the interfaces and that the way that a customer can distribute that data to their other trusted partners is industry leading and top notch for their needs.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: So I want to see if any I think we have a question in the back.

Unidentified speaker: So every new operation kind of builds itself on some hypotheses about how they’re going to approach the marketplace and what they tend to believe is true. What are kind of like the two things that maybe now that you’re, as you said, you’re ending this phase one that you’ve kind of said, this is the big insight that we had to refine this hypothesis that we built the business upon and now we’re going to carry forward and make some adjustments around?

Andrew Sunderman, Head of PTX Trimble, AGCO: Yeah, so I think the first hypothesis would be that farmers want access, they want choices. And so that’s a thing that as we’ve looked at the choices that farmers are interested in making whether that’s how they buy the technology on new equipment versus old equipment, how they buy in terms of do they have to get everything all at once or can they take small steps into what they need of just solving one problem after the next. That’s kind of a key hypothesis that I would say has really shaped our need for this full line technology channel. It’s different as Damon said than the way that most people have gone, but it solidified our our decision that this full line tech channel is a differentiator and something that farmers benefit from, not just us as a business. Maybe the second hypothesis that I would look at is that farmers look to today they look to many different providers to provide their precision ag needs.

And I think we’ve developed we’ve kind of tested this hypothesis of well can PTX actually be that singular point of contact? And we’ve been reassured that we can. And so that’s really pushed us to use our engineering resources in areas where our strength has not been in the past. I mentioned we’ve been traditionally very strong in the planting space and in the guidance and steering space and a vast majority, something around 70% to 75% of our engineers are working on products outside of that core planting and guidance and steering space today. So that’s been maybe another key hypothesis that has really focused our engineering efforts differently from where they were in the past couple of years.

Unidentified speaker: It usually seems that every there’s usually tranches of a marketplace as you start to build it and what’s true for the first tranche of the marketplace tends not to always be true as you get deeper into the marketplace. What are you anticipating as you get further down into this marketplace so that you kind of unlock it more efficiently?

Andrew Sunderman, Head of PTX Trimble, AGCO: Yeah, so maybe what I’ll think about maybe the tranches maybe even from a regional standpoint. Our customers and the way that we serve the market regionally can slightly differ as well. Certainly in the type of customer that we have here in North America is very different than what we see in Europe. And so a lot of our heritage as a company is heavily rooted in North America. As we’ve gone into Europe and places of South America, it’s allowed us and required us to strengthen some of our OEM relationships as different customer purchasing behaviors have changed.

And it’s also required us to find some adaptations to our products in different ways that really serve the local market needs better. The goals of a farmer in Europe right now because of some of the requirements to farm in those markets are different. Things such as chemical application, nutrient application are really, really top of mind for farmers in Europe at the moment. So that’s requiring us to focus on that part of the market a little bit more than say some other areas. In South America, the planting process is very, very different here than in North America.

And so it presents some opportunities for us to solve a different set of problems that we don’t experience here in The U. S. And in Canada. And so maybe from a tranche standpoint, I’d look at it as just as we’ve gone not so much phases of the business, but different opportunities to serve a global market in different ways with a base skill set and basic base technology offering.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: One more here.

Unidentified speaker: I guess a two part question. The first part is, as data is becoming more important, are the days of multi brand tractors on a larger farm coming to an end? Like might not make sense to have one competitor and another competitor different data sets because they probably don’t match together. And then on the other side, it seems like it’s getting a lot stickier switching brands. So can you just talk about what that looks like trying to get someone to switch off a different platform to move over to yours while they might still have another tractor from someone else?

So maybe take the first step and

Andrew Sunderman, Head of PTX Trimble, AGCO: you can add anything to it. So I think to address your first question, I’ll maybe bring it back to that’s a choice that we want to provide an option to the customer, but ultimately we believe they get to decide what’s the right piece of equipment for their operation. From a technology standpoint, our main goal is that we would be able to provide a technology ecosystem and a set of technology products that regardless of whichever brand they choose to use, they can get a consistent technology experience both from user experience, from user knowledge, as well as from a feature set and capability standpoint. So that’s been a big focus of ours that we really make sure that our industry leading capabilities can be used regardless of the brands that they choose. Certainly I think from a if I put on my equipment hat, there’s certainly some things where the stickiness does come into play.

Things such as support is arguably one of the stickiest parts. And I think as I look at the Fent brand offering, especially here in North America, the industry’s best warranty and support program with our Fent Gold Star program, that’s a sticking point that really attracts customers and keeps them here because they know they have a more fixed cost of ownership in the products that they utilize. I also think about a stickiness from a standpoint of customers become very accustomed to how to use the products that they have in their market. And so one of the things that we focus on is really bringing that point of knowledge to the customers, whether in that’s the demonstrations that we offer, whether that’s in the farms that we operate, or whether that’s the way in which we train and take a very education based approach in our sales methodology. This is part of I think a way that we’ve been able to remove some of the stickiness to bring customers to our products, but also then reinforce that stickiness year after year as farming is very seasonal.

And so what you did last year, it might be one year before you ever have to do it again. And so that continuous engagement with the customer, bringing new products to them at their point of need and also serving them more locally in their markets is a key part of I think what helps us to alleviate some of the stickiness and ultimately then keep people in our camp for the years to come.

Damon Audia, CFO, AGCO: Yeah, think the only thing I would add Andrew is as farms have evolved over the last one hundred years, I mean most farms are businesses now. And they’re driven by their P and Ls and their profitability. So as we’ve started to launch the Fent brand here in North America and in South America, it is one of the best if not the best performing product out there. So for a farm who’s managing his or her P and L, Fent is the most fuel efficient tractor on the marketplace. Andrew touched on the Gold Star warranty.

So that farmer, he or she has three years bumper to bumper versus an industry condition norm of two, and then that dealer network, that overall Fence experience. So as we’re looking to grow our market, you hear in Fence done quite well both in North And South America over the last several years. It’s that overall Fence experience helping that business owner who’s also a farmer manage his P and L more effectively, getting better performance at the same time better service, and thus making their farms more productive.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Any more questions in the room? So probably I have time for one question. So one math question for you Damon. Your mid cycle target is 14 to 15% EBIT margin by 2019. This year you’re doing seven to seven and a half percent.

And your volume this year is gonna be 85% of mid cycle. So let’s say I tack on, I add on high teens percent volume increase from here on, and some pricing, maybe a single digit over the next five years. If I put that in your model, you need almost, you know, over 40% incremental margin to get to that 14 to 15 percent mid But your typical incremental margin, what we’ve known historically is much lower. So help us understand why this is not a tall order and you can actually get to 14 to 15.

Damon Audia, CFO, AGCO: Yeah, so two answers. I mean first, the current year there’s two variables that we have factor in. One is to this year we’re significantly under producing relative to retail. And as I’ve said, when you look at our mid cycle margin target, last year we were at 9%. If I look at the 85% of mid cycle, that would be up 8.5%.

So I’d lose between 1% to 1.5% because of the under absorption relative to retail. So that in a mid cycle wouldn’t be the case. When I think about the growth, part of it is also the incremental cost savings that we’re generating on top of the normal environment is the delta. But if I look at the simplest way to look at that would be last year’s numbers were 9% and that was around 90% of mid cycle. If I move that to mid cycle, that’s around 10%.

So that’s sort of my starting point is where I sit. And I’m going to go from 14 to 15. So about 150 of that will come through the portfolio rationalization that we went through already. So we sold off grain and protein, which was a single digit margin business that’s out of the portfolio. So as the industry comes back and we layer in the PTX Trimble acquisition, that was a high 20s around 30% EBITDA business.

So it’s just that general volume comes back to the industry. That’s around 150 basis points of margin lift versus the 10% mid cycle. The cost actions, so we announced the restructuring action last year of 100,000,000 to $125,000,000 of run rate savings by the end of this year. At the December Investor Day, I said we’ve identified about another $75,000,000 of cost savings by the end of twenty twenty six. So as we move it by the end of twenty twenty six, that’s around $200,000,000 of cost savings.

That’s around 150 basis points of margin lift as well. And then our three growth drivers, so the FENT market share rollout in North And South America, parts growth enhanced by Farmer Core and then the PTX Trimble or the PTX revenue on top of just the portfolio changes. So the new products that get us the $2,000,000,000 those three growth engines are in the range of 150 to 200 basis points of margin lift.

Tammy Zakaria, US machinery engineering and construction analyst, JP Morgan: Awesome. I think that’s all the time we had. Thank you so much and have a wonderful rest of the conference.

Unidentified speaker: Thank you.

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