AGCO at Oppenheimer Conference: Navigating Tariff Challenges

On Tuesday, 06 May 2025, AGCO Corporation (NYSE:AGCO) presented at the Oppenheimer 20th Annual Industrial Growth Conference, revealing a mixed outlook. While the company exceeded Q1 expectations, it faces challenges from tariffs and market weaknesses. AGCO remains optimistic, reaffirming its full-year guidance and outlining strategies to mitigate tariff impacts.

Key Takeaways

• AGCO reported Q1 net sales of just over $2 billion and adjusted EPS of $0.41, surpassing expectations.
• The company reaffirmed its full-year sales outlook of $9.6 billion and EPS between $4 and $4.50.
• Tariffs on EU-sourced products pose a $0.30 headwind, prompting AGCO to explore mitigation strategies.
• AGCO aims to double its precision ag revenue to $2 billion by 2029, focusing on new technologies.
• Dealer inventory management is a priority, with significant reductions planned in North America.

Financial Results

• Q1 net sales were just over $2 billion, with adjusted operating margins at 4.1%.
• Adjusted EPS of $0.41 exceeded expectations by approximately $0.25-$0.30.
• Full-year sales outlook reaffirmed at $9.6 billion, with operating margins between 7% and 7.5%.
• Production is expected to decrease by 15% to 20% for the year.
• Foreign currency outlook improved, providing an additional $0.40 earnings benefit.

Operational Updates

• Dealer inventories are being optimized, with Europe and South America maintaining levels under four months.
• North American inventory reduced slightly, with a goal to decrease further.
• North American production down over 50% in Q1 and expected to remain so in Q2.

Future Outlook

• Precision ag revenue target set to double to $2 billion by 2029, driven by geographic expansion and new products.
• AGCO plans to enhance its autonomous offerings by 2030.
• Ukraine market seen as an opportunity, with potential growth post-war.

Q&A Highlights

• AGCO is implementing strategies like supply chain optimization and dual-sourcing to mitigate tariff impacts.
• Fendt sales in the Americas are projected to grow to $1.7 billion by 2029.
• AGCO holds a 20% market share in Europe, with strong positions in France and Germany.
• Collaboration with BIWA in Germany aims to address liquidity challenges.

For a deeper understanding, readers are encouraged to refer to the full transcript.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Alright. Well, good morning, everyone, and thank you for joining us at Oppenheimer’s twentieth annual industrial growth conference. I’m Kristen Owen. I cover the ag and infrastructure space here as part of our sustainable growth and resource optimization team at Oppenheimer. I have the privilege of being joined this morning by AGCO’s, chief financial officer, Damon Audia.

I believe we’ve got Greg Peterson, VP of IR, in the background there. Thank you for for being here this morning, Damon. Just before we dive in, I do wanna note for folks on the line, we have a q and a feature on today’s call. If you have a question or a follow-up, please feel free to drop that in, and, we’ll try to address it live on the call. If we don’t get to it, we’ll try to connect you with the team afterwards.

Damon, we we do have a lot to dig into this morning. But just given that you all reported q one results last week, I’m wondering if you can give us the quick one minute recap on on your results last week.

Damon Audia, Chief Financial Officer, AGCO: Yeah. Sure, Kristen. Glad to be here. For those of you who didn’t hear us, our net sales were just over $2,000,000,000. We have reported consolidated adjusted operating margins of 4.1%, so that would reflect decremental sort of in the low to mid 20 range.

Our adjusted earnings per share came in better than our expectations at 41¢ per share. The strong first quarter helped us reaffirm our full year outlook at 9,600,000,000.0 in sales, operating margins in the seven to seven and a half percent range, and earnings per share in the $4 and $4.50 range, all while retaining our production guide of production being down somewhere in the range of 15 to 20% for the full year. So overall, good start to the to the year.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Indeed, a a very strong start to q one. You did maintain the guidance, even with the impact of tariffs, which we’re gonna get into. Can you just talk us through some of those moving pieces around the the q one strength and then maybe some of the uncertainty or or moving pieces around the tariffs assumed in the remainder of the year?

Damon Audia, Chief Financial Officer, AGCO: Yeah. So if we look at the first quarter, you know, we’ll unpack the the 41¢ a little bit, and then I’ll sort of jump into how that affects the full year. So for the 41¢, again, better than our expectation, that’s sort of categorized in two different pieces. Operationally, we did better by about $25.30 cents or so. You know, we saw a little bit better pricing in certain parts of the world.

We saw a little bit better mix in our cost actions that we’ve been talking about for a year now or sort of June of last year have really started to gain some traction a little bit sooner than what we had expected. So when I look at all of them offset by a little bit of incremental production cuts than what we had originally planned, you know, that buckets together were about 25¢ of operational improvements. If I drop below the line, there was a little bit better other income and expense. You know, we saw lower levels of inflation in Turkey related to the currency there. Our receivable discounting because sales were a little bit lower in certain parts of the world.

We had less of a sale discounting going on, and those sort of below the line items amounted for around another 15 to 20¢ of sort of below the line operations. So, you know, put those two together is how we get to the 40¢ of earnings better than what we had originally expected. So as I said, good start to the year. That was part of the way that we allowed ourselves to reaffirm our four to four fifty of EPS. And so if I look at some of the moving pieces, so even though there wasn’t a change in the guidance, I would say under the surface, there were several parts that were moving.

So let’s put the 40¢ as a positive. We’ve looked at our foreign currency as I think the team knows here. We have a large exposure internationally, so more than half of our revenue comes from Europe. With the euro at that point, we had originally started the year with a foreign currency headwind of around 3%. As the euro has strengthened in the course of the quarter, you know, it’s allowed us to move that foreign currency, outlook to flat.

So that’s around a 3% pickup. You know, that translates to around additional 40¢ of earnings pickup for us through the course of the year. So that brings it up to 80. Now the offset to that 80 is we saw our markets weaken a little bit more. If you look at our change in our outlook, our markets in North America weakened a little bit more.

Asia Pacific is weaker than we started the year, and our European market is a little bit weaker than we started the year. Those three markets a little bit weaker offset by a slightly more positive, South American market, you know, is taking the, you know, the absolutes down and is forcing us to cut our production a little bit more. And so I would say those are, you know, driving down, you know, around 30¢ or 40¢ when you look at the under absorption, and then we layered in our tariff assumption. And so what we’ve assumed for tariffs is what is in effect today, is in place for the balance of the year. So the retaliatory tariffs after this ninety day window do not move up to the higher level, but what’s in effect sort of stays in effect for the full year.

We’ve made the assumption that that has an incremental cost to AGCO. We’ve made some assumptions as to how we will address that through cost mitigation actions, through our suppliers, through other actions we may be able to do and or some potential pricing actions. So we’ve assumed a certain level of pricing that we’re able to implement both in parts as well as our equipment, and we can talk about that. Chris, if you wanna double click on it. And we’ve also assumed that if and when we put that into effect, there’s likely some incremental weakness to our top line in North America.

Again, we did not change our industry outlook related to that because we don’t know if that would be unique to AGCO or if that would affect the overall industry. But when we look at those two things, the lower revenue for North America coupled with the pricing and how that drops to the bottom line, that’s around a 30¢ headwind for us related to tariffs. And so when you look at the weaker industry, the incremental under absorption and the tariffs, know, that’s around 70¢ or so offsetting that, you know, 80¢ of what I touched on, which is the strong q one and the FX improvement.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: And we are certainly gonna double click on tariffs. But before I get there, before we make any assumptions around the demand impact on tariffs, I wanna ask about your your baseline assumptions on sales and production sort of relative to retail demand, how you’re anticipating dealer inventories to progress as we get into the back half of the year.

Damon Audia, Chief Financial Officer, AGCO: Yeah. So let’s we’ll go around the world and let’s start with Europe. So Europe, as I said, it’s our biggest market with over 50% of our revenue. If we look at where we finished the first quarter, dealer inventory levels were just under four months. And for us, four months is that optimal level of what we want the dealers to hold.

So Fent is a little bit below that. Massey and Vulture a little bit above that. But overall, we’re feeling very good about the dealer position in Europe. And, again, I would say generally speaking, you’ll see production in retail matched in Europe may fluctuate a little bit in any given quarter because some of the exports to the other regions. But but generally for Europe, we’re going to be producing in line with, with retail demand there.

If we jump over to South America, which was one of the early was one of the markets to go into the downturn early, you know, we’ve been cutting production significantly there now for about six quarters. If we look at where we were at the end of the year in South America, we were at about five months of inventory. We looked at we finished here in the first quarter just under four months. So we took around one month out. If we look at that on a unit basis, we reduced the number of units in South America by about 7%.

So we’re making progress. Our goal is to get to around three months. And based on our outlook right now, we feel like we would be in a good position to to hit that three month mark by the end of the second quarter. I think some of the investors know AGGRASHOW just wrapped up last week, and I would say, as we said, probably for the last couple months, we were starting to feel a little bit more of a positive sentiment in South America. The soybean harvest was a record down there, so I think farmers were feeling a little bit more optimistic based on those yields.

Obviously, the geopolitical trade tensions, as we’ve seen in the past, that challenge between The US and Europe historically has benefited the Brazilian farmers, and I believe there’s a little bit of optimism down there believing that if this continues, they’re likely to be the beneficiary. And so the feedback coming out of AGGRISHOW, was definitely positive year over year on what they saw this year. If you look, you saw that we changed our outlook of the Brazilian, the Brazil retail market to go from flat to now flat to up 5%. So we’re feeling a little bit better about that South American economy, the Brazilian farmers, hopefully feel like we should be in a good position by the end of the second quarter to have our dealer inventory where we need it and then be more aligned to matching production in retail, generally speaking, for the back half of the year. If we move up to North America, North America is obviously the the one where we had the most challenge.

That industry is challenged. Again, we changed our outlook now for large ag to be down 25 to 30% as we continue to see weakness in that market. You know, our dealer inventories at the end of the year were right around nine months. As I reported on the first quarter call, they came down a little bit to eight and a half percent at the end of the first quarter, but we have to unpack that because there’s a little bit of a seasonality going on with that number. So if we look at our large ag dealer inventory, we took the number of units on hand down by around 7% from year end to q one, and that’s around two months of large ag dealer inventory.

So we’re making good progress, not where we need to be, but we definitely saw a reduction. What you saw is because of the seasonal selling pattern here, obviously, the springtime is a peak selling season for farmers in the low horsepower segment of the market. That seasonal build that we saw in the low horsepower is what kept the inventory relatively flat or only down around 1%. But again, that really wasn’t due to anything more than the seasonal nature. As we move through q two and into q three, you know, those the dealers will work through that lower horsepower stuff.

But large ag, we made progress, not where we need to be. And so as I said on the call, we’re going to continue to under produce in re for relative to retail in North America here again in q two and then likely again in q three. So, you know, just as a data point, North America production was down over 50% in q one, and it’ll be down likely over 50% again here in q two as we’re working hard to really get this dealer inventory under control. But it’s going to take us a little bit longer than the other two regions to get there just given the starting position in the state of the of the market in large ag here in North America.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Right. Thank you for that. Around the world, we’re gonna revisit some of those regions and some of our our upcoming questions. But, before we get to that, I do wanna unpack, the the tariff exposure. Can you just first help us understand your direct exposure?

Remind us what that is. And I think you you touched on this a little bit. So just the the tariffs, which specific tariffs you’ve you’ve assumed in the forward outlook?

Damon Audia, Chief Financial Officer, AGCO: Yeah. So, again, we we’ve assumed all the tariffs currently in place are staying. So you think about the largest exposure for AGCO is related to the tariff on EU sourced products. So the 10%, for products coming in from Europe, that is, you know, that’s our biggest exposure, and we’ve assumed that 10% stays for the balance of the year. You know, and just to put that in perspective for the investors, last year, AGCO’s North American revenues were just around 2,800,000,000.0.

Of that 2,800,000,000.0, 20 5 percent of that came from product that was sourced in North America or sorry, sourced in Europe. So coming out of Germany, France, and Italy. In total of the 2.8, around 35% of the revenue came from imported products. So that other 10% was coming was a smaller percentage coming from countries like, India, Japan, Brazil. And, we’ve assumed that those tariffs come into effect or stay in effect for the balance of the year as well.

So but the big one for us is the tariff on the EU, and we’ve assumed that’s currently 10. So that’s our largest exposure. Our second large exposure would be related to China, and that’s the hundred and 45 tariff, and that would be generally speaking on imported products that goes into the the assembly operations for our equipment. After that, you start to drop off to much lower levels to some of those lower horsepower tractors or other parts that are coming in from around the world.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Has that tariff impact and I’m thinking specifically about maybe China or some of the steel and aluminum. Has that shifted with some of the portfolio changes that you’ve made over the last year, bringing in PTX, Trimble, selling GMP? Most of us look to cycle over cycle or the prior twenty eighteen, twenty nineteen period as a reference point. How has that shifted, given those portfolio changes?

Damon Audia, Chief Financial Officer, AGCO: Yeah. I’d say modestly. You know, when you think about those two businesses, the PTX Trimble business and and the GSI portion of grain and protein, which was in The US, you know, you’re about relatively small parts in the grand scheme of a $9,600,000,000 business. And so I’d say a little bit to your point, you know, it’s a little bit helpful, from not having as much import on steel, but generally speaking, not a big driver for our overall exposure given the size of our equipment businesses.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: You you touched on this a little bit on the earnings call, but I I wanna come back to it. The tariff environment and how that would impact your three primary growth strategies. And I’m thinking specifically about your ambition to double FENT sales in The Americas given that those are produced outside of The US.

Damon Audia, Chief Financial Officer, AGCO: Yeah. So I think if we look at if we go start with FENT and we’ll talk about precision ag in in parts here. You know, if you look at FENT in total, I would say, generally speaking, not a lot of change to our strategy. Now it may shift a little bit into your your question or your comment here. Our goal is to take the Fent revenues, which last year were just under a billion dollars to get North And South America up to $1,700,000,000 by 2029.

Obviously, to the extent these tariffs do come in or stay in effect and it shifts grain source from The US to Brazil, we will likely see the Brazilian market perform even stronger than what it has in the past. And so when you look at that Serrado region, the Mato Grosso, that is the primary exporting region for for the Brazilian market. You know, they’re doing two to two and a half plantings per year. These are large professional growers who are looking to maximize their ROI, and the FEND product plays perfectly there. It’s the most fuel efficient tractors in the market.

The Momentum planter is the best planter by far. And so for these farmers, the the FEND product fits them perfectly. So we’ve been seeing great growth of FEND market share in that part of the in that part of Brazil. And to the extent that that part of the market booms because of this geopolitical tariff related issue, you know, that’s only gonna accelerate the FEND growth in North in, in South America. When we look at North America, again, we’re seeing good penetration.

Obviously, the tariffs will create a little bit of a headwind, but it’s not going to be directly affected to the FEND product. You know, what our CEO said on the call was, you know, at least our philosophy will be as we look at the total cost of these tariffs, and our expectations are whatever we cannot offset or mitigate internally with alternative suppliers, what we can’t push down to our supply base. So whatever we, in in theory, have to pass off to our farmers, we’re gonna look to spread that across all of our portfolio of products that are sold in North America. So we’re not gonna look at a vent tractor or an ideal combine and say, okay. That’s subject to 10%.

Therefore, the ideal has to go up by 10. We’re gonna look at the number and let’s say if, you know, if it’s a hundred in total, we’re gonna put $1 on all of our products to spread that evenly so the CPC or the comparative pricing doesn’t get out of whack with the competition, and we’re not penalizing one product versus another. So, again, we’re not necessarily going to apply it solely to the product that’s being, imported, but spread it a little bit more evenly across our entire North American portfolio. So, you know, we realize that that will create a little bit of a challenge relative to the competition, that they do nothing. But we think all of us have some type of an exposure related to these tariffs, you know, and how our two competitors react will obviously create a relative comparison for us versus them.

But at the end of the day, we know that Fent continues to perform very well in the North American market. You know, the fuel efficiency, the technology, the gold star warranty, which is that three year bumper to bumper for them, you know, is really catering to farmers who are looking for the best of the best, and we expect that to continue, especially as farmers are looking at, you know, sort of reduced levels of profitability, trying to maximize their output and their profitability. That plays well for them, and, you know, we expect that to continue.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: You you’ve given us a little bit a sense of what some of those mitigation efforts are. You know, you mentioned price if and and when after you’ve tried to offset what you can internally. Any other mitigation efforts that we should be aware of?

Damon Audia, Chief Financial Officer, AGCO: Yeah. I mean, you know, ideally, as we we talked about being the most farmer focused company. And so, you know, our our primary focus is how do we how do we minimize the cost of the farmer first, you know, and that starts with our supply chain. You know, how do we make sure that if we’re seeing any type of price increases coming from our our our supply chain, how do we work with them? How do we make sure they’re looking at all the tools, all the levers to mitigate that?

How do we try to drive productivity? Let’s keep the cost. Let’s avoid the cost where possible, you know, where we have dual sources of supply, how do we play the tariff arbitrage in that case? So if we have a supplier in The US versus one in Europe, can we move more of that to that Europe to that US supplier to to mitigate some of that? So, you know, looking to minimize the cost, as we’ve said in some of the prior calls, we do ship a fair amount to Canada.

And today, many of my European products find their way from Europe into The US, and then we ship them north to Canada. So, you know, doing some things to mitigate that with a bonded warehouse, for example. You know, we’ve looked at the alternative shipping directly into Canada, doing some light assembly there, or shipping through a bonded warehouse in The US, and, you know, that seems to be more cost effective for us to use the latter approach. And again, a little bit of a cash flow issue, but won’t really have a big effect on on the Canadian farmers. So trying to look at all the different levers.

Obviously, like many multinationals, we’re using advisers. We’re looking at what best practices are out there, really trying to keep the cost as low as possible before we have to look to that price increase that we may have to pass off to the to the dealers and the farmers.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: You you started to touch on this in your your, comments on, what this trade environment could mean for Brazil. As I said, we we kinda look to that twenty eighteen, twenty nineteen trade war as a playbook for tariffs. And while I don’t know that any of us has has great sense of certainty on what will happen in July and where tariffs are going, I think what we can learn from the prior trade war is that it did have an irreversible impact on global grain trade. So do you see any major differences this time versus last, and and how would you anticipate the industry to shift this time around?

Damon Audia, Chief Financial Officer, AGCO: Yeah. You know, it’s it’s a tough question to answer because everyone’s a little bit different. Know, I I step back and I think at the highest level, you know, the world needs a certain amount of grain, you know, to feed the the world. And that’s not going to change. So the the users and the amount per user is not changing.

The source of supply, it’s like water rolling down a hill. You know, it may take a different path from where it started, but it’s always going to get to where it needs to be. And so, you know, I look at that and I say, well, to the extent that what you see the political tariff tension creating challenges between The US and China, we saw that last time to your point that they reduced their purchases from The US and they bought more from Brazil. You know, again, hard to predict the future, but I would think, again, probably a very similar pattern plays out where US Farmers, you know, are exporting less to China. That doesn’t mean they won’t export, but now they may be finding alternatives like Mexico or other parts of the world to export their goods to, and Brazil will likely be the beneficiary of that and ramp up further exports to China.

So, you know, we’ll definitely see a mix. And again, for someone like AGCO, if we look at our relative position, of in high horsepower premium products in Brazil relative to The US, you know, if that region is growing faster and better, you know, that’s definitely an upside for us relative to others given our market our relative market share there versus our market share here in North America.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Can you put a fine point on that, Damon? What what is your market share in Brazil? I mean, guys have been in the region for for decades. How well do you feel those brands are positioned there?

Damon Audia, Chief Financial Officer, AGCO: Yeah. You know, I think if we look at the the Brazil the Brazil market, we have three brands here. In North America, we only talk about Fent and Massey Ferguson, but we have a third brand called Vulture. And Vulture actually, I think, had the first tractor factory, one of the first tractor factories in Brazil. They had been there for sixty five years.

So it’s a extremely well known brand down in Brazil. Massey Ferguson, think, has been there for sixty four years. So we have two very well known long standing brands. Vulture really catering to we call that our workhorse brand. So catering to a lot of the specialty crops, sugarcane, coffee, doing quite well.

And then Massey Ferguson catering to an array of farmers. Think of that as a full line offering down there, you know, starting with some of the lower horsepower offering services all the way up into the high horsepower. So two very well established brands, very complementary to each other in the region. And then as the Mato Grosso or Serrado region has begun to pick up for these large professional growers, about six or seven years, we began to introduce the Fent brand. So that’s the best of the best.

That’s those professional growers who are looking for maximum performance. You know, we’re starting to see that really start to take off with share. And so when you look at those three brands, I think totally, of tractor share, we’re probably at around that 30% range. So not too far off from the competition, and it’s gonna flex a little bit between, you know, high horsepower, medium, and low horsepower. But, you know, we look at the industry, fence going for the top of the market.

It’s going for those premium growers who are looking for technology, looking for return on investment. Massey Ferguson catering more to your value orientated, not your opening price point farmers, but someone who aren’t looking for all the bells and whistles, looking for a reliable, dependable, straightforward tractor. And then Vulture sort of complementing the two being more focused in that niche focus of high for you know, or high intensity sugarcane type farming and some of the coffee applications. So three brands all complementing each other and each with an opportunity to to continue to grow.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: You mentioned technology. When you’re thinking about some of the synergies in the PTX portfolio, I mean, Brazil seems like a prime opportunity for you. What’s the technology readiness as you see it in Brazil for for things like what you have in the precision planting and and PTX portfolio?

Damon Audia, Chief Financial Officer, AGCO: Yeah. It’s still I mean, as big as the market is, it’s still relatively early in the technology adoption. So when we think about the growth in in South America, we’ve been very bullish on the long term potential for Brazil just in the size of the market, but also in the technology adoption. Again, you’re looking at a country that’s doing two to two and a half plantings per year. And so as we think about the force, the requirements to increase yield, technology can play a huge part there.

So, our precision planting group has done quite well and starting to grow that. Trimble before the acquisition of the joint venture was building its presence there. So, I’d say we see huge potential, but still very early from an adoption standpoint. That’s part of the overall growth plans that we have for the PTX business to go from that billion dollars or $850,000,000 in revenue up to 2,000,000,000. Part of that is the geographic expansion, and South America is a big part of that.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: David, before I move on to Europe, I do want to address a question that came in just on your 50% under production that you mentioned in North America. Can you or excuse me, 50% production cut in North America. How does, how does that correspond to your industry expectation in the second quarter? Just what what that degree of under production is assumed in the February outlook?

Damon Audia, Chief Financial Officer, AGCO: Yeah. You know, Kristen, I don’t, the 25 to 30% that I have for the full year, I don’t have that off the top of my head for for for the second quarter. But I would again, if you assume that the markets have weakened as we went through 2024, you know, I would assume that from if we’re 25 to 30% for the full year, it’s gonna be above that average in the first half of this year. And so I would say we’re still probably gonna cut more than the industry’s decline, but probably not equal to the to the full year average, that makes sense.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: That’s perfect. Thank you. Europe, we spend a lot of time talking about North And South America on the earnings calls, on this call, probably because of of your peers. But you have mentioned before Europe is one of your more resilient end markets. It accounts for over 50% of your sales, 60% of your operating income.

I’m gonna ask you to revisit that market share question. Remind us, what what is AGCO’s market share in Europe and and any sense of how that is split between Massey, Fent, and Valtra?

Damon Audia, Chief Financial Officer, AGCO: Yeah. So, you know, I think, if you include when we look at all of Europe, Middle East, you know, I think generally Agco’s right around the 20% mark. Now if you look at our business more Western Europe, as you know, if we look at our market in France, we’re probably in the mid to upper twenties. And if we look at Germany, which is a big market, we’re probably in that mid to upper thirties. So again, you know, we have a very strong presence in these large mature markets.

And again, it’s broken down amongst our three major brands. You know, I won’t break down by the three, but each of them play a distinct role. Again, I think it’s important with you know, when we look at ourselves versus our competitors, some of them have one brand. You know, they sell different types or different versions within the one brand. You know, our brands are are very complementary.

We don’t see cannibalization between Massey and Fent. When we look at the industry around the world, we sort of say, hey. There’s two different markets. Half of the market, generally speaking, are these high-tech, high performance looking for premium type services. That’s where Fent plays.

Then there’s a second half of the market that are a little bit more value orientated. They don’t need all the bells and whistles. They don’t need the latest technology. That’s where Massey Ferguson generally plays. And then you have more of these niche brands.

You know, if we look at the Vultr brand, as I said, plays in the the workhorse in the sugarcane in South America, but also very strong in the Nordic regions and plays a certain portfolio complementary to Massey and Vulture. So, you know, we don’t really see a Massey farmer usually is not someone who’s gonna trade up and buy a fence tractor, and that fence farmer is normally not someone who’s gonna trade down and buy a Massey. So we try to we segregate the market a little bit by brands versus others who maybe do it by different types underneath one brand.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: You mentioned your strong market share in Germany. This has been a a historically very good market for you. You’ve had some hiccups with a large dealer in the region over the last year. Can you just give us an update on bringing that dealer back to business as usual?

Damon Audia, Chief Financial Officer, AGCO: Yeah. So, you know, obviously, we we have a great strong presence in Germany. The team has done well. We do have one large dealer called BIWA. BIWA is a large dealer.

They’re a conglomerate. You know, there are other non ag businesses. They dealt with some liquidity, some challenges there. So it put the conglomerate itself under strategic review. There was a work out consultant who stepped in.

We’ve worked very closely with the BIWA management team. We’ve worked very closely with the restructuring expert. You know, they have published their documents. They think that this is a viable business. They’re working to potentially sell some of the non Ag businesses.

It was no surprises. You’re working through a liquidity concern. You want to harness your strongest businesses, and Ag has been a great business for them. So they’ve seen very good demand. They’ve continued to work very well with us.

It’s part of their ability to dig out of the hole that they have, the leverage issues they have on their other businesses. And so overall, what I would say is the business itself continues to perform well. But what we see with BIWA is not like other dealers. They’re not holding as many stock orders. You know, we have a retail order, and then we have a dealer stocking order.

And that, you know, in BIWA situation, the retail demand has continued to be very strong facilitating some of the market share growth we’re seeing in Germany with Fent and with Massey. But we’re just not seeing that dealer inventory, you know, held the way you would see other dealers. And so when you heard me ask talk about the dealer inventories on prior calls, I usually say fence a little bit below. That’s because BIWA’s presence, they’re not carrying that stocking order. So, you know, it’s not necessarily a bad thing for us right now, and we’re managing it with them.

So we don’t see any risk. We don’t see anything that’s creating any near term issues for us with BIWA. They’re working with us, and they’re working out of their particular challenges. And over the long term, we think they’ll get back to normal, and they’ll you know, we view them as a critical part of our, of our distribution network in Europe.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Yeah. The other question we often get about Europe is, just what a potential for a true ceasefire in Ukraine could look like for AGCO. Can you just round that out for us, how you view that opportunity? And then we’ll get into, a couple final items in our discussion.

Damon Audia, Chief Financial Officer, AGCO: Yeah. So if we look back, you know, the Ukraine prewar was somewhere in this as a percentage of sales, it was around two to 3% of AGCO’s European sales. So, you know, an important market, but not the the primary market for us. You know, when we look at the size of the region or we look at the size of the country, you know, today, our team would say it’s probably around 10% of a France or a Germany. So those two very large markets, you know, Ukraine probably around 10% today.

If the war was to to end, you know, we think that could probably double fairly quickly. So a nice step up in opportunity. We’ve been doing a lot behind the scenes here to really try to support the Ukrainian farmers, Ukrainian dealers. You know, we have a a plan where if they make an order, they get top priority in the in the production queue. And so we’ve actually seen our market share grow in The Ukraine since the war.

We’ve tried to be visible to support the farmers, support the dealers, knowing that at some point in time, there will likely be a rebuild, and we wanna be there to help facilitate that. So we’ve orchestrated meetings, with government officials, with banking officials, other political people saying, you know, what are the administrative things that need to be done? Because when the war does end, we expect there’d be a large infusion of capital. And how do we accelerate that to hit the ground running as quickly as possible just trying to be supportive where we can with the dealers and all the other opportunities to present ourselves in the most favorable light. The good news is if you look back at the Ukraine prior to the war, you know, a lot of that country was serviced by Russian equipment.

And so, you know, unlikely that would be the case this time. And so to the extent it does open or when it opens, you know, we’re hopeful that we’ll see that large infusion of capital and that it will likely be serviced by the western companies. And, again, hopefully, given the presence that we’ve been there, how we’ve tried to facilitate, you know, maybe we see an outsized benefit for AGCO, you know, given the support, but, you know, time will tell. But overall, we’re we’re positive that Ukraine will be a benefit, for us when it opens.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Right. I know we are just about at time, but I wanna get a chance to ask you one one more question that we get often on the technology front. Mhmm. You mentioned it earlier, but you put some targets out there around the PTX Trimble portfolio combined with with precision ag and some of what you have internally. Target is to to double your precision ag revenue by 2,000,000,000 or to 2,000,000,000 by 2029.

Just walk us through the steps to get there and how folks on the call should think about, those milestones.

Damon Audia, Chief Financial Officer, AGCO: Yeah. So I think there’s a a couple things. Obviously, we’re sitting well below mid cycle today. So I think you got a one is we look at just the overall volume that happens as we go from sitting at around 85% of cycle of mid cycle up to mid cycle. So that will create a natural underlying lift to to the numbers.

But if I break down the the different components, you know, there’s a couple things that we’re doing. You know, one will be geographic expansion. As I mentioned, you know, we look at where precision planting was strong. It was mainly US with opportunities to really grow in Europe and South America. And if I look at the Trimble prior to the joint venture, which is now PTX Trimble, you know, they were very strong in Europe and there was geographic expansion opportunities in North America and South America.

So part of the growth will be just sort of bringing those two products together, those two groups together and expanding in, you know, where they’re in the geographies where they were not as strong. The primary area is going to be new product introductions. And so you’ve already started to see some of the products coming out of the PTX Trimble or out of the PTX organization. You know, let’s focus on autonomy for a second. You know, we’ve already announced the Outrun program, which is a retrofit application for the autonomous green card.

So we’re the first company out there with an autonomous application. Again, this is retrofit, so the farmers can bolt it on their John Deere tractor. They can bolt it on their Fent tractor. They don’t have to buy a brand new piece of equipment. I would say the early results from the farmers have been very excited as they’re testing this, and they’re seeing this taking the labor out of the grain cart, and it’s allowing that farmer, if he or she’s sitting in the combine, to autonomously bring that cart next to them.

That’s a huge opportunity for them. That was the first one in the market. We’ve demoed the tillage, so that’s coming. And what we’ve committed to is to have an autonomous offering across the crop cycle by 2030. So the teams are working, on all of those different opportunities.

You know, that’s a huge opportunity, again, unique to AGCO, is I think, Christian, you know, we go retrofit first. So we don’t bring that to our new equipment. We start in the aftermarket. We start with that discreet go to market channel, starting retrofit first so the farmers can bolt it on his or her piece of equipment first. And then when they get comfortable and they like the technology, hopefully, they migrate into an OEM product like fence that has that technology already embedded in it.

So you see things like autonomy, targeted spring. So we have our Symphony Vision system, which we demoed earlier this year at our winter conference. So this is the targeted spraying, the vision system that can identify a crop versus a weed. Again, very much retrofit first, so the farmers can go out, they can buy the equipment, the camera system, the nozzle systems. They can bolt that to their existing boom on their sprayer, and they can result in significant herbicide savings as they’re now only spraying a weed versus the entire broadcast spraying.

So leveraging that type of technology, not only here in North America, but in Europe and South America, and then we can layer on the other technologies, water management, radical agronomics, all the different things we’re bringing out in the planting, which is the cornerstone of precision planting. So lots of new technology innovations, all trying to drive productivity for the farmers, improve their yields, reduce their input costs. We grow that retrofit channel first, and then we bring it into the OEM channel second. And so we see growth as many of our OEM customers love to use that technology on their equipment, and we know that we see opportunities to grow that as well. So when we put all those together, sort of how we see ourselves getting to the, the 2,000,000,000 by 2029.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: I suspect we could have an entire call based on that topic alone. Unfortunately, we will have to leave it there because we are at time. But, Damon, thank you very much for for taking the time to answer some of our questions this morning, and we’ll look forward to hearing more of that technology journey. I think September is is the next technology day.

Damon Audia, Chief Financial Officer, AGCO: We’ll In Germany. Absolutely. Look forward to seeing you there.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Thank you everyone for joining us today, and thank you to the AGCO team, and hope you enjoy the conference.

Damon Audia, Chief Financial Officer, AGCO: Thanks, Kristen. Thank you.

Kristen Owen, Oppenheimer Analyst, Oppenheimer: Thanks.

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