AGCO has reported financial results for the third quarter ended Sept. 30, 2023. Net sales for 3Q2023 were approximately $3.5 billion, an increase of 10.7% year-over-year. Excluding favorable foreign currency translation of 3.5%, net sales for 3Q23 grew 7.2% compared to the 3Q2022.

Net sales for 2023 YTD were approximately $10.6 billion, an increase of 21.2% year-over-year. Excluding unfavorable currency translation impacts of 0.7%, net sales for the first 9 months of 2023 increased 21.9% compared to the same period in 2022.

Net sales in the North American region increased 21.9% in the first 9 months of 2023 compared to the same period of 2022, excluding the negative impact of currency translation. The growth resulted primarily from increased sales of high-horsepower tractors, application equipment and combines along with the positive effects of pricing to mitigate inflationary cost pressures. Income from operations for the first 9 months of 2023 was approximately $160.6 million higher, with operating margins expanding nearly 400 basis points compared to the same period in 2022. Operating income benefited from higher sales and production, positive net pricing and a favorable sales mix.

South American net sales grew 23.4% in the first 9 months of 2023 compared to the same period of 2022, excluding the impact of favorable currency translation. Strong sales growth in Brazil drove most of the increase. Increased sales of high-horsepower, higher-margin tractors as well as elevated sales of Momentum planters and favorable pricing drove most of the increase. Income from operations in the first 9 months of 2023 grew by approximately $131.6 million compared to the same period in 2022, and operating margins were 20.3%. The improved South America results reflect the benefit of higher sales and production as well as a favorable sales mix.

North America retail tractor sales declined approximately 2% in the first nine months of 2023 compared to last year. The decline was driven by weaker sales in smaller tractors partially offset by improved sales of high-horsepower tractors, which increased approximately 10% in the first 9 months of 2023 compared to the same period in 2022. North America industry retail tractor demand for 2023 is expected to be down modestly compared to 2022. Industry retail sales for combines in North America increased significantly in the first 9 months of 2023 compared to 2022, due mainly to improving supply chains.

South American industry tractor retail sales decreased 8% during the first nine months of 2023 compared to 2022 levels. Retail demand in Brazil was negatively affected by the depletion of the government subsidized loan program prior to its June 30 fiscal year end. Healthy farm income, supportive exchange rates and continued expansion in planted acreage in Brazil are driving increased investments in high-tech farm equipment. Weaker smaller equipment demand due to financing delays is being partially offset by strong demand for large equipment, resulting in an outlook of modestly lower demand for the South American tractor industry in 2023 compared to strong levels last year.

AGCO’s net sales for 2023 are expected to be approximately $14.7 billion, reflecting improved sales volumes and pricing. Gross and operating margins are projected to improve from 2022 levels, reflecting the impact of higher sales and production volumes as well as pricing and a favorable sales mix. These improvements are expected to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives.

In an Oct. 31 note to investors, Stifel analysts stated AGCO's results were above expectations driven by strong pricing and improved adjusted operating margins. 

"Guidance was raised including higher assumptions for organic revenue (around $200 million) and operating margins (12% vs. 11.7% previously).

"Even if 2024 demand were to soften, we also expect AGCO to have notable offsets from self-help initiatives such as growth in precision ag, parts and expansion of the Fendt product. All of these carry a positive mix tailwind and coupled with decent order visibility and relatively low dealer inventories, we think earnings could prove more resilient than feared."

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