As demand for farm equipment softens worldwide, machinery manufacturer AGCO continues to deal with falling sales.
At AGCO, which is based in Duluth, Ga., net sales fell to $2.1 billion in the second quarter of 2015, which represents a 24.8% decrease year-over-year. The drop affected tractors and combines alike in North America, South America and Western Europe, according to the company’s earnings release.
“During the first half of 2015, lower commodity prices and the expectation of reduced farm income have pressured global sales of farm equipment,” Martin Richenhagen, AGCO’s chairman, president, and CEO said. “Grain prices continue to be highly sensitive to 2015 crop production forecasts and will likely remain volatile throughout the growing season.”
Here is what AGCO is seeing in terms of industry trends in various regions:
North America. With $563.1 million in the second quarter, net sales are down 17.9% for AGCO in North America. Industrywide, year-over-year sales for tractors (excluding compact tractors) are down 10% and combines are down 37%. “Industry retail sales in North America declined with a significant drop in high-horsepower tractors, combines and sprayers,” Richenhagen said. “Growth in hay and forage equipment and small tractors, due to healthy conditions in the livestock sector, has provided a partial offset to the decline in large agricultural equipment.”
Western Europe. AGCO did not break out its European numbers, which it combined with Africa and the Middle East for $1.137 billion in net sales during the quarter. That’s 25.3% lower than the same quarter last year while industrywide, Western European tractor sales are off just 8% and combine sales are off 15%. “In Western Europe, margins for dairy producers remained weak and lower commodity prices kept market demand soft from the row crop segment,” Richenhagen said. “Industry sales declines were most pronounced in the United Kingdom, Finland, France and Germany.”
South America. With $280.3 million, AGCO net sales fell 36.3% year-over-year. Industrywide, South American tractor sales are down 19% and combines are down 32% compared to 2014. “Reduced industry sales in South America were the result of lower demand in Brazil due to softness in the sugar sector, weakness in the general economy and changes to the government financing program,” Richenhagen said.
Overall, AGCO expects the financial headwinds to continue for now, with a forecast of $7.7 billion to $7.9 billion in net sales in 2015. “Our long-term view remains optimistic with expanding demand for grain supporting farm economics and healthy growth in our industry,” Richenhagen said.