AGCO Reports Strong 3rd. Quarter Results

October 29, 2008 07:00 PM
 
An AgWeb.com Farm Equipment Special

Excerpted from AGCO's third quarter and nine-month financial results presentation to the company's investors.

AGCO-- the multi-brand conglomerate for agricultural equipment-- has reported its third quarter and nine-month financial results to its investors. For the third quarter, they show sales up 35%; net income double the previous year.

AGCO reported record third quarter net sales of $2.1 billion and record net income of $1.04 per share for the third quarter of 2008. Adjusted net income, which excludes restructuring and other infrequent expenses (income), was also $1.04 per share for the third quarter of 2008.

Net sales for the third quarter of 2008 increased approximately 22% compared to the same period in 2007, excluding favorable currency translation impacts of $120.0 million.

"I am pleased with AGCO's record performance in the third quarter and the first nine months of 2008," stated Martin Richenhagen, AGCO's Chairman, President and Chief Executive Officer. "Despite experiencing supplier constraints and rising material costs during the first nine months of the year, AGCO's operating margins have expanded by more than a full percentage point. The preemptive pricing actions taken in the first half of 2008 along with focused management efforts enabled us to deliver net income growth of 33% in the third quarter and 80% for the first nine months of 2008 compared to the same periods last year.” Third Quarter and Year-to-Date Results

Net sales were $2,085.4 million for the third quarter of 2008, an increase of approximately 29.3% as compared to $1,613.0 million for the third quarter of 2007. AGCO reported net income of $102.6 million, or $1.04 per share, for the third quarter of 2008, compared to reported net income of $76.9 million, or $0.80 per share, for the third quarter of 2007. Adjusted net income, excluding restructuring and other infrequent expenses (income), was $102.7 million, or $1.04 per share, for the third quarter of 2008 compared to $74.2 million, or $0.77 per share, for the third quarter of 2007.

For the first nine months of 2008, net sales were $6,267.4 million, an increase of approximately 34.6% as compared to $4,657.0 million in net sales for the first nine months of 2007. AGCO reported net income of $298.0 million for the first nine months of 2008, or $3.01 per share, compared to net income of $165.2 million, or $1.73 per share, for the first nine months of 2007. Adjusted net income, excluding restructuring and other infrequent expenses (income), was $298.2 million, or $3.01 per share, for the first nine months of 2008, compared to $162.7 million, or $1.70 per share, for the first nine months of 2007.

Results in AGCO's North American segment benefited from the healthy farm economy and a strengthening distribution network. In the third quarter of 2008, operating income grew $15.4 million compared to the same period in 2007. Strong sales growth and improved margins offset adverse currency impacts on products sourced from Brazil and Europe. Income from operations improved by approximately $23.2 million for the first nine months of 2008 compared to the same period in 2007.

North America - Industry unit retail sales of tractors for the first nine months of 2008 decreased approximately 5% over the comparable prior year period. Industry unit retail sales of tractors over 100 horsepower increased compared to the prior year, while industry sales of tractors under 100 horsepower declined during the first nine months of 2008. Industry unit retail sales of combines for the first nine months of 2008 increased approximately 25% from the prior year period. AGCO's unit retail sales of tractors were down in the first nine months of 2008 due to decreases in tractor sales under 100 horsepower, partially offset by strong growth of tractors over 100 horsepower. Sales of combines were up compared to the same period in 2007.

South America -Industry unit retail sales of tractors increased approximately 36% and industry unit retail sales of combines increased approximately 87% for the first nine months of 2008 compared to the prior year period. AGCO's South American unit retail sales of tractors and combines also increased in the first nine months of 2008 compared to 2007.

Outlook:

For the full year of 2008, farm equipment sales are expected to increase from 2007 levels. Modest growth in industry retail sales in Western Europe and increased penetration of western sourced equipment in Eastern and Central Europe is expected to result in total European industry retail sales above last year's strong levels. In North America, the slowing general economy is expected to produce weaker industry retail sales of low and medium horsepower tractors, but improved farm income and healthy farmer balance sheets are expected to result in increased industry retail sales of high horsepower tractors and combines compared to 2007. In South America, favorable farm fundamentals in Brazil and Argentina are expected to produce increased industry retail sales.


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