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AGCO Reports Fourth Quarter Results

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DULUTH, Ga., February 08, 2022--(BUSINESS WIRE)--AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide manufacturer and distributor of agricultural equipment and solutions, reported net sales of approximately $3.2 billion for the fourth quarter of 2021, an increase of approximately 16.1% compared to the fourth quarter of 2020. Reported net income was $3.75 per share for the fourth quarter of 2021, and adjusted net income(3), which excludes restructuring expenses and the reversal of a valuation allowance previously established against the Company’s deferred tax assets in Brazil, was $3.08 per share. These results compare to reported net income of $1.78 per share and adjusted net income(3), which excludes restructuring expenses and a gain on sale of an investment, of $1.54 per share for the fourth quarter of 2020. Excluding unfavorable currency translation impacts of approximately 3.2%, net sales in the fourth quarter of 2021 increased approximately 19.3% compared to the fourth quarter of 2020.

Net sales for the full year of 2021 were approximately $11.1 billion, which is an increase of approximately 21.7% compared to 2020. Excluding favorable currency translation impacts of approximately 2.2%, net sales for the full year of 2021 increased approximately 19.6% compared to 2020. For the full year of 2021, reported net income was $11.85 per share, and adjusted net income(3), excluding restructuring expenses and the reversal of a valuation allowance previously established against the Company’s deferred tax assets in the United States and Brazil, was $10.38 per share. These results compare to reported net income of $5.65 per share and adjusted net income(3), which excludes a non-cash impairment charge, restructuring expenses and a gain on sale of an investment, of $5.61 per share for 2020.

Fourth Quarter Highlights

  • Reported fourth quarter regional sales results(1): Europe/Middle East ("EME") +4.3%, North America +39.1%, South America +51.6%, Asia/Pacific/Africa ("APA") +15.0%

  • Constant currency fourth quarter regional sales results(1)(2)(3): EME +8.7%, North America +38.8%, South America +56.2%, APA +15.4%

  • Fourth quarter regional operating margin performance: EME 12.1%, North America 3.5%, South America 12.0%, APA 13.6%

  • Full-year operating margins and adjusted operating margins(3) improved to 9.0% and 9.1% respectively, in 2021 compared to 6.6% and 7.0% in 2020

  • Generated approximately $683 million in cash flow from operations and approximately $413 million in free cash flow(3) in 2021

  • Full-year earnings forecast for 2022 of approximately $11.50 per share

(1)

As compared to fourth quarter 2020.

(2)

Excludes currency translation impact.

(3)

See reconciliation of Non-GAAP measures in appendix.

"AGCO delivered record results in 2021 highlighted by significantly higher sales and margins compared to 2020," stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. "Our performance was fueled by improved global industry demand and focused execution by the AGCO team, who exceeded sales targets despite considerable supply chain challenges. Adjusted operating margins reached 9.1% of net sales due to the benefits of sales growth and pricing that helped to offset substantial inflationary cost pressures. Our smart technology product lines are in strong demand and are driving productivity improvements for our customers and growth opportunities for AGCO. Looking forward to 2022, we expect supply chain pressures to persist, presenting challenges throughout the year. Our teams are working tirelessly with our suppliers to mitigate the impact of these issues to serve our customers as well as to deliver another strong year of performance. We are forecasting sales growth and margin expansion in 2022 as industry demand trends positively and our farmer-first strategy gains traction."

Market Update

Industry Unit Retail Sales

Tractors

Combines

Year ended December 31, 2021

Change from
Prior Year

Change from
Prior Year

North America(1)

14%

24%

South America

22%

20%

Western Europe(2)

16%

3%

(1) Excludes compact tractors.

(2) Based on Company estimates.

"Elevated soft commodity prices are supporting improved farm income in 2021 despite significantly higher farm input costs," stated Mr. Hansotia. "These favorable farm fundamentals are resulting in robust demand for agricultural equipment as farmers look to upgrade their fleets."

"Full year global industry retail sales of farm equipment in 2021 were higher across AGCO’s key markets, with fourth quarter industry retail sales higher than the prior year despite a strong finish to 2020," continued Mr. Hansotia. "North American full-year industry retail tractor sales were up significantly across all horsepower categories compared to the previous year. Sales of high horsepower tractors and combines showed the most strength as an extended fleet age and favorable commodity prices stimulated demand. These conditions are expected to continue, resulting in higher forecasted North American industry sales in 2022. In Western Europe, industry retail tractor sales increased approximately 16% for the full year of 2021 compared to 2020. Healthy income levels for arable farmers as well as dairy and livestock producers supported increased equipment demand in 2021. Market demand improved across all the major Western European markets with the strongest growth in Italy, Finland and the United Kingdom. We expect 2022 industry demand in Western Europe to be flat to modestly higher compared to the improved levels in 2021. South American industry retail tractor sales increased 22% during 2021, with robust recovery in Brazil and Argentina as well as the smaller South America markets. Increased crop production and favorable margins are supporting farm profitability. We expect farm economics to remain supportive in South America resulting in increased 2022 industry sales compared to 2021. Longer term, we remain optimistic that elevated grain demand driven by population growth and increased protein consumption will support favorable industry conditions."

Regional Results

AGCO Regional Net Sales (in millions)

Three Months Ended December 31,

2021

2020

% change
from 2020

% change from
2020 due to
currency
translation(1)

% change
excluding
currency
translation

North America

$

674.7

$

485.1

39.1%

0.3%

38.8%

South America

405.6

267.5

51.6%

(4.6)%

56.2%

EME

1,796.9

1,722.7

4.3%

(4.4)%

8.7%

APA

278.0

241.8

15.0%

(0.4)%

15.4%

Total

$

3,155.2

$

2,717.1

16.1%

(3.2)%

19.3%

Year Ended December 31,

2021

2020

% change
from 2020

% change from
2020 due to
currency
translation(1)

% change
excluding
currency
translation

North America

$

2,659.2

$

2,175.0

22.3%

1.5%

20.8%

South America

1,307.7

873.8

49.7%

(4.6)%

54.3%

EME

6,221.7

5,366.9

15.9%

2.9%

13.0%

APA

949.7

734.0

29.4%

7.1%

22.3%

Total

$

11,138.3

$

9,149.7

21.7%

2.2%

19.6%

(1) See Footnotes for additional disclosures.

North America

Net sales in the North American region increased 20.8% for the full year of 2021 compared to 2020, excluding the positive impact of currency translation. Increased sales of high horsepower and mid-range tractors as well as Precision Planting products represented the largest increases. Income from operations for the full year of 2021 increased approximately $44.4 million compared to 2020. The improvement was the result of higher sales and production, a richer mix of products and favorable price realization, all which offset higher material costs.

South America

AGCO’s South American net sales increased 54.3% for the full year of 2021 compared to 2020, excluding the impact of unfavorable currency translation. Sales increased significantly across all the South American markets with growth achieved in tractors, combines and planting equipment as well as replacement parts. Income from operations for the full year of 2021 increased by approximately $102.9 million compared to 2020 and operating margins exceeded 10%. The improved South America results reflect the benefit of higher sales and production, favorable pricing, and a better sales mix, partially offset by higher materials costs.

Europe/Middle East

Net sales in AGCO’s Europe/Middle East region increased 13.0% for the full year of 2021 compared to 2020, excluding favorable currency translation impacts. Increased sales of tractors, combines and replacement parts contributed to growth across all of Europe. Income from operations increased approximately $170.1 million for the full year of 2021 compared to 2020, due to higher net sales and production volumes as well as price realization which offset higher material costs and engineering expenses.

Asia/Pacific/Africa

Asia/Pacific/Africa net sales increased 22.3%, excluding the positive impact of currency translation, during the full year of 2021 compared to 2020. Higher sales in Africa, Australia and China produced the majority of the increase. Income from operations improved by approximately $51.8 million for the full year of 2021 compared to 2020 due to higher sales and an improved product mix.

Outlook

The health, safety and well-being of all AGCO employees, dealers and farmer customers continue to be AGCO’s top priority. The ability of the Company’s supply chain to deliver parts and components on schedule is currently difficult to predict. The following outlook is based on AGCO’s current estimates of component deliveries. AGCO’s results will be impacted if the actual supply chain delivery performance differs from these estimates.

AGCO’s net sales for 2022 are expected to be approximately $12.3 billion, reflecting improved sales volumes and pricing partially offset by negative foreign currency translation. Gross and operating margins are projected to improve from 2021 levels, reflecting the impact of higher sales and production volumes as well as pricing to offset cost inflation. These improvements are planned to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives. Based on these assumptions, 2022 earnings per share are targeted at approximately $11.50.

* * * * *

AGCO will host a conference call with respect to this earnings announcement at 10:00 a.m. Eastern Time on Tuesday, February 8th. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO’s website at www.agcocorp.com in the "Events" section on the "Company/Investors" page of our website. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for twelve months following the call. A copy of this press release will be available on AGCO’s website for at least twelve months following the call.

* * * * *

Safe Harbor Statement

Statements that are not historical facts, including the projections of earnings per share, sales, industry demand, market conditions, commodity prices, currency translation, farm income levels, margin levels, investments in product and technology development, new product introductions, restructuring and other cost reduction initiatives, production volumes, tax rates and general economic conditions, are forward-looking and subject to risks that could cause actual results to differ materially from those suggested by the statements. The following are among the factors that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements.

  • COVID-19 has negatively impacted our business, initially through closures, higher absentee rates, and reduced production at both our plants and the plants that supply us with parts and components, and more recently through supply chain challenges, including the inability of some of our suppliers to meet demand and logistics and transportation-related companies to deliver products in a timely manner. In addition, we have had to incur various costs related to preventing the spread of COVID-19, including changes to our factories and other facilities and those related to enabling remote work. We expect COVID-19 to continue to impact our business, although the manner and extent to which it impacts us will depend on future developments, including the duration of the pandemic, the timing, distribution and impact of vaccinations, and possible mutations of the virus that are more contagious or resistant to current vaccines. Measures taken by governments around the world, as well as businesses, including us, and the general public in order to limit the spread of COVID-19 will impact our business as well. These measures have included travel bans and restrictions, quarantines, shelter in place orders, curfews, business and government office closures, increased border controls or closures, port closures and transportation restrictions. The impacts of COVID-19 and such measures could include decreases in demand for our products, factory closures, increased absentee rates, reduced production, incurrence of additional costs due to the adherence to cleaning requirements and social distancing guidelines and increased costs of labor, parts and components and shipping, incurrence of impairment charges, slower collections and larger write-offs of accounts receivable, among other changes.

  • Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, adverse weather, tariffs, increases in farm input costs, lower commodity prices, lower farm income and changes in the availability of credit for our retail customers, will adversely affect us.

  • A majority of our sales and manufacturing takes place outside the United States, and, many of our sales involve products that are manufactured in one country and sold in a different country, and as a result, we are exposed to risks related to foreign laws, taxes and tariffs, trade restrictions, economic conditions, labor supply and relations, political conditions and governmental policies. These risks may delay or reduce our realization of value from our international operations. Among these risks are the uncertain consequences of Brexit, Russian sanctions and tariffs imposed on exports to and imports from China.

  • Most retail sales of the products that we manufacture are financed, either by our joint ventures with Rabobank or by a bank or other private lender. Our joint ventures with Rabobank, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance over 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate. Any difficulty by Rabobank to continue to provide that financing, or any business decision by Rabobank as the controlling member not to fund the business or particular aspects of it (for example, a particular country or region), would require the joint ventures to find other sources of financing (which may be difficult to obtain), or us to find another source of retail financing for our customers, or our customers would be required to utilize other retail financing providers. As a result of the recent economic downturn, financing for capital equipment purchases generally has become more difficult in certain regions and in some cases, can be expensive to obtain. To the extent that financing is not available or available only at unattractive prices, our sales would be negatively impacted.

  • Both AGCO and our finance joint ventures have substantial accounts receivable from dealers and end customers, and we would be adversely impacted if the collectability of these receivables was less than optimal; this collectability is dependent upon the financial strength of the farm industry, which in turn is dependent upon the general economy and commodity prices, as well as several of the other factors listed in this section.

  • We have experienced substantial and sustained volatility with respect to currency exchange rate and interest rate changes, which can adversely affect our reported results of operations and the competitiveness of our products.

  • Our success depends on the introduction of new products, particularly engines that comply with emission requirements and sustainable smart farming technology, which require substantial expenditures; there is no certainty that we can develop the necessary technology or that the technology that we develop will be attractive to farmers or available at competitive prices.

  • Our expansion plans in emerging markets, including establishing a greater manufacturing and marketing presence and growing our use of component suppliers, could entail significant risks.

  • Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations, or otherwise are the victim of a cyber attack, we could be subject to significant claims, penalties and damages.

  • Attacks through ransomware and other cyber attacks are rapidly increasing. While we have implemented the safeguards that we believe are reasonable, we always will be subject to the risk that one of these attacks is successful and disrupts or damages our business.

  • We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. Recently suppliers of several key parts and components have not been able to meet our demand and we have had to decrease our production. It is unclear when the supply chain issues will be restored or what the ultimate impact on production, and consequently sales, will be.

  • Although as a general proposition our business has not experienced significant inflation in many years, beginning in the second half of 2021 we experienced significant inflation in a range of costs, including for parts and components, shipping, and energy. While we have been able to pass along most of those costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will impact our performance.

  • We face significant competition, and if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose customers and our net sales and performance would decline.

  • We have a substantial amount of indebtedness, and, as a result, we are subject to certain restrictive covenants and payment obligations that may adversely affect our ability to operate and expand our business.

Further information concerning these and other factors is included in AGCO’s filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2020 and subsequent Form 10-Qs. AGCO disclaims any obligation to update any forward-looking statements except as required by law.

* * * * *

About AGCO

AGCO (NYSE: AGCO) is a global leader in the design, manufacture and distribution of agricultural solutions and delivers high-tech solutions for farmers feeding the world through its full line of equipment and related services. AGCO products are sold through five core brands, Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®, supported by Fuse® smart farming solutions. Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales of $11.1 billion in 2021. For more information, visit http://www.AGCOcorp.com. For company news, information and events, please follow us on Twitter: @AGCOCorp. For financial news on Twitter, please follow the hashtag #AGCOIR.

Please visit our website at www.agcocorp.com

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)

December 31, 2021

December 31, 2020

ASSETS

Current Assets:

Cash and cash equivalents

$

889.1

$

1,119.1

Accounts and notes receivable, net

991.5

856.0

Inventories, net

2,593.7

1,974.4

Other current assets

539.8

418.9

Total current assets

5,014.1

4,368.4

Property, plant and equipment, net

1,464.8

1,508.5

Right-of-use lease assets

154.1

165.1

Investment in affiliates

413.5

442.7

Deferred tax assets

169.3

77.6

Other assets

293.3

179.8

Intangible assets, net

392.2

455.6

Goodwill

1,280.8

1,306.5

Total assets

$

9,182.1

$

8,504.2

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Current portion of long-term debt

$

2.1

$

325.9

Short term borrowings

90.8

33.8

Accounts payable

1,078.3

855.1

Accrued expenses

2,062.2

1,916.7

Other current liabilities

221.2

231.3

Total current liabilities

3,454.6

3,362.8

Long-term debt, less current portion and debt issuance costs

1,411.2

1,256.7

Operating lease liabilities

115.5

125.9

Pensions and postretirement health care benefits

209.0

253.4

Deferred tax liabilities

116.9

112.4

Other noncurrent liabilities

431.1

375.0

Total liabilities

5,738.3

5,486.2

Stockholders’ Equity:

AGCO Corporation stockholders’ equity:

Common stock

0.7

0.8

Additional paid-in capital

3.9

30.9

Retained earnings

5,182.2

4,759.1

Accumulated other comprehensive loss

(1,770.9

)

(1,810.8

)

Total AGCO Corporation stockholders’ equity

3,415.9

2,980.0

Noncontrolling interests

27.9

38.0

Total stockholders’ equity

3,443.8

3,018.0

Total liabilities and stockholders’ equity

$

9,182.1

$

8,504.2

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)

Three Months Ended December 31,

2021

2020

Net sales

$

3,155.2

$

2,717.1

Cost of goods sold

2,472.5

2,121.5

Gross profit

682.7

595.6

Selling, general and administrative expenses

285.2

283.1

Engineering expenses

109.5

99.9

Amortization of intangibles

15.3

14.8

Restructuring expenses

7.9

14.3

Bad debt expense

0.8

5.5

Income from operations

264.0

178.0

Interest (income) expense, net

(0.1

)

1.9

Other expense (income), net

10.2

(15.1

)

Income before income taxes and equity in net earnings of affiliates

253.9

191.2

Income tax (benefit) provision

(13.0

)

69.8

Income before equity in net earnings of affiliates

266.9

121.4

Equity in net earnings of affiliates

16.4

14.0

Net income

283.3

135.4

Net income attributable to noncontrolling interests

(1.2

)

$

Net income attributable to AGCO Corporation and subsidiaries

$

282.1

$

135.4

Net income per common share attributable to AGCO Corporation and subsidiaries:

Basic

$

3.77

$

1.81

Diluted

$

3.75

$

1.78

Cash dividends declared and paid per common share

$

0.20

$

0.16

Weighted average number of common and common equivalent shares outstanding:

Basic

74.7

74.9

Diluted

75.3

75.9

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)

Years Ended December 31,

2021

2020

Net sales

$

11,138.3

$

9,149.7

Cost of goods sold

8,566.0

7,092.2

Gross profit

2,572.3

2,057.5

Selling, general and administrative expenses

1,088.2

1,001.5

Engineering expenses

405.8

342.6

Amortization of intangibles

61.1

59.5

Impairment charge

20.0

Restructuring expenses

15.3

19.7

Bad debt expense

0.5

14.5

Income from operations

1,001.4

599.7

Interest expense, net

6.7

15.0

Other expense, net

50.4

22.7

Income before income taxes and equity in net earnings of affiliates

944.3

562.0

Income tax provision

108.4

187.7

Income before equity in net earnings of affiliates

835.9

374.3

Equity in net earnings of affiliates

65.6

45.5

Net income

901.5

419.8

Net (income) loss attributable to noncontrolling interests

(4.5

)

7.3

Net income attributable to AGCO Corporation and subsidiaries

$

897.0

$

427.1

Net income per common share attributable to AGCO Corporation and subsidiaries:

Basic

$

11.93

$

5.69

Diluted

$

11.85

$

5.65

Cash dividends declared and paid per common share

$

4.74

$

0.63

Weighted average number of common and common equivalent shares outstanding:

Basic

75.2

75.0

Diluted

75.7

75.6

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)

Years Ended December 31,

2021

2020

Cash flows from operating activities:

Net income

$

901.5

$

419.8

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

220.7

212.5

Impairment charge

20.0

Amortization of intangibles

61.1

59.5

Stock compensation expense

27.4

37.6

Equity in net earnings of affiliates, net of cash received

20.8

(43.7

)

Deferred income tax (benefit) provision

(117.9

)

3.4

Other

20.5

(7.4

)

Changes in operating assets and liabilities:

Accounts and notes receivable, net

(207.7

)

(90.5

)

Inventories, net

(762.6

)

119.7

Other current and noncurrent assets

(268.0

)

(49.8

)

Accounts payable

292.2

(59.1

)

Accrued expenses

241.2

185.3

Other current and noncurrent liabilities

253.7

89.2

Total adjustments

(218.6

)

476.7

Net cash provided by operating activities

682.9

896.5

Cash flows from investing activities:

Purchases of property, plant and equipment

(269.8

)

(269.9

)

Proceeds from sale of property, plant and equipment

6.3

1.9

Purchase of businesses, net of cash acquired

(22.6

)

(2.8

)

(Investments in) sale of unconsolidated affiliates, net

(9.6

)

29.1

Other

(15.4

)

Net cash used in investing activities

(311.1

)

(241.7

)

Cash flows from financing activities:

(Repayments of) proceeds from indebtedness, net

(3.8

)

150.0

Purchases and retirement of common stock

(135.0

)

(55.0

)

Payment of dividends to stockholders

(358.5

)

(48.0

)

Payment of minimum tax withholdings on stock compensation

(34.9

)

(19.8

)

Payment of debt issuance costs

(3.8

)

(1.4

)

Distributions to noncontrolling interests, net

(3.5

)

(3.1

)

Net cash (used in) provided by financing activities

(539.5

)

22.7

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(62.3

)

8.8

(Decrease) increase in cash, cash equivalents and restricted cash

(230.0

)

686.3

Cash, cash equivalents and restricted cash, beginning of year

1,119.1

432.8

Cash, cash equivalents and restricted cash, end of year

$

889.1

$

1,119.1

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share amounts, per share data and employees)

1. STOCK COMPENSATION EXPENSE

The Company recorded stock compensation expense as follows (in millions):

Three Months Ended December 31,

Years Ended December 31,

2021

2020

2021

2020

Cost of goods sold

$

0.2

$