AGCO 2Q16 Earnings Call Notes

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AGCO (AGCO) Martin H. Richenhagen on Q2 2016 Results

Chided the IR guy for mispronouncing his name

“Thank you, Greg, and I hope that one day you learn how to pronounce my last name properly. It’s not Riken-hagen, it’s Rishen-hagen.”

Continued decline in industry sales

“The outlook of healthy global crop production, especially in commodity prices, and estimates call for 2016 farm income to be at or below 2015 levels. In North America, relatively young machinery fleet and dealers’ efforts to reduce inventory levels have contributed to a continued decline in our industry sales through the first half of the year. Weaker demand from the row crop sector resulted in significantly lower industry retail sales of high horsepower tractors, combine harvesters and sprayers.”

More supportive policies have finally contributed to higher sales in that market

“Regional industry demand declined most significantly in South America during the first half of 2016. In Brazil, political and economic uncertainty is curtailing investment in farm equipment. More supportive government policies in Argentina have contributed to higher sales in that market finally.”

Record harvest and low corn prices have different dynamic effects

” I think it’s a mixed picture, so that means there are certainly farmers who will be in a record harvest. And so, even with lower corn or crop prices, they still will be very, very profitable. And then on the other hand, there are farmers who benefit from it. Everybody who has then (29:57) chicken, pigs and so on, of course enjoys lower commodity prices. So therefore, it’s a very, very difficult picture, and very interesting to understand. But overall, what we know is that farm income is very important. I think that farmers in America still have money and still want to invest, but maybe not on the record level we saw maybe between 2010 and 2013.”

British will likely try to replace European subsidies with British subsidies

“And then I think that, in the UK, in order to avoid any major problems with Brexit, the government wants to – I met the Secretary of Agriculture of England, who is actually – no, I shouldn’t make that comment in public – but I think they will try to basically replace European subsidies by British subsidies. That’s at least the plan. So I don’t think that we will see a huge upswing next year in Europe, but I also don’t see a big downswing either.”