AGCO 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Softer industry demand

“While our products are performing well in the market, our results reflect the impacts from both softer industry product demand and our resulting production cost cuts.”

Reducing inventory controlling costs

“In response to weaker industry conditions, we are executing our plan to reduce inventory and aggressively control costs. Our team is analyzing all aspects of the business to identify cost savings and to better align our operations with the current market environment.”

Strong harvests are still necessary

“Despite the downturn in the commodity markets, we remain confident that long-term agricultural fundamentals remain positive. Strong harvests are still required to meet the growing demand for food and biofuel requirements.’

Reengineered the business to cope with what’s to come in 2015

“we basically tried to reengineer our business in a way that we can cope with the markets in 2015. We want to take quick and very radical and aggressive steps in order to reduce our cost.”

Trying to take inventories down quickly

“we’re still targeting that we can get our inventories down to level or below last year, at the end of December. So we’ve got a lot of work to do here in the balance of the year. We have significantly reduced our production levels here in the third quarter and the fourth quarter to try to achieve that. Ultimately, it will depend on us meeting our sales targets at the end of the year”

Our business is built to do well in some areas when other areas not doing well, but everything went down at once this year

“Our footprint, in a way, basically, normally would allow us to compensate, let’s say, a downturn in one market by opportunities in another market. So that’s what we saw in the past. Brazil going down, North America going up — or North America going down, Europe going up, things like that. And what we were — what we saw so far this year is that all markets globally went down ”

We’re making radical cuts early to try to get ahead of the events

“I think I would agree to your point that we decided to make severe radical cuts very early, and therefore, we might — I hope that we are a little bit ahead of the events.”

Big strategic Indian shareholder

“I invited Mallika to join the board, which gives us a very good diversification. She’s not only a woman, she has been businesswoman of India for several years, and she is very, very well connected and knows our industry very, very well. And on top of that, she is a woman which also was attractive to us. And then there’s mandatory stock ownership for directors, and Mallika wanted to signalize how much she believes in our business and how much she believes in our strategic alliance and wanted to buy more. In order to make sure that we don’t get into complication here long term, we decided to agree on a standstill agreement, which is 12.5% on the basis of the share count December 31, 2013, and this is pretty much what she is holding out through programs, and she is pretty close.’