AGCO 3Q16 Earnings Call Notes

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AGCO (AGCO) Q3 2016 Results

Martin Richenhagen

Sabilization in Brazil and more supportive gov policies in Arg

“Market conditions in South America have been difficult during the first nine months of 2016. More recently demand is starting to stabilize in Brazil where solid farm fundamentals are beginning to overcome previous weakness caused by political and economic challenges. More supportive government policies in Argentina have also contributed to higher sales in that market.”

Andrew H. Beck

Farm income will be down again in 2016

“In the United States, the USDA estimates that farm income will be down again in 2016, and as a result, our North American industry forecast calls for a decline of 10% to 15% from 2015 levels, with a more significant decline in higher horsepower equipment.”

Need to raise prices to offset steel price increases

“Well, we’re still working those price increases and probably not ready to give any numbers at this point, but for sure we’ve talked with our marketing teams about monitoring the steel price increases, and understanding that we need to make sure our pricing offsets that completely next year. So that’ll be our intent, but we don’t have firm numbers to give you yet, Jerry.”

Have seen a pullback in demand for storage and conditioning equipment

“Well, I think what we’re seeing in that market right now is certainly a pullback in demand in the grain storage equipment. That usually everyone is focusing just on the silos, but a lot of that business is also in the conditioning, drying equipment, also the conveyance equipment as well. So there are multiple aspects to that. What we’re seeing is a pullback – a significant pullback in the conditioning equipment because the harvest have been quite easy and the grain has been relatively dry. So the hours on the equipment don’t require any replacement this year. We’re also seeing a pullback in commercial activity as some of the big processors are pulling back on CapEx right now.”