AGCO 4Q14 Earnings Call Notes

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

“I’ll begin my remarks on Slide 3, where you can see that in the fourth quarter of 2014, AGCO sales were down approximately 13%. While our products are performing well in the market, our results reflect the impacts from softer industry wide, our resulting production cuts and the negative impact of currency translation.”

Near ideal growing conditions were bad for farmers

“Nearly ideal growing conditions produced record crop production across the global ag markets in 2014. The record harvest contributed to an increase in year-end grain inventories.

The resulting reduction in commodity prices has negatively impacted the economy for row crop farmers but favorably reduced the input cost for dairy and livestock producers.”

Lower horsepower equipment to dairy and livestock farmers

“industry sales increased in the lower-horsepower category, which are typically sold to dairy and livestock sectors, while sales of higher-margin, high-horsepower tractors and combines declined significantly in the full year of 2014”

15-17% sales decline for 2015

“Our 2015 forecast assumes softer industry demand across all regions and a sales decline ranging from 15% to 17%.”

Reducing expenses by 150m

“In total we will be reducing expenses by about $150 million or about 10% of the cost in these areas compared to 2014 levels. We are forecasting operating margins ranging from 5.5% to 6% in 2015 and we are targeting an effective tax rate of 36% to 37% for 2015.”

Customers are very loyal to brands and dealers

“for the most part we still believe customers are very loyal to brands and very loyal to their dealers and those are the areas that we continue to work on, our investment in new products and our investment in our distribution network are the real keys to success in our business and we are trying to continue to effort those even in the weaker market conditions we have.”

Farm income probably wasn’t so bad because yields were up even though prices down

“I also think that we should have in mind as mentioned doing – and this presentation the harvest conditions in 2014 were excellent. So while commodity prices went down the volume of course went up and the yields went up. So therefore I think farm income was most probably not as bad and I think everybody has the funds and the money to invest. The question, the big question is will they do so?’