AGCO 4Q15 Earnings Call Notes

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AGCO (AGCO) Martin H. Richenhagen on Q4 2015 Results

Most projecting another decline projected for farm income in 2016

“Excellent harvests across all major regions put pressure on commodity prices and the USDA estimates, that U.S. farm income will be down significantly in 2015, with most experts projecting another decline in 2016. This softer farm economics have reduced demand for agricultural machinery, especially for larger models.”

More work remains to reduce inventory levels

“The industry made progress in reducing inventory levels, but more work remains especially with large horsepower tractors and combines. Forecasts are pointing to reduced farm income in 2016, and we are expecting lower demand.”

You could call it catastrophe in Brazil

“sales in South America were extremely weak, resulting from political uncertainty, or you could call it catastrophe and a depressed general economy in Brazil”

There are some manufacturers who have a major inventory problem

“Well, it depends very much on the manufacturer, so there are some who really have a major problem. I don’t want to mention name here, we talk about AGCO. When it comes to smaller tractors, I think this might also be an issue for the guys who basically didn’t plan properly, mainly companies from Asia.”

The government in Brazil is in really bad shape

“We try to lobby, politicians right now don’t listen, so the government in Brazil is in very bad shape. They don’t know what they are doing, they don’t have a strategy, they are corrupt, and this damaging not only our business but business in general.”

We’re hopeful that the new President in Argentina comes in with a more pro business strategy

“one is the election in Argentina where we are very hopeful that the new President with whom we will meet soon comes in with a much more business oriented strategy for farmers. That means that we lobbied many years with Kirchner on basically reducing the export duties. And I think we have chances that this will be done, which would of course help Argentinean farmers a lot.”

Venezuela is close to complete bankruptcy

“there is one other bad exception with this Venezuela, I think Venezuela is close to complete bankruptcy, the political system doesn’t work at all, you can’t travel there without being killed. So that’s really, really a very, very difficult market.”

Europe seems to have bottomed out

“I would like to make a general observation. To me, it looks like as if Europe somewhat is close to have bottomed out. And Europe seems to be, in general, a little bit more stable than the other markets.”