AGCO Q3 2020 Earnings Report
Key Takeaways
AGCO reported strong Q3 2020 results with net sales increasing by 18.4% compared to Q3 2019. Reported and adjusted net income was $2.09 per share for the third quarter of 2020.
Reported regional sales results: Europe/Middle East (“EME”) 22.7%, North America 8.6%, South America 14.4%, Asia/Pacific/Africa (“APA”) 25.2%
Constant currency regional sales results: EME 18.9%, North America 9.1%, South America 48.5%, APA 21.3%
Regional operating margin performance: EME 13.3%, North America 10.0%, South America 6.1%, APA 10.1%
Year-to-date free cash flow increased over $309 million from the first nine months of 2019
AGCO
AGCO
AGCO Revenue by Geographic Location
Forward Guidance
Net sales in 2020 are expected to be approximately $8.9 billion reflecting relatively flat end-market demand, the unfavorable impact of currency translation, offset by the benefit of positive pricing. Adjusted operating margins are expected to be improved from 2019 levels due to positive pricing and expense reductions. Based on these assumptions, 2020 adjusted net income per share, excluding the impact of restructuring expenses and the non-cash goodwill impairment charge, is targeted at approximately $5.00.
Positive Outlook
- Relatively flat end-market demand
- Unfavorable impact of currency translation
- Benefit of positive pricing
- Adjusted operating margins are expected to be improved from 2019 levels
- Expense reductions
Challenges Ahead
- The Company is uncertain of the impact of the coronavirus (“COVID-19”) pandemic due to increased volatility in global economic and political environments, market demand for its products, supply chain disruptions, workforce availability, exchange rate and commodity price volatility and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial condition and liquidity.
- The Company may be required to record significant impairment charges in the future with respect to certain noncurrent assets such as goodwill and other intangible assets and equity method investments, whose fair values may be negatively affected by the COVID-19 pandemic.
- The Company also may be required to write-down obsolete inventory due to decreased customer demand and sales orders.
- Additionally, the Company is closely monitoring the collection of accounts receivable, as well as the operating results of it finance joint ventures around the world. If economic conditions around the world continue to deteriorate, the Company may not be able to sufficiently collect accounts receivable, and the operating results of its finance joint ventures may be negatively impacted, thus negatively impacting the Company’s results of operations and financial condition.
- The Company is also closely assessing its compliance with debt covenants, the recognition of any future applicable insurance recoveries, cash flow hedging forecasts as compared to actual transactions, the fair value of pension assets, accounting for incentive and stock compensation accruals, revenue recognition and discount reserve setting and the realization of deferred tax assets in light of the COVID-19 pandemic.
Revenue & Expenses
Visualization of income flow from segment revenue to net income