UPDATE: Agco Cuts '09 Profit Forecast As Demand Tumbles
28 April 2009 - 6:34PM
Dow Jones News
Agco Corp. (AG) said Tuesday that global sales of farm equipment
would fall even more than expected as it cut its 2009 profit
forecast by more than 27%.
The U.S.-based company is the global number-three maker of
tractors and combines by sales but the largest player in South
America, where it now expects industry sales to fall by 25% to 35%
compared with last year.
The combination of falling commodity prices, weaker crop demand
and currency shifts is crimping demand for everything from tractors
to seeds and fertilizers following a prolonged sector boom.
Tight credit conditions have also been a factor, notably in
South America, despite the launch of government-backed credit
programs.
Agco had previously forecast a 20% to 30% industry sales decline
for the region, where it compares with CNH Global N.V. (CNH) and
Deere & Co. (DE).
Tractor sales fell 60% in drought-racked Argentina during the
first quarter, said Agco, though they climbed 3% in Brazil as
demand for smaller equipment was buoyed by state-backed loan
programs.
Agco expects sales in North America to fall 15% to 20% this
year, compared with a 5% decline forecast previously. Sales in
Western Europe are expected to fall 10% to 15% this year.
The Duluth, Ga.-based tractor and combine maker reported
first-quarter net income of $34 million, or 36 cents a share, down
from $59 million, or 59 cents a share, a year earlier. Net sales in
the quarter fell 12% to $1.57 billion.
Wall Street analysts expected Agco to earn 23 cents a share on
sales of $1.56 billion, according to Thomson Reuters.
Agco trimmed its profit forecast for the year. It now sees
earnings per share in a range of $2 to $2.50, down from a forecast
of $3 to $3.25 previously. Agco expects sales for the year to be
$6.7 billion to $7 billion. The company expects unfavorable
currency exchange rates to lower sales this year by 11%.
Agco has turned its focus toward developing higher horsepower
tractor models used in large-tract farming, particularly in the
U.S.
"I think our focus on the professional farmer is the right
strategy," Chairman and Chief Executive Martin Richenhagen said
during a conference call. "Those products have higher margins and
the farmers act more like investors."
Agco shares were recently down 2.6% at $23.61.
-By Bob Tita, Dow Jones Newswires; 312-750-4129