Agco’s lower sales of tractors under 100 hp and hay products tied to the dairy and cattle sectors, as well as dealer inventory reductions, contributed to a third-quarter North American sales decline of around 31.9% compared to sales in the same period in 2008.
That’s according to the recent Agco third-quarter sales report posted on the ag manufacturing company’s Web site.
Agco reports net sales of about $1.4 billion for the third quarter of 2009, a decrease of approximately 32.7% compared to net sales of nearly $2.1 billion for the third quarter of 2008. For the first nine months of 2009, net sales were about $4.8 billion, a decrease of about 23.8% compared to those reported in the same period last year.
“Our third-quarter results were impacted by weak markets and significant production cuts aimed at reducing our company and dealer inventories,” stated Martin Richenhagen, Agco chairman, president and CEO. “Expectations of lower farm income in 2009 and the lingering effects of constrained credit in some markets have negatively impacted our business. We are facing softening end-market demand in Western Europe and North America, partially offset by stabilizing markets in South America. The priority for the remainder of the year continues to be lowering our investment in working capital in order to better align us with current market demand.
“Further progress was made with our inventory reduction efforts and cost reduction initiatives during the third quarter. Company and dealer inventories were reduced by approximately $165 million from June 30, 2009, levels by cutting production approximately 31% in the third quarter compared to the third quarter of 2008. We continue to make adjustments to our cost structure to match lower sales levels by aggressively reducing our work force. Through a combination of layoffs, temporary furloughs and the dismissal of temporary employees, we have lowered our workforce by approximately 25% since the beginning of the year. We are not, however, losing sight of our long-term objectives to expand and upgrade our product offerings and improve our profitability. We are continuing to invest in new product development, distribution enhancements and productivity improvements in our production facilities.”
Agco’s Europe/Africa/Middle East region reported a sales decline of about 30.3% compared to that of the third quarter of 2008, excluding unfavorable currency translation impacts. Demand in the third quarter of 2009 softened significantly in France, Germany, Finland and Scandinavia, while the Russian and Eastern European markets continue to be extremely weak.
AGCO’s South American region reported a sales decline of approximately 20.5% compared to third-quarter 2008 figures, excluding unfavorable currency translation impacts. Dry weather and credit constraints have resulted in weaker demand.
Lower net sales, reduced gross margins and the negative impact of currency translation all contributed to a decline in income from operations for the third quarter and first nine months of 2009. Gross margins declined due to lower production volumes and a weaker product mix, partially offset by the impact of reduced workforce levels and cost-containment initiatives. The company continued its investment in engineering in the first nine months of 2009 at levels slightly below the prior year. Unit production of tractors and combines for the third quarter of 2009 was approximately 31% below comparable 2008 levels.