AGCO's annual harvests may be smaller than those of major rivals John Deere and CNH , but it reaps some healthy profits. AGCO makes tractors, combines, hay and forage tools, sprayers, grain storage and protein production systems, seeding and tillage implements, and replacement parts for agricultural end uses. It sells through a global network of some 3,100 dealers and distributors spanning 140 countries. It also builds diesel engines, gears, and generators through its AGCO Sisu Power unit. Core brands include Massey Ferguson, GSI, Challenger, Valtra (Finland-based), and Fendt (Germany). The company offers financing services to retail customers and dealers via a venture with Dutch company Rabobank.
AGCO has operations in Argentina, Austria, Brazil, Canada, Denmark, France, Germany, Ireland, Italy, the Netherlands, Sweden, the UK, and the US. It also has a presence in Australia and Asia. Europe accounted for around 50% of its total revenue in 2014, while the US and South America each accounted for roughly 20%.
AGCO divides its operations across six segments. Tractors accounted for about 60% of its total sales in 2014, while replacement parts generated 14%. Its newest segment, grain storage and protein production systems, accounted for 9%, while combines, application equipment, and other machinery collectively accounted for the remaining 20%.
Sales and Marketing
AGCO distributes its products primarily through a network of 3,100 independent dealers and distributors, who are responsible for retail sales to the equipment's end user in addition to after-sales service and support of the equipment. Distributors also sell its products through a network of dealers supported by the distributor. Sales are not dependent on any specific dealer, distributor, or group of dealers.
Advertising expenses for 2014 and 2013 totaled $59.8 million, and $60.5 million, respectively.
In 2014 AGCO's revenues decreased by 10% due to softer global market conditions and the unfavorable impact of currency translation. Regionally, net sales in North America dropped during 2014; the most significant declines were in net sales in high horsepower tractors, sprayers and implements, partially offset by a growth in sales of low horsepower tractors, grain storage equipment, and hay tools.
Net sales were lower in South America for tractors, offset by increased net sales of grain storage equipment. In the EAME region, net sales dropped, with the largest sales decreases in France and Germany, partially offset by growth in Africa and Turkey. In the Asia/Pacific region, net sales also decreased due to sales declines in Asia.
In 2014 AGCO's net income decreased by 31% due to lower revenues, restructuring, and other infrequent expenses.
Operating cash flow declined by 44%.
The company is targeting China and Russia as areas for growth and continues to focus on developing technologically advanced equipment to solve the myriad challenges facing farmers, such as population growth, changing diets, and scarcity of land.
In 2015 AGCO opened its Future Farm and Learning Center near Lusaka, Zambia, as part of its mission on the African Continent to provide agricultural solutions for African farmers.
In 2014 DuPont Agriculture and AGCO Corporation teamed up to bring wireless data transfer technology solutions to farmers in leading agricultural markets, including the US, Canada, Brazil, and in Europe.
That year AGCO and Appareo Systems teamed up in a joint venture. Building on the existing IAS (Intelligent Agricultural Solutions) business structure, the JV will focus on the need for more advanced electronic technology centered around data collection, wireless communication, advanced sensors, and intelligent machine control.
In 2013 it formed a new joint venture with Russian Machines in order to manufacture and distribute agricultural equipment and replacement parts in Russia. AGCO and Russian Machines plan to make a total investment of approximately $100 million in the joint venture over the next three years. Its manufacturing facility will be located in Golitsyno, near Moscow.
AGCO also expands its presence though the opening and expansion of offices. In 2013 it began expansion on its manufacturing center in Jackson, Minnesota and plans to invest $43 million into the facility over the next three years. Also in 2013 it opened a new parts distribution center in Johannesburg to better cater to customers in the Sub-Saharan Africa region.
Mergers and Acquisitions
Strategic acquisitions have supported AGCO's momentum and added to its net revenues over the years. In 2014 it obtained Intersystems, a Nebraska-based manufacturer of commercial material handling equipment sold to grain operations globally.
In 2012 it acquired a 60% share in Santal Equipamentos for $31 million. Headquartered in Ribeirão Preto, Brazil, Santal Equipamentos manufactures and distributes sugar cane planting, harvesting, and handling equipment across Brazil. AGCO bought the remaining shares in that company in 2014 for $3.7 million.