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About AGCO Corporation

This company has been plowing the furrow of premium agricultural equipment since 1990. 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 more than 4,000 dealers and distributors spanning about 140 countries. It also builds diesel engines, gears, and generators through its power engines unit. Core brands include Massey Ferguson, GSI, Challenger, Valtra (Finland-based), and Fendt (Germany). AGCO Finance offers financing services to retail customers and dealers via a venture with Rabobank, a Dutch bank specializing in agricultural loans. Europe accounts for nearly half of AGCO's sales.

Operations

Tractors account for more than 55% of AGCO's sales and replacement parts nearly 15%. Combines and application equipment each make up less than 5% of revenue; grain storage and protein production systems, and other machinery products account for about 20%

Geographic Reach

AGCO has manufacturing locations in the US, France, Italy, Finland, Germany, Austria, Hungary, Denmark, Brazil, and China. It manufactures and assembles its products in about 50 locations worldwide, including six locations where the company operates joint ventures. Europe is its largest market, representing about 53% of net sales, followed by North America at around a quarter of sales.

Sales and Marketing

AGCO distributes its products primarily through a network of more than 4,000 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. AGCO also sources machinery and parts from third parties to control costs, inventory, and supply, partly in response to the high seasonality of agricultural machinery demand.

Financial Performance

AGCO's revenue is closely linked to shifts in the agricultural industry. In recent years strong global crop production has kept agricultural commodities prices low, reducing farm incomes. As a result, AGCO's revenue has been choppy the last five years, dipping about 4% between 2014 and 2018. However, AGCO's sales have been on the upswing since 2016 as farmers began replacing older equipment after years of pent-up demand. 

Sales in 2018 increased nearly 13% to $9.4 billion compared to $8.3 billion in 2017. Growth in 2018 was fueled in North America by the positive effects of AGCO's 2017 acquisition of Precision Planting as well as higher tractor, sprayer, hay tool, and grain storage equipment sales. AGCO also saw increased demand in France, Germany, the UK, Australia, and China.  

Net income increased 53% to $285.5 million in 2018 compared to 2017, primarily due to higher net sales and operating margin.   

Cash at the end of 2018 was $326.1 million, a decrease of $41.6 million from the prior year. Cash from operations contributed $595.5 million to the coffers, while investing activities used $205.5 million, mainly for capital expenditures. Financing activities used $413.3 million, primarily for debt repayment.  

 

Strategy

AGCO continued to invest through the market downturn. The squeeze forced the company into seeking solutions to product development that marry innovation with cost reduction. AGCO developed its global platform and module strategy, which leverages common product architectures and standardizes components across AGCO's manufacturing sites and brands, lowering costs and improving its products. 

The company has made significant investments in smart farming technology that leverages data collected from machinery to increase productivity. AGCO now offers a full line of smart farming equipment that serve the needs of a farm's entire operations from soil preparation and planting, spraying, and harvesting to grain storage and protein production. The company's IDEAL combine, launched in 2019, has more than 80 onboard computers and sensors that provide data visualization of the machinery's operation. 

AGCO further boosted its smart ag offerings in 2019 with the announcement of a strategic partnership with Solinftec, a provider of digital agriculture solutions. The deal allows AGCO customers access to Solinftec's digital offerings including on-board computers, soil sensors, and algorithms that enable real-time insights that improve agricultural efficiency. Solinftec's solutions launched in Brazil in early 2019 for producers of sugarcane, soybeans, cotton, and corn, and will be available to US soybean and corn producers in 2020. 

The market downturn had the additional effect of prompting AGCO to improve its operational efficiency in search of margin growth amid low revenue. The company targeted purchasing, factory productivity, and product development. AGCO also balanced reductions in sales and administrative and fixed manufacturing costs with focused spending.

 

Mergers and Acquisitions

Strategic acquisitions have supported AGCO's international growth.

In 2017 AGCO completed the $940 million of GSI Holdings Corp from Centerbridge Partners. GSI's primary business lines are grain-storage equipment and equipment used in raising hogs and poultry, such as ventilation fans for barns and watering systems. The company markets its equipment under half a dozen brand names.

Also in 2017, the company also acquired Precision Planting LLC for $198.1 million. Precision Planting, headquartered in Tremont, Illinois, manufactures high-tech planting equipment. The acquisition provides AGCO with an opportunity to expand its precision farming technology offerings globally.

AGCO Corporation

4205 RIVER GREEN PKWY
Duluth, GA 30096-2584
Phone: 1 (770) 813-9200

Stats

Employer Type: Publicly Owned
Stock Symbol: AGCO
Stock Exchange: , NYSE
SVP and CFO: Andrew H. Beck
Chairman, President, and CEO: Martin H. Richenhagen
SVP and Chief Supply Chain Officer: Hans-Bernd Veltmaat
Employees (This Location): 215
Employees (All Locations): 21,200

Major Office Locations

Duluth, GA

Other Locations

Visalia, CA
Norcross, GA
Clear Lake, IA
Batavia, IL
Morton, IL
Beloit, KS
Hesston, KS
Edgewood, MD
Jackson, MN
Independence, MO
Charlestown, NH
Kadoka, SD
La Porte, TX
Kitchener, Canada
Espoo, Finland
Forssa, Finland
Huittinen, Finland
Hyllykallio, Finland
Iisalmi, Finland
Joensuu, Finland
Jyvaskyla, Finland
Kajaani, Finland
Kokkola, Finland
Kouvola, Finland
Kuopio, Finland
Kuusamo, Finland
Lahti, Finland
Lappeenranta, Finland
Loimaa, Finland
Mikkeli, Finland
Oulu, Finland
Pirkkala, Finland
Pori, Finland
Rovaniemi, Finland
Salo, Finland
Sastamala, Finland
Savonlinna, Finland
Turku, Finland
Tuuri, Finland
Vaasa, Finland
Varkaus, Finland
Virrat, Finland
Ylivieska, Finland