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 some 4,200 dealers and distributors spanning more than 150 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
Tractors account for more than 55% of its total sales and replacement parts more than 15%.
AGCO has manufacturing locations in the US, France, Italy, Finland, Germany, Austria, Hungary, Denmark, Brazil, and China. It manufactures and assembles its products in more than 50 locations worldwide, including seven locations where the company operates joint ventures. Europe is its largest market, representing about 55% 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 4,200 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. It 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.
AGCO's revenue is closely linked to shifts in the agricultural industry. In recent years AGCO has been stung by crop oversupply reducing farmers' revenue and expenditure on machinery and equipment. AGCO's revenue dipped more than 30% from 2013-16 as a result.
In 2017, the agricultural machinery industry began to recover as harvests and crop production fell from record highs and pushed up commodity prices, restoring farmers' buying power once more. The recovery helped AGCO's grow its revenue for the first time since 2013, reaching $8.3 billion, up 12% on 2016. Contributions from acquisitions and favorable currency exchange effects accounted for $295.1 million of the approximately $900 million top-line growth.
Net income also grew, up 18% to $189.3 million, on the back of higher net sales and increased productivity levels in Europe and North America; North America also benefited from cost reduction methods. On the downside, margins shrank in Latin America due to lower production levels, material cost inflation, and a transition to higher horsepower tier 3 emission technology.
Cash inflow from operations increased 51% to $577.6 million thanks to higher net income and an increase in accounts payable and accrued expenses, partially offset by an increase in inventories.
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 sites and brands, lowering costs and improving its products. The company is increasing the technological sophistication of its products; in 2017 it launched the Fendt 1000 tractor, equipped with auto steering, a connectivity module, and Tractor Management System. It also made a number of acquisitions in the downturn to diversify its products and geographic spread.
The market downturn had the additional effect of forcing AGCO to improve its operational efficiency in search of margin growth amid low revenue. It targeted purchasing, factory productivity, and product development. It balanced reductions in sales and administrative and fixed manufacturing costs with focused spending.
Emerging economies present an opportunity for AGCO to introduce its high-tech machinery. Inefficiencies in the crop handling sector in Brazil and Eastern Europe offer the company with long-term opportunities for its grain storage and handling products. In China, to grow its presence in the animal rearing industry, AGCO established a joint venture with CP Foods to manufacture protein production equipment which will support sales and margin growth in the region.
Adhering to this strategy, AGCO in 2017 announced plans to further develop its Challenger farm machinery business in Africa by integrating it with Fendt, AGCO’s partner brand that manufactures agriculture tractors and machines. Challenger is AGCO’s core brand in Africa, the Asia-Pacific region, and North and South America.
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.
4205 RIVER GREEN PKWY
Duluth, GA 30096-2584
Phone: 1 (770) 813-9200
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
Clear Lake, IA
La Porte, TX