6-6-06 JP Morganv5 -...
Transcript of 6-6-06 JP Morganv5 -...
JP Morgan Basics & Industrials Conference
June 2006
AGCO CorporationAGCO Corporation
A World of Solutions for Your Growing Needs
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Forward Looking Statements
Statements that are not historical facts, including projections of future sales, net income, earnings, operating income, cash flow, cost reduction, production levels, capitalization, coverage ratio forecasts, industry demand outlook, and our goals and objectives for margins, asset management, revenue and productivity improvements, are forward looking and are subject to risks which could cause actual results to differ materially from those suggested by the statements. These statements are based on current information and beliefs and, accordingly, the Company can give no assurance that the statements will be achieved. The Company bases its outlook on key operating, economic and agricultural data which are subject to change including, but not limited to: farm cash income, worldwide demand for agricultural products, commodity prices, grain stock levels, weather, crop production, farmer debt levels, existing government programs and farm-related legislation. Additionally, the Company’s financial results are sensitive to movement in interest rates and foreign currencies, as well as general economic conditions, pricing and product actions taken by competitors, customer acceptance of product introductions, the success of its facility rationalization process and other cost cutting measures, availability of governmental subsidized financing programs, production disruptions and changes in environmental, international trade and other laws which impact the way in which it conducts its business. Further information concerning these and other factors that could significantly affect the Company’s results is included in our Form 10K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission. The Company disclaims any responsibility to update any forward looking statements.
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Europe50%
South America12%
North America29%
Rest of World
9%
2005 Net Sales = $5.4 billion
AGCO Profile
Parts13%
Sprayers6% Other
7%
Combines5%
Hay/ Forage
3%
Tractors66%
Geographic View Product View
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Award Winning Technology
� Fendt 936 Vario – 2005 Agritechnica Show – Machine of the Year award for high-horsepower tractors
� Valtra C150 – 2005 Italian EIMA Agricultural Show Golden Tractor of the Year Award
� Massey Ferguson 6400 – Dyna-6 2005 Royal Show New Equipment Award/Technical Innovation Award
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Market Overview
North America ’04 ’05 Q106>40 HP Tractors +19% + 5% + 5%
Combines +41% + 1% +13%
Western EuropeTractors + 2% (5%) 0%
Combines (11%) +5% ( 3%)
South America (Brazil+Argentina )Tractors +8% (31%) ( 1%)Combines +8% (58%) (29%)
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� Brazil possesses nearly 19% of world’s cultivable land� Another 220 million acres available for farming
�140 million acres devoted to farming today
�530 million acres devoted to ranching today
AMAZON RAIN
FOREST
220 MILLION ACRES TO BE OPENED
AGCO Market Share in Brazil
No. 1 in Tractors
No. 3 in Combines
World Production
No. 1 in Coffee
No. 1 in Oranges
No. 1 in Sugar Cane
No. 2 in Soybeans
No. 2 in Cattle
No. 4 in Corn
Long-term Brazil Opportunity
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Key Strategies – New Products
425 HP Class 8 Combine
� High Capacity
� MF / Challenger / Gleaner brands
� Fastest Unloading Rate
Fendt 900X
� Up to 360 hp
� 60 KPH
� Tier III Engines� Advanced Electronics
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Key Strategies – Improve Distribution
� Strengthen our North American distribution network
� Grow the Challenger product line through strength of the Caterpillar dealer network
� Capitalize on growing Eastern and Central Europe/CIS market opportunities Russia
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Strategy� Distribute Challenger branded farm machinery through CAT dealers
� Focus on North America & developing markets� Leverage relationship with finest equipment distribution network in the world
� Encourage CAT dealer investment in AG equipment, sales people and new store
locations
Challenger Product Line Initiative
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Key Strategies – Common Product Platforms
Common Components� Cabs
� Engines
� Drivelines
Common Designs� Combines
� Balers� Sprayers
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Key Strategies – Expand Engine Production
� 2005 volume: ~24,000 units
� Target: 45,000 to 55,000 units
� $15M to $20M annual savings
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Key Strategies–Cost Reduction and Productivity
Labor
� Work elimination
� Automation� Productivity
2005 Cost of Sales & Operating Expenses
Material
� Low-cost country sourcing
� Leveraging global spend
All Other
�In
itiat
ives
Labor
Material
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� Total AGCO Gross Margins improved slightly despite 6.9% decrease in net sales
� European sales up 13.6% vs Q105 (Excluding currency translation)
� Q1 NA focus on working capital–reduced build of dealer inventories, improved cashflow, and contributed to 18% reduction in NA Sales
� SA market continued to decline and currency impacts resulted in lower sales and margins
Q106 Results
$1,257 $1,170
Q105 Q106
17.5%17.6%
Q105 Q106
Free Cash Flow (in millions)Net Sales (in millions) Gross Margin %
Q105
Q106
Q105 Q106
($320) ($197)
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Long Term View
Extended Global Farming Outlook
� Growing demand for larger, more productive farm equipment
� Mechanization to increase in developing countries
� Expanding demand for bio-fuels supports increased requirements for farm products
� Brazil to continue to expand global agricultural leadership
AGCO is well positioned to take advantage of long-t erm trends