News Releases

• Net sales of $2.6 billion, down 18.8% year-over-year
• Reported earnings per share of $4.22 and adjusted earnings per share⁽¹⁾ of $1.35
• Strong year-to-date free cash flow generation
• Full-year net sales and adjusted earnings per share outlook raised

DULUTH, Ga., July 31, 2025 /PRNewswire/ -- AGCO (NYSE: AGCO), a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology, reported net sales of $2.6 billion for the second quarter ended June 30, 2025, a decrease of 18.8% compared to the second quarter of 2024. The second quarter of 2024 included other revenue of $290.5 million which represents revenue from the Company's divestiture of the majority of its Grain & Protein business as shown in the regional net sales table. Reported net income was $4.22 per share for the quarter and adjusted net income⁽¹⁾ was $1.35 per share. These results compare to reported net loss of $(4.92) per share and adjusted net income⁽¹⁾ of $2.53 per share for the second quarter of 2024. Excluding favorable foreign currency translation of 3.5%, net sales in the quarter decreased 22.3% compared to the second quarter of 2024.

"AGCO achieved solid second-quarter results with deliberate execution in the areas we can control despite a challenging global agricultural environment marked by weak farm economics and delayed purchasing decisions in several parts of the world," said Eric Hansotia, Chairman, President and CEO. "Our strong earnings and cash flow generation illustrate meaningful progress in reducing dealer and company inventories through aggressive production cuts. Operating margins benefited from disciplined cost control and continued implementation of our restructuring initiatives. Demand for our premium brands remains resilient, supported by growing interest in precision agriculture and sustainable technologies."

Hansotia continued, "The global trade landscape has become increasingly complex, with uncertainty surrounding trade negotiations impacting farmer confidence and investment decisions, particularly in North America and Europe. AGCO is closely monitoring these developments and remains focused on operational agility, supply chain resilience and executing our Farmer-First strategy."

Net sales for the first six months of 2025 were approximately $4.7 billion which is a decrease of 24.1% compared to the same period in 2024. The first six months of 2024 included other revenue of $490.6 million which represents revenue from the Company's divestiture of the majority of its Grain & Protein business as shown in the regional net sales table. For the first six months of 2025, reported net income was $4.36 per share and adjusted net income⁽¹⁾ was $1.76 per share. These results compare to reported net loss of $(2.67) per share and adjusted net income⁽¹⁾ of $4.85 per share for the same period in 2024. Excluding favorable foreign currency translation of 0.7%, net sales in the first six months of 2025 decreased 24.8% compared to the same period in 2024.

Second Quarter Highlights

• Reported regional sales results⁽²⁾: Europe/Middle East ("EME") (5.1)%, North America (32.9)%, South America (4.0)%, Asia/Pacific/Africa ("APA") (5.4)%
• Constant currency regional sales results^(1)(2)(3): EME (11.2)%, North America (32.2)%, South America (4.7)%, APA (5.9)%
• Regional operating margin performance: EME 14.7%, North America (5.3)%, South America 7.8%, APA 6.9%
• On July 9, 2025, AGCO's Board of Directors authorized a new share repurchase program authorizing the Company to repurchase up to $1.0 billion of the Company's common stock

 

Market Update

Hansotia concluded, "Challenging farm economics in the first half of 2025 have dampened demand for agricultural equipment across Europe and the U.S., with declining commodity prices and rising input costs specifically impacting U.S. farmer sentiment. Instead, there is growing interest in precision agriculture tools that offer efficiency gains without significant capital investment. In Brazil, erratic weather and lower prices have made farmers more cautious, with many choosing to maintain existing equipment rather than invest in new high-horsepower machinery. In Europe, environmental regulations and weather-related disruptions are driving demand for sustainable and adaptive technologies. While traditional equipment sales remain under pressure, we are seeing a clear shift toward smarter, more efficient solutions as farmers work to protect margins and navigate ongoing volatility."

North American industry retail tractor sales declined 13% in the first half of 2025 compared to the same period in 2024 with the steepest drops occurring in higher horsepower categories — particularly in recent months. Combine unit sales fell 33% year-over-year during the same period. Ongoing uncertainty around grain export demand and elevated input costs are expected to continue weighing on industry demand throughout 2025, especially for larger equipment.

Brazil industry retail tractor sales rose 6% in the first half of 2025 compared to the same period in 2024, driven primarily by demand for smaller tractors. Despite record soybean harvests and potential trade benefits, demand for larger equipment has yet to show meaningful improvement. If trade conditions continue to strengthen farm economics, demand could pick up later in the year. For now, industry growth in Brazil is expected to remain modest.

Western Europe industry retail tractor sales declined 12% during the first six months of 2025 compared to the same period in 2024 with double digit percentage decreases across most markets except Spain and Italy, which both saw modest growth. Demand is expected to remain soft throughout the year, as lower income levels weigh on arable farmers. However, steady demand from dairy and livestock producers is expected to partially offset the overall decline.

Regional Results

AGCO Regional Net Sales (in millions)

 

North America

North American net sales decreased 32.2% during the second quarter of 2025 compared to the second quarter of 2024, excluding the impact of unfavorable currency translation. Softer industry sales and under-production of end-market demand contributed to lower sales. The most significant sales declines occurred in high-horsepower tractors, sprayers and hay equipment. Income from operations for the second quarter of 2025 decreased $58.3 million compared to the same period in 2024 and operating margins were (5.3)%. The decrease was primarily a result of lower sales and production volumes.

South America

Net sales in the South American region decreased 4.7% during the second quarter of 2025 compared to the second quarter of 2024, excluding the impact of favorable currency translation. Dealer inventory de-stocking drove most of the decrease. Lower sales of mid-range tractors, planters and sprayers accounted for most of the decline. Income from operations for the second quarter of 2025 increased $17.4 million compared to the same period in 2024. This increase was primarily a result of improved product mix and improved factory efficiency, partially offset by negative pricing impacts.

Europe/Middle East

Europe/Middle East region net sales decreased 11.2% during the second quarter of 2025 compared to the second quarter of 2024, excluding the impact of favorable currency translation. Lower sales across most of the Western European markets were partially offset by growth in Eastern Europe and Scandinavia. Declines were largest in high-horsepower tractors and combines. Income from operations decreased $34.3 million in the second quarter of 2025 compared to the same period in 2024. This decrease was primarily a result of lower sales and production volumes as well as higher warranty costs.

Asia/Pacific/Africa

Net sales in the Asia/Pacific/Africa region decreased 5.9%, excluding favorable currency translation impacts, during the second quarter of 2025 compared to the second quarter of 2024 due to weaker end market demand and lower production volumes. Lower sales in Australia, China and Japan drove most of the decline. Income from operations decreased $1.0 million in the second quarter of 2025 compared to the same period in 2024 primarily due to lower sales and production volumes.

Outlook

AGCO now expects full-year 2025 net sales of approximately $9.8 billion. Adjusted operating margins are projected to be approximately 7.5%. Lower production volumes are expected to be partially offset by cost controls and stable engineering expenses. Based on these assumptions, full-year earnings per share are now targeted between $4.75 and $5.00. These estimates incorporate the expected impact of tariffs in effect as of July 31, 2025, along with AGCO's mitigation strategies. Any changes to tariff policies or related responses could affect these projections.

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AGCO will host a conference call with respect to this earnings announcement at 10 a.m. Eastern Time on Thursday, July 31. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO's website at www.agcocorp.com under the "Investors" Section. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for 12 months following the call. A copy of this press release will be available on AGCO's website for at least 12 months following the call.

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Safe Harbor Statement

Statements that are not historical facts, including the projections of earnings per share, production levels, sales, industry demand, market conditions, commodity prices, currency translation, farm income levels, margin levels, strategy, investments in product and technology development, new product introductions, restructuring and other cost reduction initiatives, production volumes, tax rates and general economic conditions, are forward-looking and subject to risks that could cause actual results to differ materially from those suggested by the statements. The following are among the factors that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements.

• Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, adverse weather, tariffs, increases in farm input costs, lower commodity prices, lower farm income and changes in the availability of credit for our retail customers, will adversely affect us.
• We maintain an independent dealer and distribution network in the markets where we sell products. The financial and operational capabilities of our dealers and distributors are critical to our ability to compete in these markets. Higher inventory levels at our dealers and high utilization of dealer credit limits as well as the financial health of our dealers could negatively impact future sales and adversely impact our performance.
• On April 1, 2024, we completed the acquisition of the ag assets and technologies of Trimble through the formation of a joint venture, PTx Trimble, of which we own 85%. Financing the PTx Trimble transaction significantly increased our indebtedness and interest expense. We also have made various assumptions relating to the acquisition that may not prove to be correct, and we may fail to realize all of the anticipated benefits of the acquisition. All acquisitions involve risk, and there is no certainty that the acquired business will operate as expected. Each of these items, as well as similar acquisition-related items, would adversely impact our performance.
• A majority of our sales and manufacturing takes place outside the United States, and many of our sales involve products that are manufactured in one country and sold in a different country. As a result, we are exposed to risks related to foreign laws, taxes and tariffs, trade restrictions, economic conditions, labor supply and relations, political conditions and governmental policies. The recent announcements of significant trade policy and tariff actions by the U.S. government, including but not limited to tariffs on imported steel and aluminum products, multiple tariffs on certain imports from China, tariffs on certain imports from Canada and Mexico, announced trade deal between the United States and European Union of baseline tariffs on certain imports from the European Union, and baseline tariffs on most imports from most other countries, are creating significant uncertainty and potential risks for our business. These announcements in some cases were followed by delays and changes in implementation, and the ultimate tariff structures are unclear at the current time. Depending upon which countries are impacted, increases in tariffs can increase both the costs of the inputs that we use in manufacturing products and increase the after-tariff sales prices of the products that we sell. The impacts of the tariffs may be partially mitigated as a majority of our sales and manufacturing takes place outside the United States. Additionally, these tariffs will increase the cost of certain raw materials and components, impacting our cost of goods sold. While we are actively exploring opportunities to mitigate these increased costs, there can be no guarantee that we will be able to fully offset the impact of these tariffs. Furthermore, the imposition of retaliatory tariffs from other countries on our exported products could negatively affect our sales and marketplace access in those countries. Moreover, the uncertainty of the tariff changes and any future trade policy changes has adversely impacted, and is expected to continue to adversely impact, our sales.
• We cannot predict or control the impact of the conflict in Ukraine on our business. Already it has resulted in reduced sales in Ukraine as farmers have experienced economic distress, difficulties in harvesting and delivering their products, as well as general uncertainty. There is a potential for natural gas shortages, as well as shortages in other energy sources, throughout Europe, which could negatively impact our production in Europe both directly and through interrupting the supply of parts and components that we use. It is unclear how long these conditions will continue, or whether they will worsen, and what the ultimate impact on our performance will be. In addition, AGCO sells products in, and purchases parts and components from, other regions where there could be hostilities. Any hostilities likely would adversely impact our performance.
• Most retail sales of the products that we manufacture are financed, either by our joint ventures with Rabobank or by a bank or other private lender. Our joint ventures with Rabobank, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate. Any difficulty by Rabobank to continue to provide that financing, or any business decision by Rabobank as the controlling member not to fund the business or particular aspects of it (for example, a particular country or region), would require the joint ventures to find other sources of financing (which may be difficult to obtain), or us to find another source of retail financing for our customers, or our customers would be required to utilize other retail financing providers. As a result of the recent economic downturn, financing for capital equipment purchases generally has become more difficult in certain regions and in some cases, can be expensive to obtain. To the extent that financing is not available or available only at unattractive prices, our sales would be negatively impacted. In addition, Rabobank also is the lead lender in our revolving credit facility and term loans and for many years has been an important financing partner for us. Any interruption or other challenges in that relationship would require us to obtain alternative financing, which could be difficult.
• Both AGCO and our finance joint ventures have substantial accounts receivable from dealers and end customers, and we would be adversely impacted if the collectability of these receivables was less than optimal; this collectability is dependent upon the financial strength of the farm industry, which in turn is dependent upon the general economy and commodity prices, as well as several of the other factors listed in this section.
• We have experienced substantial and sustained volatility with respect to currency exchange rate and interest rate changes, which can adversely affect our reported results of operations and the competitiveness of our products.
• Our success depends on the introduction of new products, particularly engines that comply with emission requirements and sustainable smart farming technology, which require substantial expenditures; there is no certainty that we can develop the necessary technology or that the technology that we develop will be attractive to farmers or available at competitive prices.
• Our expansion plans in emerging markets, including establishing a greater manufacturing and marketing presence and growing our use of component suppliers, could entail significant risks.
• Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations, or otherwise are the victim of a cyberattack, we could be subject to significant claims, penalties and damages.
• Cybersecurity breaches including ransomware attacks and other means are rapidly increasing. We continue to review and improve our safeguards to minimize our exposure to future attacks. However, there always will be the potential of the risk that a cyberattack will be successful and will disrupt our business, either through shutting down our operations, destroying data, exfiltrating data or otherwise.
• We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. In addition, the potential of future natural gas shortages in Europe, as well as predicted overall shortages in other energy sources, could also negatively impact our production and that of our supply chain in the future. There can be no assurance that there will not be future disruptions.
• Any future pandemics could negatively impact our business through reduced sales, facilities closures, higher absentee rates, and reduced production at both our plants and the plants that supply us with parts and components. In addition, logistical and transportation-related issues and similar problems may also arise.
• We recently have experienced significant inflation in a range of costs, including for parts and components, shipping, and energy. While we have been able to pass along most of those costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will adversely impact our performance.
• We face significant competition, and if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose customers and our net sales and performance would decline.
• We have a substantial amount of indebtedness (and have incurred additional indebtedness as part of the PTx Trimble joint venture transaction), and, as a result, we are subject to certain restrictive covenants and payment obligations, as well as increased leverage generally, that may adversely affect our ability to operate and expand our business.

Further information concerning these and other factors is included in AGCO's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2024, and subsequent Form 10-Qs. AGCO disclaims any obligation to update any forward-looking statements except as required by law.

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About AGCO

AGCO (NYSE: AGCO) is a global leader in the design, manufacture and distribution of agricultural machinery and precision ag technology. AGCO delivers value to farmers and OEM customers through its differentiated brand portfolio including leading brands Fendt®, Massey Ferguson®, PTx and Valtra®. AGCO's full line of equipment, smart farming solutions and services helps farmers sustainably feed our world. Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales of approximately $11.7 billion in 2024. For more information, visit www.agcocorp.com.

 

 

 

 

 

AGCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share amounts, per share data)

1. ACCOUNTS RECEIVABLE SALES AGREEMENTS

The Company has accounts receivable sales agreements that permit the sale, on an ongoing basis, of a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. The cash received from receivables sold under these accounts receivable sales agreements that remain outstanding as of June 30, 2025 and December 31, 2024 was approximately $2.0 billion and $2.3 billion, respectively.

In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world. The cash received from trade receivables sold under factoring arrangements that remain outstanding as of June 30, 2025 and December 31, 2024 was approximately $254.2 million and $220.5 million, respectively.

Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within "Other expense, net" in the Company's Condensed Consolidated Statements of Operations, were approximately $19.8 million and $38.7 million during the three and six months ended June 30, 2025, respectively. Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within "Other expense, net" in the Company's Condensed Consolidated Statements of Operations, were approximately $35.9 million and $63.8 million during the three and six months ended June 30, 2024, respectively.

The Company's finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to the Company's dealers. As of June 30, 2025 and December 31, 2024, these finance joint ventures had approximately $94.3 million and $139.2 million, respectively, of outstanding accounts receivable associated with these arrangements.

2. INVENTORIES

Inventories, net at June 30, 2025 and December 31, 2024 were as follows (in millions):

3. INDEBTEDNESS

Long-term debt consisted of the following at June 30, 2025 and December 31, 2024 (in millions):

As of June 30, 2025 and December 31, 2024, the Company had short-term borrowings due within one year, excluding the current portion of long-term debt, of approximately $134.1 million and $90.4 million, respectively.

1.002% European Investment Bank ("EIB") Senior Term Loan due 2025

On January 24, 2025, the Company repaid €250.0 million (or approximately $262.3 million) upon maturity of the EIB Senior term loan due 2025.

4. RESTRUCTURING AND BUSINESS OPTIMIZATION EXPENSES

The Company is focused on operational efficiencies to build a more resilient business. On June 24, 2024, the Company announced a restructuring program (the "Program") in response to increased weakening demand in the agriculture industry. The initial phase of the Program is focused on further reducing structural costs, streamlining the Company's workforce and enhancing global efficiencies related to changing the Company's operating model for certain corporate and back-office functions and better leveraging technology and global centers of excellence. The Company estimates that it will incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million in connection with this phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs. The Company incurred the majority of the charges in 2024 and expects to incur the remaining charges in 2025.

As of December 31, 2024, accrued severance and other related costs primarily associated with the Program were approximately $136.2 million. During the three and six months ended June 30, 2025, the Company recorded $2.5 million and $1.7 million, respectively, of severance and other related costs, net of reversals, primarily associated with the Program, and paid approximately $39.4 million and $69.7 million, respectively, of severance costs. The $79.9 million of accrued severance and other related costs as of June 30, 2025, inclusive of approximately $11.7 million of favorable foreign currency translation impacts, are expected to be paid primarily during the next 12 months.

Business optimization expenses primarily relate to professional services costs incurred as part of the restructuring program aimed at reducing structural costs, enhancing global efficiencies by changing the Company's operating model for certain corporate and back-office functions. During the three and six months ended June 30, 2025, the Company recognized approximately $13.1 million and $26.9 million, respectively, of business optimization expenses.

5. SEGMENT REPORTING

The Company has four operating segments which are also its reportable segments which consist of the North America, South America, Europe/Middle East and Asia/Pacific/Africa regions. The Company's reportable segments are geography based and distribute a full range of agricultural machinery and precision agriculture technology. The Company's Chief Operating Decision Maker ("CODM"), Eric P. Hansotia, Chairman of the Board, President and Chief Executive Officer, evaluates segment performance primarily based on income from operations. The CODM utilizes income from operations to evaluate each segment's performance including the allocation of resources. Sales for each segment are based on the location of the third-party customer. The Company's selling, general and administrative expenses and engineering expenses are generally charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income (loss) from operations for one segment may not be comparable to another segment. Segment results for the three and six months ended June 30, 2025 and 2024 based on the Company's reportable segments are as follows (in millions):

 

 

A reconciliation from the segment information to the consolidated balances for income (loss) from operations is set forth below (in millions):

RECONCILIATION OF NON-GAAP MEASURES

This earnings release discloses adjusted income from operations, adjusted operating margin, adjusted net income, adjusted net income per share and net sales on a constant currency basis and excluding a recent acquisition, each of which exclude amounts that are typically included in the most directly comparable measure calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). The net sales for the three months ended June 30, 2025 were not adjusted to exclude a recent acquisition as the acquisition occurred in the second quarter of 2024. A reconciliation of each of those measures to the most directly comparable GAAP measure is included below.

The following is a reconciliation of reported income (loss) from operations, net income (loss) attributable to AGCO and net income (loss) per share attributable to AGCO to adjusted income from operations, adjusted net income and adjusted net income per share for the three and six months ended June 30, 2025 and 2024 (in millions, except per share data):

 

 

The following is a reconciliation of adjusted operating margin for the three and six months ended June 30, 2025 and 2024 (in millions):

 

The Company does not provide a quantitative reconciliation of forward-looking, non-GAAP financial measures to the most directly comparable GAAP financial measure because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have a significant impact on such calculations and providing them may imply a degree of precision that would be confusing or potentially misleading.

The following table sets forth, for the three months ended June 30, 2025 and 2024, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

 

The following table sets forth, for the six months ended June 30, 2025 and 2024, the impact to net sales of currency translation and a recent acquisition by geographical segment (in millions, except percentages):

 

SOURCE AGCO Corporation

 

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AGCO Second Quarter 2025 Earnings Call Transcript

The following is the official transcript from AGCO’s earnings conference call held on August 4, 2025. Prepared remarks were delivered by AGCO leadership, followed by a question-and-answer session with analysts. This transcript is provided for convenience and should be read together with the earnings release and related materials available on AGCO’s Investor Relations website.

August 4, 2025

Corporate Speakers

• Greg Peterson: AGCO; Head of Investor Relations
• Eric Hansotia: AGCO; Chairman, President & Chief Executive Officer
• Damon Audia: AGCO; Senior Vice President and Chief Financial Officer

Participants

• Tami Zakaria: JP Morgan; Analyst
• Stephen Volkmann: Jefferies; Analyst
• Timothy Thein: Raymond James; Analyst
• Jamie Cook: Truist; Analyst
• Kristen Owen: Oppenheimer & Company; Analyst
• Peter Kalemkerian: RW Baird; Analyst
• Kyle Menges: Citigroup; Analyst
• Steven Fisher: UBS; Analyst

Operator:

Good day. Welcome to the AGCO Second Quarter 2025 Earnings Call.

(Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations.

Greg Peterson:

Thanks. And good morning. Welcome to those of you joining us for AGCO’s second quarter 2025 earnings call.

We will refer to a slide presentation this morning that is posted on our website at www.agcocorp.com.

The Non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the appendix of the presentation.

We will make forward-looking statements this morning including statements about our strategic plans and initiatives as well as their financial impacts.

We'll discuss demand, product development and capital expenditure plans and timing of those plans and our expectations concerning the costs and benefits of those plans and timing of those benefits.

We'll also cover future revenue, crop production and farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates and other financial metrics.

All of these are subject to risks that could cause actual results to differ materially from those suggested by the statements.

These risks include, but are not limited to, adverse developments in the agricultural industry, supply chain disruption, inflation, tariffs, weather, commodity prices, changes in product demand, interruptions in the supply of parts and products, the possible failure by us to develop new and improved products on time including premium technology and smart farming solutions, within budget and with the expected performance and price benefits, difficulties in integrating the PTx Trimble businesses in a manner that produces the expected financial results, introduction of new or improved products by our competitors and reduction in pricing by them, the war in the Ukraine, difficulties in integrating acquired businesses and in completing expansion and modernization plans on time and in a manner that produces the expected financial results, and adverse changes in foreign financial and foreign exchange markets.

Actual results could differ materially from those suggested in these statements.

Further information concerning these and other risks is included in AGCO's filings with the Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2024, and subsequent Form 10-Q filings.

AGCO disclaims any obligation to update any forward-looking statements except as required by law.

We'll make a replay of this call available on our website later today.

On the call with me this morning is Eric Hansotia, our Chairman, President and Chief Executive Officer; and Damon Audia, Senior Vice President and Chief Financial Officer.

With that, Eric please go ahead.

Eric Hansotia:

Thanks, Greg, and good morning to everyone joining us today.

We delivered solid second-quarter results, driven by disciplined execution in areas within our control, despite a challenging global agricultural landscape.

Weak farm economics and delayed purchasing decisions across several regions heavily influenced the uncertainty in global trade that impacted demand.

Net sales totaled over $2.6 billion, down approximately 19% year-over-year or 11% excluding the Grain & Protein business we divested last year. This decline reflects continued softness in North America and Western Europe, coupled with our ongoing impact from reducing dealer inventories in several parts of the world. Despite the uncertain near-term outlook, we remain focused on executing our strategy, supporting our dealers and customers, and investing in technologies that will fuel long-term growth.

We are closely monitoring evolving tariff policies in the U.S. and in other parts of the world.

As I said last quarter, we will try to limit the effects on farmers by trying to minimize increases through supplier discussions and other supply chain adjustments.

We will implement price increases where appropriate and feasible.

For the quarter, consolidated operating margins were 6.2% on a reported basis and 8.3% on an adjusted basis, reflecting strong decremental margins in the mid-teens. This performance highlights excellent global execution by our teams, who continue to deliver on our sales strategy and with a richer mix of products in several parts of the world, while simultaneously executing on our ongoing restructuring plans.

Notably, we achieved these margins despite a 16% reduction in production hours compared to quarter two 2024 as we are diligent in our efforts to align dealer inventories as quickly as possible.

We made meaningful progress in reducing both company and dealer inventories. This discipline was reflected in our working capital improvements, and free cash flow generation during the first half of the year, which was up nearly $400 million compared to the same period in 2024.

In Europe, sentiment has been moving more positive for much of the past year. Granted, that improvement trend has paused in the last two months.

As AGCO's largest and most critical region, Europe continues to provide better demand stability, strong consistent operating margins and helps dampen the impact of U.S. trade policy on our financials.

In North America, farmer sentiment remains cautious. Although government aid is expected to support higher net farm income, tight margins persist due to elevated input costs and reduced export demand. The uncertainty for farmers on several fronts has continued to weigh on their willingness to update their equipment.

However, North America ag barometers continue to show relatively strong sentiment.

On a more positive note, South American farmers are poised to expand their global share in key commodities over the next year, supported by favorable trade policies.

Despite the near-term uncertainty in some markets, we continue to believe that 2025 will be the trough for the ag industry with modestly higher demand in 2026 in all regions. Global tractor sales were the lowest last month of any time in the past 15 years, which supports our view of trough conditions.

Turning to a couple of AGCO-specific items.

We recently announced our resolution with TAFE on all outstanding commercial, governance, and shareholding matters. This outcome was made possible through close collaboration with Sudarshan Venu, son of TAFE's Chairman and Managing Director. This agreement was a very positive step forward for AGCO and its shareholders. This agreement paves the way for a more shareholder-friendly capital allocation strategy, including the new $1 billion share repurchase program that Damon will discuss shortly.

AGCO's Board and management remain fully committed to our Farmer-First strategy, which we believe will enhance customers' outcomes, drive operational success, and deliver strong returns for shareholders.

Slide four provides an overview of industry unit retail sales by region for the first half of 2025. The global farm equipment market continues to face significant headwinds, with North America and Western Europe experiencing the most pronounced declines.

However, Brazil is showing early signs of recovery, supported by favorable trade dynamics coupled with the fact that they were the first of our major markets to experience the downturn.

North America tractor sales declined 13% year-over-year, with consistent softness across horsepower categories. Higher horsepower segments saw steeper declines in recent months, reflecting ongoing uncertainty around grain export demand and persistently high input costs. These pressures are expected to continue weighing on demand, particularly for large equipment.

In Western Europe, tractor sales fell 12% in the first half of 2025 compared to the same period last year. This decline reflects more cautious farmer sentiment driven by policy uncertainty and softening commodity prices.

We are now in the fourth year of industry decline, which is longer than the typical European market downturns of past cycles.

Turning to Brazil. Tractor sales rose 6% in the first half of 2025, led by demand in lower horsepower categories.

While the U.S. continues to face reduced access to key export markets, Brazil is well-positioned to expand shipments to China, which could support a faster recovery. Despite record soybean harvests and favorable trade conditions, demand for larger equipment remains subdued due to the weaker crop prices.

That said, we are seeing early signs of recovery in the broader ag machinery market and expect continued improvement in Brazilian industry demand through the remainder of 2025.

And for combine sales, we saw declines across all three markets: - North America, Western Europe and Brazil, with North America experiencing the sharpest drop at 33% year-over-year. Despite these near-term normal industry challenges, AGCO remains well positioned for the long term.

Structural tailwinds, including global population growth, rising protein consumption, and increasing demand for clean energy solutions like sustainable aviation fuel and vegetable oil-based diesel, continue to support our outlook. Although geopolitical trade actions may shift the source of grain supply, they do not constrain the global demand for grain.

Our evolving precision ag technology stack with a focus on retrofitting almost any brand provides a differentiated competitive edge, helping farmers improve yields and meet the world's growing food needs.

Slide five outlines AGCO's factory production hours. To ensure year-over-year comparability, we've excluded grain and protein production hours from the 2024 baseline. Quarter two production hours were down approximately 16% compared to quarter two, 2024. Regionally, production was down in Europe, up in South America, and down over 50% in North America where we are hyper-focused on reducing dealer inventories.

Looking ahead, we still expect full-year 2025 production to be 15% to 20% lower than 2024 levels.

For the balance of the year, we will effectively be producing in-line with retail demand in most parts of the world with the exception of North America, where we will continue to significantly underproduce as we continue to right size our dealer inventories. Reducing dealer inventory remains a top priority in light of soft market demand and elevated inventory levels.

We are in good shape for the second half of 2025 in Europe and South America and further work is needed in North America.

Looking at a regional inventory breakdown.

In Europe, dealer inventory remains just under four months of supply, in-line with our target. Fendt is below this average, while Massey Ferguson and Valtra are slightly above.

Overall, Europe's near-target inventory levels are a big positive given AGCO's significant exposure to the region and its stability.

Looking to South America, we made good progress, reducing dealer inventory to around three months of supply, with units down around 3% and months of supply down almost one month from March 31.

We are now at our target level.

In North America, dealer inventory units declined approximately 10% from quarter one, 2025, driven by significant production cuts.

However, inventory remains elevated at around nine months of supply above our six-month target, given a lower outlook. Given the continued challenging outlook, we expect to underproduce relative to retail demand for the balance of the year in North America.

Slide 6 highlights AGCO's three high-margin growth levers, which are central to our strategy to achieve mid-cycle operating margins of 14% to 15% by 2029, while also outgrowing the industry by 4% to 5% annually. These initiatives reflect AGCO's transformation into a more resilient, higher performing company, one that is not only targeting stronger mid-cycle margins but also delivering higher highs and higher lows across the business cycle, which we are clearly demonstrating in these past couple of years.

To reiterate the 2029 growth lever targets we shared at our Analyst Meeting last December. Number one, our Fendt globalization and full line expansion centers on scaling the Fendt brand across North America and South America with combined revenues expected to reach $1.7 billion by 2029. Number two, our Precision Ag growth.

For that, we are targeting $2 billion in global Precision Ag revenues driven by our retrofit-first strategy and the integration of advanced digital capabilities that enhance farmer productivity and profitability.

And third is our global parts expansion.

We aim to expand our Global Parts business to $2.3 billion, with a focus on increasing the market share of genuine AGCO parts and improving service penetration, leveraging our FarmerCore strategy. These three levers are designed to drive sustainable, high-margin growth and position AGCO to deliver superior returns through the cycle.

AGCO's continued strong investment in R&D has earned recognition from leading global organizations, reinforcing our commitment to innovation and our Farmer-First strategy.

Slide seven highlights two award-winning technologies that exemplify this approach, each designed to enhance farmer profitability through improved efficiency, yield and ease of use. PTx OutRun is the world's only autonomous harvesting solution and was recently honored with a 2025 World Changing Ideas Award from Fast Company.

It is the first commercially available autonomous retrofit grain cart system designed to help farmers maximize yield and address the global labor shortage.

The OutRun kit enables autonomous grain cart operation and is currently compatible with competitive tractors, with Fendt compatibility coming in 2026. This breakthrough represents a major leap forward in harvest efficiency and smart farming.

On the equipment side, you have heard me say before that Fendt is the best of the best, and the Fendt 620 Vario is another example.

It continues to set new benchmarks in performance and efficiency.

It achieved the absolute best-in-class fuel efficiency in the DLG power mix test, recording the lowest diesel consumption in the 165- to 240-horsepower category.

Thanks to its VarioDrive transmission and Fendt low engine speed concept, the 620 Vario delivers unmatched efficiency and performance.

profi Magazine also praised the tractor for its exceptional field and road capabilities. These achievements are just a couple of the examples that reflect AGCO's commitment to delivering smart, farmer-first solutions that drive profitability, sustainability and ease of use.

I'd like to take a moment to recognize and thank the teams behind these innovations. Their efforts are helping AGCO fulfill its vision of being as farmers’ trusted partner for industry-leading smart farming solutions.

On slide 8, you can see the details for our 2025 Tech Days in Germany.

We are looking forward to showing off our PTx portfolio and how it will solve farmers' problems in late September. The key to delivering better customer outcomes for our farmers is our Precision Ag business. The performance of our PTx business is improving across many areas.

We've been hitting our financial and operational forecasts consistently over the last few quarters.

Our margins, although at trough levels are improving.

We are seeing strong growth in channel sign-ups of dealers and are growing strongly throughout the world.

The conversion to PTx Trimble guidance receivers on AGCO Machinery is almost complete.

And our innovation engine is firing with the team on track to exceed more than 10 innovations in 2025, well ahead of plan.

We hope you will join us and look forward to seeing you there for a hands-on and up-close experience.

Now I will hand it over to Damon to walk you through some of our financial results from the quarter.

Damon Audia:

Thank you, Eric. And good morning, everyone.

Slide 9 provides an overview of regional net sales performance for the second quarter and first half of 2025. Net sales were down approximately 15% in the second quarter compared to the second quarter of 2024, when excluding the positive impact of currency translation.

For comparison purposes, the impact of the divestiture of the Grain & Protein business, which was approximately $290 million in Q2 of 2024 has been excluded.

By region, the Europe Middle East segment reported sales down roughly 11% in the quarter compared to the same period in 2024, excluding the impact of favorable currency translation. Lower sales across most of the Western European markets were partially offset by growth in Eastern Europe and Scandinavia. Declines were largest in the high-horsepower tractors and combines.

South American net sales decreased approximately 5%, excluding the impact of favorable currency translation. Underproduction of retail demand drove most of the decrease. Lower sales of mid-range tractors, planters and sprayers accounted for most of the decline.

Net sales in the North American region decreased approximately 32%, excluding the impact of unfavorable currency translation.

Softer industry sales and underproduction of end-market demand contributed to lower sales. The most significant sales declines occurred in high-horsepower tractors, sprayers and hay equipment.

Net sales in Asia Pacific and Africa decreased 6%, excluding favorable currency translation impacts, due to weaker end-market demand and lower production volumes. Lower sales in Australia and China drove most of the decline.

Finally, consolidated replacement parts sales were approximately $503 million in the second quarter, up 3% year-over-year on a reported basis, and down approximately 1% when excluding the impact of favorable currency translation.

Turning to Slide 10. The second quarter adjusted operating margin was 8.3%, a 200 basis points decline compared to the second quarter of 2024, but about 100 basis points better than our forecast. The weak industry conditions are resulting in significantly higher costs related to factory underabsorption and higher discounts.

However, our SG&A expense reduction program is helping to offset some of these volume-related pressures in helping us deliver a more profitable business in the trough year, as Eric mentioned.

The multiphase program is designed to reduce structural costs, streamline our workforce, and enhance global efficiencies by better leveraging AI, automation and global centers of excellence, while delivering better outcome for our farmers.

By region, the Europe Middle East segment income from operations decreased approximately $34 million, while operating margins remain resilient at just under 15%. The decrease in income from operations was primarily a result of lower sales and production volumes and higher warranty costs.

North American income from operations in the quarter decreased approximately $58 million year-over-year, and operating margins were negative in the second quarter. Lower sales from the weak market conditions and significantly lower production hours were the primary drivers for the lower operating margins year-over-year.

Operating income in South America increased by approximately $17 million in Q2 of 2025 versus Q2 of 2024, and operating margins improved in the quarter to nearly 8%. This increase was primarily a result of improved factory efficiency and product mix.

Income from operations in our Asia Pacific/Africa segment decreased approximately $1 million due to lower sales and production volumes.

Slide 11 shows our free cash flow year-to-date.

As a reminder, free cash flow represents cash provided by or used in operating activities, less capital expenditures. Free cash flow conversion is defined as free cash flow divided by adjusted net income. Through June of 2025, we generated $63 million of free cash flow, approximately $390 million more than the same period in 2024, when we had net cash outflows of almost $330 million. This improvement was primarily driven by better working capital performance and approximately $100 million lower capital expenditures year-over-year.

For the full year, we continue to expect free cash flow to be within our targeted range of 75% to 100% of adjusted net income.

Our capital allocation priorities remain unchanged, reinvesting in the business, repaying debt to maintain our investment-grade credit ratings and returning capital to our shareholders.

However, following the TAFE settlement, our Board of Directors approved a new $1 billion share repurchase program, recognizing this is as a preferred method of capital return for many of our shareholders versus the special variable dividends we had issued over the last several years.

In addition to the repurchase program, we also recently declared our regular quarterly dividend of $0.29 per share.

We remain focused on deploying capital in the most effective ways to drive long-term value for our shareholders, and we are excited given our increased flexibility related to the share repurchases.

Slide 12 highlights our current 2025 market outlook for our three major regions.

We've made modest adjustments to our forecasts for North America and Western Europe compared to the expectations shared on our first quarter call.

In North America, we continue to expect significantly lower demand in 2025 versus 2024.

While net farm income forecasts have improved due to government support, elevated input costs and uncertainty around export demands are pressuring margins and causing farmers to delay equipment purchases.

We now expect the small tractor segment to decline approximately 5% compared to our prior outlook of down 0% to 5%, and we maintain our expectations for the large ag segment to be down 25% to 30% year-over-year.

In Western Europe, we now anticipate industry demand to decline approximately 5% to 10% versus our previous forecast of around 5%. Persistent rainfall and unfavorable growing conditions have continued to weigh on wheat production across key markets. Combined with lower commodity prices and elevated input costs, this is putting further pressure on farm income, leading us to revise our outlook.

Our outlook for Brazil remains unchanged at flat to up 5%.

Strong soybean yields in the Midwest and favorable trade dynamics continue to support farmer optimism and retail demand for tractors.

Slide 13 highlights the primary assumptions underlying our current 2025 outlook.

We continue to anticipate 2025 global industry demand to be approximately 85% of mid-cycle.

Our sales outlook was increased modestly due to foreign exchange and still includes market share gains and pricing in the 1% range. Based on the year-to-date weakening of the U.S. dollar, we now expect around a 2% favorable foreign currency impact in 2025, revised up from our prior expectations of no impact.

Tariffs continue to create significant demand uncertainty and increased cost for us.

Our current full-year guidance reflects the tariffs currently in effect across our global markets, along with our anticipated mitigation plans through cost or pricing actions. That said, the potential for retaliatory measures or additional U.S. tariffs could influence our outlook.

We are closely monitoring these developments and remain nimble in our approach.

We will update our guidance as needed if the situation evolves.

Engineering expenses are expected to remain approximately flat compared to 2024.

With the continued need to reduce dealer inventories in the North American market, production hours are expected to continue to be down between 15% to 20% in 2025, as Eric mentioned earlier. These reductions were heavily concentrated in the first half of the year with more moderate adjustments expected in the second half, mainly in North America.

Despite ongoing geopolitical trade conflicts and uncertainty affecting our farmers around the world, we have revised our expected adjusted operating margin to approximately 7.5%, reflecting the upper end of our prior guidance range. This outlook remains achievable based on our demand outlook as well as the structural changes and cost initiatives implemented across the business.

We continue to view 2025 as the bottom of the trough, with our current margin projection approximately 350 basis points above AGCO's performance at the last trough in 2016. Lastly, our effective tax rate for 2025 is still anticipated to be approximately 35%.

Turning to slide 14 for our current 2025 outlook.

We have raised our full-year net sales forecast to approximately $9.8 billion, up from $9.6 billion previously, reflecting the current market environment and the continued weakening of the U.S. dollar.

Our 2025 earnings per share target has also been revised upward to a range of $4.75 to $5.00 compared to the prior range of $4.00 to $4.50. These estimates reflect the projected impacts of tariffs in place as of July 31, including the recently announced EU tariff of 15%, along with our planned mitigation actions.

Any changes to existing tariffs or additional trade measures could affect this outlook.

Based on our demand outlook, we have lowered our capital expenditures to approximately $350 million, down from the $375 million communicated in Q1 earnings call and compared to $393 million in 2024. This level of investment still keeps AGCO well positioned to respond to future demand inflections.

Our free cash flow conversion target remains unchanged at 75% to 100% of adjusted net income, supported by continued focus on working capital management throughout 2025.

As Eric said, halfway through the year, we are pleased with our performance in this very challenging trough year.

Our teams around the world have navigated dynamic environments, grown share and remained intensely focused on reducing dealer inventories without compromising the needs of the farmers.

With our improved outlook for 2025, we view our current performance as another data point as to how we have structurally improved the profitability of our business regardless of where we are in the cycle. Lastly, our Q3 2025 net sales are expected to be approximately $2.5 billion.

If you were to exclude Grain & Protein sales from Q3 2024, our sales would be up roughly 7% on a like-for-like basis.

We anticipate Q3 earnings per share to be in the range of $1.20 to $1.25, up significantly from Q3 of 2024.

With that, I will turn the call over to the operator to begin the Q&A.

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Operator:

(Operator Instructions) The first question comes from Tami Zakaria with JP Morgan.

Tami Zakaria:

Very nice quarter. My first question is on the updated operating margin guide. Just wanted to make sure I understood what's implied.

So if all regions except North America, is going to produce to retail demand.

Shouldn't operating margin sequentially get better versus 2Q for the rest of the year?

Basically, I'm trying to understand what's implied in that 7.5% and what that means for 3Q and 4Q versus 2Q?

Damon Audia:

Yes. I think Tami, there is a seasonality to our business.

As you remember, Q2 is one of our stronger quarters. So Q3 will be a seasonally lower quarter and then Q4 will pick back up.

So if I think about the back half of the year, the way I would frame the operating margins is probably around 7.5% in Q3, given that lower seasonality, lower production and then a stronger quarter, a little bit over 9% to get you to that 7.5% for the full year that we have.

Tami Zakaria:

Understood. That's helpful color.

Then I think I heard Eric mentioned in the prepared remarks that demand for next year would be modestly higher in all regions.

I just wanted to understand, do you have order books open for next year?

What gives you the confidence or what underpins the expectation that demand could actually be higher in all regions next year?

Eric Hansotia:

Yes. We have our order books open, but they're not reaching into 2026 right now. Really what drove that comment, Tami, is that we've got our data scientists have built a forecasting model, and it looks at all different variables of farmer sentiment, crop prices, inventory levels, a number of things.

I think there's like 200 variables, and they assigned weighting on those variables based on their likelihood of predicting the future. That model is what we use to guide our expectations of the market demand, and it's pointing up in all of the regions for 2026.

And it's been highly accurate so far in 2025.

Now can things change between now and then with the tariff policies and things like that?

Sure. But with our best estimate of what we think will happen and the world is not certain yet, but it's getting a little more certain these days, that's why we made the forecast we did.

It lines up with a lot of what the rest of the industry is saying whether it's machinery or other parts of ag. They're saying 2025 is the trough at the very bottom and expectations will move up, that's backed by like the sentiment indicators in Europe with the CEMA barometer and the Purdue Index in North America, farmer sentiment index and both of those are up strongly over the last several months.

Operator:

The next question comes from Stephen Volkmann with Jefferies.

Stephen Volkmann:

Eric, I know your comments around sort of precision ag, and I'm curious whether you think the adoption that you're seeing now albeit in a weak market, is that actually ahead of your expectations?

Have you changed your view of kind of the slope of that adoption line going forward?

Eric Hansotia:

No. I'd say it's really coming out according to plan.

We're hitting our -- the PTx group overall, which is our overall tech business is hitting our forecast every month this year.

So it's delivering to plan, I wouldn't say we're raising our plan at this stage.

We're just delivering to it. It's a combination of the innovation flywheel. That's going really well.

I've been running this business now for the last six months and spending a lot of time with our engineers, with our salespeople, with the whole organization at the different sites out in the field.

So we've gotten to be really close to it. Innovation engine and the flywheel kicking out new innovations each year. We're ahead of schedule on that.

Then the other half is establishing the channel. We've got multiple paths to market. We have OEM partners.

We kept all of those and we're looking to grow them, setting up our AGCO dealers to be PTx dealers and then this full-line tech channel, and all of those, I'd say are going according to plan.

So happy with the business in a much better year this year than last.

Stephen Volkmann:

Great. Okay. Great.

Then just a follow-up unrelated, I guess but your TAFE agreement, I certainly understand your ability to buy back shares there.

But is there kind of more to it there than you think we should keep in mind?

Eric Hansotia:

Well I think this is a huge win for AGCO and its shareholders. This -- this agreement is very, very robust.

It allows the two companies to part ways and go their own way.

We can cash out of our ownership stake in TAFE, that brings in $260 million in cash.

It removes the TAFE member from the AGCO board. It allows us to be very, very focused on the core of our strategy.

It's the last piece in the overall structural changes we made. We exited Grain & Protein. We brought in PTx Trimble to form the overall PTx business.

We've now resolved all of the TAFE issues that were a big distraction, that's now behind us.

We are in full implementation mode on Reimagine and we are in full implementation mode on FarmerCore. Those are the five pieces we've been wanting to establish to structurally get the AGCO we wanted to get.

Now we've got it. We can focus on right at the core of our business to be super innovative and farmer focused, and we've minimized a lot of our distraction.

So high focus, low distraction.

We think it's a great outcome for our management team and our shareholders.

Operator:

The next question comes from Tim Thein with Raymond James.

Timothy Thein:

Great. Eric, just to continue on that line of thought there. Just in terms of capital allocation, with the, call it, I guess about $600 million of proceeds between the TAFE proceeds as well as the, call it, $300 million to $350 million of free cash flow. Just how you're thinking about capital allocation and specifically kind of the buyback cadence relative to that new authorization?

I know there's other things that we have leveraged and other things to balance, but maybe just maybe some high-level thoughts as to how you're thinking about the timing of that buyback program?

Eric Hansotia:

Yes. Actually, I'm glad you raised that.

I should have answered, Steve. I should have inserted that into Steve's question.

But there's -- the size of this business wasn't so huge, but what it unlocks is I've talked about the focus, I talked about distraction, but it also gets us on the path of what almost all of our investors have been asking for, for the last five years.

As I met with investors, they'd say we much prefer share buybacks than this special variable dividend.

But that's all we could do for this period because of the framework that was there, we had a shareholder concentration with traffic.

Now, that's gone. That's behind us.

And so, we're now free to operate the way our investors would want us to.

So as Damon talked about in his comments, our priority is supporting the operating needs of the company through capital and R&D investments, then looking at opportunistic M&A.

But now we can move in that share buyback opportunity and you raised two of the topics and we're looking at some others to be able to get our free cash back to investors in the form of share buybacks. That's moved way up the list, we know that investors want that more than this special variable dividend.

So that's going to be our primary vehicle going forward after our operating needs are met.

We'll -- we don't have specific timing in terms of -- that was the other part of your question.

It's really going to be contingent on when those cash flows become available. When we get the money in, then we can talk about how we get it back to shareholders.

We're not wanting to get out in front of our headlights on this.

Timothy Thein:

Okay. Understood.

Then maybe just on the topic of production hours, and you highlighted several times how the status of inventory reduction in North America where that's heading.

But I'm just curious, are the -- what you've seen and what you are seeing in the dealers are commenting in terms of the early order patterns in North America.

Is that informing you at all in terms of how you're thinking about 4Q production outlook.

Maybe just a thought on that.

Eric Hansotia:

You bet, early order programs for AGCO don't really start until the middle of August.

So we will learn more here soon. When I -- when we talk to dealers, we were just out visiting some dealers here recently, there's cautious optimism.

I was just with a group of farmers and dealers last week, and it matches the sentiment indicator from Purdue in North America, and that is that -- they believe that this -- essentially the tariff situation and uncertainty will get resolved.

Then ultimately, the administration cares a lot about farmers and will figure out a way that it's positive for farmers.

And so, there's some cautiousness in the market today but they don't expect that to last forever.

So as the playing field gets more clear, I think that will unlock confidence. The market wants to be able to buy -- we want to come off the bottom.

The fleet age is getting older and older now for about two years. There are -- for the new technology they want to get in the market.

They just want a lot more certainty.

Operator:

The next question comes from Jamie Cook with Truist.

Jamie Cook:

Nice quarter. I guess two questions. One, there's a lot of debate on 2026 and the market outlook.

But I guess I'm more interested in the factors that AGCO can control to grow earnings next year.

So assuming a flat market, Eric or Damon, what do you think the biggest buckets are in terms of your ability to grow earnings, whether it's restructuring, repo, producing in line with retail, just your confidence level there that if the market is flat next year, it still implies that AGCO's earnings are trough in 2025 and growing?

Then I guess my second question, just given the excess inventory that we have in North America, understanding you're underproducing that, that's what drove the losses in the first half of the year. Just what are you assuming in the back half of the year for North America, like when do the losses stop?

Damon Audia:

Yes. Sure, Jamie.

So for 2026, again, using the assumptions that you outlined, I think the two biggest drivers that would enhance the margins in 2026.

One would be the underproduction lapping that next year, again as we're already starting to produce to retail in South America and in Europe, as Eric alluded to, we're working hard to get North America.

I've said in some of my comments in the prior quarters, today we have about over 1% headwind related to this under-absorption embedded in our margins.

So if we were simply producing the retail, I think you're looking at sort of that sort of level flowing back into the system. So that would be the top one.

The second one the restructuring actions. Again we've said, by the end of this year, we should be run rating somewhere in that $100 million to $125 million range.

We've said there's about an incremental $60 million this year.

So I will get a little bit more next year.

I've also identified that $75 million that I would run rate by the end of next year, some of that will be incremental to the P&L in 2026 as well.

So you're going to get a little bit of '25 rolling into '26 and the '26 execution starting sort of mid-year -- so I think those are the two big variables.

I'm not going to speculate on what we do with repurchases, as Eric alluded to, we're eager to jump into that.

But how much we do and how fast we go, I would say would be upside to what we do from the core operations.

Operator:

The next question comes from Kristen Owen with Oppenheimer & Company.

Kristen Owen:

I just want to follow up on the cadence of the production hours in the second half of the year because it looks like you're now anticipating that your production will be roughly flat in 3Q and maybe down a little bit more than what the original production outlook was for the year.

So I'm trying to square that with your operating margin outlook that you provided in the first question.

I think the most helpful way of asking this is, can you give us a little bit of color where that margin cadence is for, say Europe relative to South America, North America for the rest of the year?

Damon Audia:

Yes. Sure, Kristen. And maybe I'll try to weave in Jamie's second question is we didn't get to answer her North American, one so I'll try to weave that in as well.

I think when you look at the production hours Q3 and Q4, you have got to remember last year, this is sort of in a year-over-year comparison.

You may remember last year, we took an elongated shutdown in Europe given what we were trying to do with dealer inventory there.

Then we sort of moved production back up in Europe in the fourth quarter.

So when we're looking at the Q3 production, what you're seeing is Europe actually being up sort of, I'll call it, call it low teens. North America will be down over 50%, and then you'll have some improvement in South America in Q3, and then because of that, what I did last year in Europe, and I move into Q4, again I'm still expecting North American down a lot, but South but Europe will actually likely be down a little bit, just again given more of the year-over-year comparisons.

So that's sort of why you're seeing the change in the production hours here between Q3 and Q4 versus our last assumption.

When I look at the margins here, again for Europe, I think we're looking probably something relatively similar to Q2. So as I think about Q3, probably right in that same range.

Then as we get the higher volume as we see in our fourth quarter, we would see the European margins pick up a couple of percent from the Q3 level.

So again, more of that sales driven margin in Q4.

For North America, as I alluded to, with the production being down over 50% in Q3 and probably down over 50%, again in Q4 as we look to rightsize dealer inventory, we still see that position in a loss.

We still see the North American margins being negative. And again given the Q2 is a strong seasonal quarter for them as we move into Q3 and Q4, which are lower revenue quarters, I would say that those losses could be right around 10%, 11% range, if not a little bit more, depending on the ultimate sales.

Kristen Owen:

Okay. That is incredibly helpful.

Then my follow-up question, just tying back to your comments on parts sales and just servicing the existing fleet, both with the aftermarket technology and parts and services. Just can you expand on what's helping support that?

And any color that you can provide on how that's impacted PTx Trimble sales in the quarter?

Damon Audia:

Yes. I'll touch on some of the general things of what we're seeing with parts and then maybe I'll ask Eric to elaborate a little bit on FarmerCore which has been a catalyst for here in North America.

But I think overall parts sales has been relatively resilient.

As I said in my comments, it was up around 3% when you look at the quarter year-over-year.

I'd say it's a little bit following the regional pattern where Europe has continued to do quite well.

South America is recovering. North America was a little bit more of a challenged market. Again I think as Eric talked about his comments, we're seeing a lot of hesitation.

I think there's some optimism for the future, but at least right now given the uncertainty, I'd say our geographic weighting of parts has been a little bit more challenged in North America.

But what we are seeing in the penetration rate relative to FarmerCore is giving us that optimism that as these markets start to stabilize as farmers get more comfortable, we definitely see the opportunity for parts to continue that annual growth that we've seen.

But maybe I'll let Eric touch about -- touch on FarmerCore and how that's contributing to parts as well.

Eric Hansotia:

Yes. There's a few elements of FarmerCore.

If you remember, that's our strategy to -- instead of the farmer having to come to a brick-and-mortar store where the farmer comes to the business, in this case, FarmerCore means we're going to -- the business is going to come to the farmer.

So digital tools like online configurator to configure the machine or ecommerce. Ecommerce is allowing our parts sales to grow significantly.

It's one of our fastest-growing businesses right now. Oftentimes, the farmer is looking for a part of ours.

When they look for a part, they're buying a bigger order than they would have if they would have just gone into the store because we can do recommendations and things like that.

So, it's not only more convenient, but it's also capturing more of the farmer wallet. We're using AI chatbots to assist dealers with spare parts inquiries and make that job a lot easier and more accurate for the farmer.

And so there's a lot of activities going on relative to parts directly, but then overall FarmerCore, we've put in place 25 -- our dealers have put in place 25 new store formats last year and on track to do that again this year.

We've implemented over 140 of those new service trucks that we've shown you before, where the work comes out to the farm and all the work that gets done on the farm.

So, all of these feed together, whether it's the digital tools, the new ways of interacting, there different footprint of our dealers, all to be way more convenient than most farmer-focused distribution network in the industry, and that helps with parts sales because it's -- on the one hand, it's more convenient and it captures more of the farmer's wallet.

So we're continuing to believe that's the right strategy for the farmer and helps grow AGCO's high-margin business.

Operator:

The next question comes from Mig Dobre with RW Baird.

Peter Kalemkerian:

This is Peter Kalemkerian on for Mig this morning.

A two-part question here on share gains.

First part, is there any way to quantify what's embedded in the full year guide for '25 from that share gain component?

And second, is there any color that you might be able to provide on what you're seeing with shares specifically on Fendt in North America, just thinking U.S. here tariffs are obviously a factor with Fendt product which I assume Fendt might be priced a bit higher on a relative basis to some other machines in the marketplace compared to where they were at in a tariff-free environment.

So correct me if I'm wrong on that last point.

But yes, any way to quantify the share gain component of the guide?

Then any color on the Fendt rollout in North America would be helpful.

Damon Audia:

Yes. So Peter, we don't really break down share specifically by brand or by region.

I can tell you we are -- if we look at our three different brands, the teams have done very well in gaining share in all of the regions. Again if you remember last year, Fendt had an exceptionally strong year, gained a lot of share, and they've done very well year-to-date holding that in Europe, Massey and Valtra also gaining South America, the team has done really well across the brands gaining share.

In North America here, again the industry is down quite a bit.

But when you look at the actual share for several of the different Fendt products, we're actually seeing the share tick up year-to-date.

Now again, you raised a great question that as we think about the implementation of these tariffs, how will that affect our pricing strategy relative to the competition. Again you heard from Eric, Fendt is the best of the best.

We know that it delivers better fuel efficiency, better performance of the farmers, but we've got to make sure that that value relative to the alternative fits what the farmer needs.

I think that's what we're going to work through here.

We have announced some price increases in North America related to parts related to PTx and for our model year '26 branch.

But again we're going to see how this unfolds over the next six months and make sure that we continue our strategy of growing Fendt because we know farmers in North America deserve the best of the best, and that's what Fendt offers them, and we want to make sure that they have that available.

Eric Hansotia:

And let me just build on that a little bit. Everything you said is spot on.

I want to talk about the pricing strategy of AGCO, and I think of our competitors based on what we can see and hear from them, there's two separate topics. They're not tied together.

One topic is how much cost comes into the company because of tariffs on certain products coming from certain countries into new markets?

We gather all that up and so do our competitors.

Separately is, how do we put -- how do we manage those costs.

So my point here is, just because a certain product is incurring a tariff, it doesn't mean that we put price on that product the same way.

We manage price separate from cost.

So we could have certain products -- all of our competitors and us have certain products that are going to be more expensive in markets, whether they came from Indonesia or Japan or India or Germany wherever or Brazil.

So -- but we're all seeing now where do we put the price. It could be some in North America. It could be in other markets. It could be on the products that got tariffs, it could be on all products.

It most often is not just on the products that incurred the tariff because you want to keep the overall portfolio in balance with the rest of the market.

So it's much more of a spreading across the whole portfolio and the whole globe versus just where the tariffs were incurred.

Operator:

And was there a follow-up to your question?

Peter Kalemkerian:

No. That was super helpful color, guys.

Operator:

The next question comes from Kyle Menges with Citigroup.

Kyle Menges:

I don't think you guys actually quantified the change in tariff impact in the EPS guide.

So I guess that would be helpful. Just how that influenced the change in the EPS guide.

Then just now that we have an EU trade deal, any update on how you're feeling about production footprint and pricing you might need to take to offset tariffs?

Damon Audia:

Sure, Kyle.

So if I think about the change in our guide, which was $4.00 to $4.50, now $4.75 to $5.00.

I guess the way I would walk that change is, we beat Q2 by around $0.30, the FX that we've now moved to a 2% positive is around a $0.45 positive.

We've weakened the industries in Europe and in North America, small ag, I would say that's about a $0.25 headwind. The incremental tariff costs, I remember at the end of the first quarter, I quantified the net tariff cost at around $0.30 to us from an EPS standpoint, that's now around $0.45.

So an incremental $0.15 headwind.

Then we have some other positives in the numbers that get us to the $4.75 to the $5.00. The $0.15 incremental related to tariffs is really driven by two things.

One is as we've gotten better clarity with certain tariffs of EU at 15%, what we're seeing with Indonesia, Japan, some of the places that we import these -- our products, we've rolled those through. So that's been a negative.

The other headwind is as we have announced some pricing actions.

As I mentioned on a prior question, we've announced pricing actions for parts for PTx as well as for our equipment group, some of that pricing is going in a little bit later than what we had originally anticipated.

So there's more of a delay of that pricing dropping to the bottom line.

Those two together are creating a little bit more of an EPS headwind related to the tariffs, as I said, to the extent of around $0.15.

As it relates to the overall pricing, I think Eric just touched on some of the comments, now that we have clarity on how the EU tariffs are going to affect our production, we'll see how that compares to the competitive landscape relative to the value proposition that we offer the farmers and we'll adjust accordingly. From a production standpoint, again we do review our production footprint on a regular basis as we think about our volume growth, as we think about our long-term share and where we're going to be making or selling those products, we always step back and say is there a lower cost alternative for us to service the farmers the right way.

Now that we're getting some more clarity on this, we'll revisit this as we do on a regular basis.

I don't anticipate any sort of near-term changes given the market environment, given the demand.

But it's something we're going to make sure that we're constantly assessing to keep our costs as low as possible.

Kyle Menges:

Very helpful.

Then I guess another question on the production hours and just kind of trying to square that with some of the other comments you guys made.

I mean the guidance for production hours for the year was unchanged.

But, did bring down industry retail outlook for North America and Europe a little bit. Then I guess squaring that with some of the inventory comments.

It sounds like just quarter-over-quarter, no change to Europe, dealer inventory.

South America, I guess you reduced by a couple of months, but that North America inventory sounds like actually increased by 0.5 month sequentially.

So maybe just trying to square no change to production hours with some of those other comments in guidance?

Damon Audia:

Yes. So again remember, our inventory outlook is a 12-month forward look. In the low horsepower change, we really don't make much of that. That's third-party produced products that we buy.

So that's not going to have a big driver on our production hours.

Then when I look at the change in Europe, I would say again relatively modest tweak and what you saw us change in Europe is sort of offset here by the sort of an increased level of production cuts in North America.

So it's sort of a netting of what we're seeing to keep our -- to stay within the 15% to 20% range.

Operator:

The last question today will come from Steven Fisher with UBS.

Steven Fisher:

You mentioned the – obviously, the $0.30 beat in the quarter.

Can you just bridge or break that down onto the key drivers were there?

Then the second question is wondering if you could just give your perspectives on the potential changes to the ag policy in Europe and how influential these policies might be relative to just kind of core ag fundamentals?

Damon Audia:

Yes. I think Steve, at the high level, the highest level, the beat was heavily driven by slightly better volumes across most of the regions and a little bit better mix. That was the vast majority of the beat and then cost savings came in a little bit better.

But I would say the vast majority was the overall volume.

Then on the ag, Eric, you want to take that one.

Eric Hansotia:

Sure. We keep our eyes on that real closely. That's just a proposal.

It's not a policy yet. The farm groups are all pushing back pretty strongly.

If you look what happened on diesel tax or on some of the regulations that were proposed for some of the green deal in Europe, farmers pushed back pretty hard and then there's a balancing point that was found on all of those.

I think that's going to happen again here.

So this is a starting point of the discussion. There will be a lot of negotiations and challenges back and forth, and I think we'll end up in a reasonable place in the end.

But we'll have to see where all that shakes out.

It's too early to tell.

Operator:

This concludes our question and answer session.

I would like to turn the conference back over to Eric Hansotia for any closing remarks.

Eric Hansotia:

Thank you for joining us today and for the thoughtful questions throughout the call. AGCO continues to make meaningful progress in our transformation journey, building on the momentum we established in 2024, particularly with the launch and expansion of our PTx Precision Ag platform, but it's really -- that's a big part of our five-piece puzzle, Grain & Protein out, PTx Trimble in, the build of PTx, the TAFE issue resolved, Reimagine project, leveraging AI is in full implementation and FarmerCore is in full implementation. These all together allow us to have the AGCO that we've been wanting, gives us more focus as a leadership team, less distraction, all able to accelerate our execution.

We already delivered solid performance in the second quarter despite ongoing global trade uncertainty and soft industry demand.

We made further strides in cost reduction and inventory management, both of which remain key priorities for the remainder of the year.

Those are in our control, and we're hyper focused on executing.

Our long-term success is anchored in the execution of our Farmer-First strategy. The entire organization is passionate about this and our dealers and farmers appreciate it.

We remain focused on growing our margin-rich businesses that we've talked about from the beginning, globalizing Fendt, parts and services and precision ag, while maintaining disciplined cost management.

To close, our updated financial outlook reflects our confidence in the strategy and the strength of our global team. Even in a challenging environment, we are investing in the future, gaining share and executing with agility. That is why we announced the $1 billion share buyback, the largest in our company history.

We are bullish on the future of AGCO. To our shareholders, thank you for your continued support.

We look forward to building long-term value and advancing our Farmer-First strategy.

Have a great day.

Operator:

Thank you for joining the AGCO earnings call. The call has concluded.

Have a nice day.