News Releases

• Net sales of $2.5 billion, down 4.7% year-over-year
• Reported earnings per share of $4.09 and adjusted earnings per share⁽¹⁾ of $1.35
• Full-year adjusted earnings per share outlook increased to approximately $5.00
• $300 million in share repurchases to commence in the fourth quarter of 2025, utilizing $230 million in after-tax proceeds received from the TAFE ownership sale

DULUTH, Ga., Oct. 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 $2.5 billion for the third quarter ended September 30, 2025, a decrease of 4.7% compared to the third quarter of 2024. The third quarter of 2024 included other revenue of $251.2 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 $4.09 per share for the quarter and adjusted net income⁽¹⁾ was $1.35 per share. These results compare to reported net income of $0.40 per share and adjusted net income⁽¹⁾ of $0.68 per share for the third quarter of 2024. Excluding favorable foreign currency translation of 3.7%, net sales in the quarter decreased 8.4% compared to the third quarter of 2024.

"AGCO delivered another solid quarter of navigating a complex global landscape shaped by challenging farm economics, high interest rates, and cautious capital investment," said Eric Hansotia, AGCO's Chairman, President and CEO. "Our continued investments in precision agriculture, autonomous solutions and sustainable technologies helped maintain demand for our premium brands. At the same time, we have responded decisively with disciplined production cuts, aggressive cost management, and accelerated strategic restructuring initiatives."

Hansotia continued, "While political shifts and global trade tensions weighed on farmer sentiment especially in North America, AGCO's diversified global footprint and Farmer-First strategy helped mitigate regional disruptions. Our strong earnings and improved cash flow generation reflect the structural changes we have made. We remain focused on improving productivity for farmers, driving growth across our portfolio and delivering value for our shareholders which has been enhanced with the previously announced $1 billion share repurchase program, expected to commence this quarter."

Net sales for the first nine months of 2025 were approximately $7.2 billion, a decrease of 18.4% compared to the same period in 2024. The first nine months of 2024 included other revenue of $741.8 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 nine months of 2025, reported net income was $8.45 per share and adjusted net income⁽¹⁾ was $3.11 per share. These results compare to reported net loss of $(2.27) per share and adjusted net income⁽¹⁾ of $5.53 per share for the same period in 2024. Excluding favorable foreign currency translation of 1.0%, net sales in the first nine months of 2025 decreased 19.4% compared to the same period in 2024.

Third Quarter Highlights

• Reported regional sales results⁽²⁾: Europe/Middle East ("EME") +27.5%, North America (32.1)%, South America (8.1)%, Asia/Pacific/Africa ("APA") (5.9)%
• Constant currency regional sales results^(1)(2)(3): EME +20.3%, North America (32.1)%, South America (9.5)%, APA (5.2)%
• Regional operating margin performance: EME 15.6%, North America (10.5)%, South America 5.7%, APA 4.9%
• Completed the sale of AGCO's ownership interest in TAFE for $260 million (after-tax proceeds of $230 million)
• The Company plans to initiate $300 million in share repurchases in the fourth quarter of 2025, utilizing the $230 million of after-tax proceeds from the TAFE ownership sale

Market Update

Hansotia concluded, "Near-record global crop production in 2025 has increased inventories and pressured commodity prices. While elevated government payments in North America are supporting farm income, crop margins remain constrained. These economic challenges have weakened demand for farm equipment in North America and Europe. Still, farmers continue to invest in precision technologies to boost productivity and profitability. In Brazil, sentiment is improving largely due to record soybean yields, though rising input costs, recent trade tensions, high interest rates and political uncertainty are dampening purchasing activity. In Europe, confidence varies by region, with Western farmers benefiting from favorable yields, while Southern and Eastern areas have been impacted by adverse weather. Dairy and livestock producers have benefited from strong prices and steady demand. While traditional equipment sales remain under pressure, we see a clear transition toward smarter, more efficient solutions as farmers seek to protect margins and manage ongoing volatility."

North American industry retail tractor sales declined 10% in the first nine months 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 29% 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 3% in the first nine months of 2025 compared to the same period in 2024, driven primarily by demand for smaller and mid-size tractors coupled with favorable trade dynamics. Despite record soybean harvests and potential trade benefits, demand for larger equipment has yet to show meaningful improvement. High financing costs and political uncertainty are expected to continue to constrain demand in 2025.

Western Europe industry retail tractor sales declined 8% during the first nine months of 2025 compared to the same period in 2024 with double digit percentage decreases across most markets except Spain, which saw strong growth. Demand is expected to remain soft throughout the remainder of 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

Net sales in the North American region decreased 32.1% during the third quarter of 2025 compared to the third 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 combines. Income from operations for the third quarter of 2025 decreased $56.4 million compared to the same period in 2024 and operating margins remained negative. The decrease was primarily a result of lower sales and production volumes.

South America

South American net sales decreased 9.5% during the third quarter of 2025 compared to the third quarter of 2024, excluding the impact of favorable currency translation. Weaker industry demand drove most of the decrease with lower sales across the majority of the product categories. Income from operations for the third quarter of 2025 decreased $22.6 million compared to the same period in 2024. This decrease was primarily a result of lower sales and production levels and the impact of modestly negative pricing.

Europe/Middle East

Net sales in the Europe/Middle East region increased 20.3% during the third quarter of 2025 compared to the third quarter of 2024, excluding the impact of favorable currency translation. This reflects a recovery in production levels and corresponding sales following extended plant downtime last year. Increases were largest in high-horsepower and mid-range tractors. Income from operations increased $163.1 million in the third quarter of 2025 compared to the same period in 2024. This increase was primarily a result of significantly higher sales and production volumes.

Asia/Pacific/Africa

Asia/Pacific/Africa region net sales decreased 5.2%, excluding unfavorable currency translation impacts, during the third quarter of 2025 compared to the third quarter of 2024 due to weaker end market demand and lower production volumes. Lower sales across most of the Asian markets were partially offset by higher sales in Australia and Africa. Income from operations increased $0.9 million in the third quarter of 2025 compared to the same period in 2024 primarily due to lower manufacturing costs, partially offset by lower sales volume.

Outlook

AGCO 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 targeted at approximately $5.00. These estimates incorporate the expected impact of tariffs in effect as of October 31, 2025, along with AGCO's mitigation strategies. Any changes to tariff policies or related responses could affect these projections.

* * * * *

AGCO will host a conference call with respect to this earnings announcement at 10 a.m. Eastern Time on Friday, October 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.

* * * * *

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, 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, continue to create 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 on the countries affected, increases in tariffs have raised the costs of inputs used in manufacturing our products, which in turn has impacted our cost of goods sold. Additionally, higher tariffs may lead to increased after-tariff sales prices for the products 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. 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.

* * * * *

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 September 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 September 30, 2025 and December 31, 2024 was approximately $252.7 million and $220.5 million, respectively.

Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within "Other expense (income), net" in the Company's Condensed Consolidated Statements of Operations, were approximately $21.9 million and $60.6 million during the three and nine months ended September 30, 2025, respectively. Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within "Other expense (income), net" in the Company's Condensed Consolidated Statements of Operations, were approximately $28.4 million and $92.2 million during the three and nine months ended September 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 September 30, 2025 and December 31, 2024, these finance joint ventures had approximately $87.1 million and $139.2 million, respectively, of outstanding accounts receivable associated with these arrangements.

2.      INVENTORIES

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

3.      INDEBTEDNESS

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

As of September 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 $109.2 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.

Senior Term Loans due between 2025 and 2028

In August 2025, the Company repaid €63.0 million (or approximately $72.8 million) upon maturity of the Senior term loans due 2025.

 

4.      RESTRUCTURING AND BUSINESS OPTIMIZATION EXPENSES

On June 24, 2024, the Company announced a restructuring program (the "Program") in response to increased weakening demand in the agriculture industry. 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 the initial 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 nine months ended September 30, 2025, the Company recorded $4.2 million and $5.9 million, respectively, of severance and other related costs, net of reversals, primarily associated with the Program, and paid approximately $30.8 million and $100.5 million, respectively, of severance costs. The $53.3 million of accrued severance and other related costs as of September 30, 2025, inclusive of approximately $11.7 million of 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 nine months ended September 30, 2025, the Company recognized approximately $4.5 million and $31.4 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 nine months ended September 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 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 excludes 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 September 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 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 nine months ended September 30, 2025 and 2024 (in millions, except per share data):

 

The following is a reconciliation of adjusted operating margin for the three and nine months ended September 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 September 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 nine months ended September 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

---

We continue to anticipate a favorable currency impact of roughly 2%.

Our guidance reflects current tariffs across our global footprint, along with mitigation efforts through cost actions and pricing. That said, the potential for additional U.S. tariffs or retaliatory measures fosters continued uncertainty. We’re monitoring developments closely and will adjust our outlook if needed.

Engineering expense is expected to remain effectively flat year-over-year.

We still expect our adjusted operating margin to be approximately 7.5%, reflecting structural improvements and cost initiatives, positioning us roughly 350 basis points above our last trough in 2016.

Lastly, we revised our effective tax rate to 33% to 35%, modestly better than our prior estimate of approximately 35%.

Turning to Slide 13 for our current 2025 outlook.

We continue to expect full year net sales of approximately $9.8 billion, consistent with our prior outlook. This reflects the modest changes in demand trends across key markets.

We refined our earnings per share forecast to approximately $5, reflecting strong execution across our global operations. This assumes no material changes to existing trade measures.

Capital expenditures are now expected to be around $300 million. While this represents a decrease from the prior estimate of $350 million, we remain focused on supporting strategic initiatives and maintaining flexibility in response to shifting demand trends.

We continue to target free cash flow conversion of 75% to 100% of adjusted net income, supported by disciplined working capital management and improved inventory efficiency.

As Eric noted, we’re pleased with our performance through the third quarter in what remains a challenging and evolving year. Our teams have executed well, grown share and continued to reduce dealer inventories while supporting farmers’ needs.

With this updated outlook, we believe our results further demonstrate the structural improvements in AGCO’s profitability. Even in a down cycle, we’re delivering stronger margins and more consistent earnings, a reflection of our transformed business model.

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

---

QUESTIONS AND ANSWERS

Operator:

(Operator Instructions) Our first question today is from Kristen Owen with Oppenheimer & Company.

Kristen Owen:

I’m wondering if we can start here with the strong Europe results. And maybe just ask a simple question is how Europe performed relative to your expectations? I’m just trying to parse through some of the onetime items versus the underlying trends there? And what’s supporting the outlook for a little bit more constructive growth in 2026. And I’ll start there.

Damon Audia:

Yes. Sure, Kristen. So I think Europe, I would say, performed modestly better than what we had expected, more on the top line. So volumes were a little bit stronger than what we had originally anticipated. The production, what you saw with the margins heavily influenced by the production schedule, I would say, was relatively in line with what we had expected. So overall, we feel good.

I think the key point for us is we look at Europe right now, the dealer inventory levels are sitting below the optimal level for us. So we feel very good as we go into the fourth quarter into ‘26 here that we’re sitting in a relatively strong position from producing in line with retail or hopefully, if the markets were to pick up, and again, we haven’t given a full outlook for ‘26 yet. But the dealer inventory levels are positioned well there for ‘26.

Kristen Owen:

And then my follow-up, understanding it’s very early days to digest, but any initial thoughts on the China trade agreement that was announced yesterday and how that might complement some of the government support that’s been floated out there. Just early thoughts on what that could do for your North American outlook next year.

Eric Hansotia:

Yes. We see this as clearly net positive. There’s a combination of the soybean purchases that are more clear now for this year and the next few years. So farmers can -- that’s really the core of what farmers look to is market stability and predictability. But then there’s also the government support that’s been strengthened. And so it’s a dual positive outlook.

Having said that, we think this is going to be a little bit of a show-me situation, where the farmers are going to need to have this -- have the trades actually happen, the deal actually finalized, the beans actually being purchased, which will then drive real pricing in the market. So our phones weren’t ringing off the hook yesterday with all kinds of purchasing orders coming in. But it’s net positive, that will just take some time to play out in the market. It’s probably more of a 2026 effect.

Operator:

The next question comes from Jamie Cook with Truist Securities.

Jamie Cook:

I guess just my first question, just on the North America dealer inventory. It’s nice that it came down to eight months, I guess, versus eight to nine or nine months last quarter. I mean this sounds like this is obviously going to go into -- the excess inventory is going to go into 2026. So -- just any color there at what point in 2026 do you think we could get rightsized? And if we continue this way, and given what you’re saying about North America, is there greater risk in 2026, North America would be at a loss again for 2026. I guess that’s my first question. And then I’ll ask the next one after you answer this.

Damon Audia:

Yes, Jamie. So I think overall, North America, the team did a really good job in reducing the units on hand as I think Eric said around 13% down sequentially. Given the change in our industry outlook for this year with large ag being down now around 30, and as Eric alluded in his opening comments here, we do see North America down large ag down in North America next year as well. That is putting pressure on us to get to that 6-month target.

I don’t -- we won’t get there by the end of the year. I think we’ll make improvement from the eight months down, but we won’t get to the six months now. Again, that’s based on our current outlook. I think as Eric just said on the prior question here, a lot of new information has come out over the last couple of days with the China trade agreement, with more conversations about subsidies for the farmers, and just to put it in perspective, again, our industry -- our inventory levels are based on the 12-month forward look. So again, if hypothetically, if large ag in North America was flat next year instead of what we’re assuming is down, that would have changed my current eight months, we would have reduced it by around half a month. And so it’s fairly sensitive to what looks -- what ‘26 will look like.

So again, if we see that market turn here based on farmer sentiment, based on increased purchasing in ‘26, we’re going to be in line with our target fairly quickly. So a little bit hard to answer right now because I think there’s a little bit of flux in the system based on some of the most recent news.

Jamie Cook:

Okay. And then I guess just my second question, tariffs and the lower price. I think last quarter, the guidance assumes $0.45 in net tariff impact to EPS. Any update sort of with Section 232, how that impacts you? And just curious how we’re managing the higher cost, but then obviously you lowered your pricing assumptions. So where are you seeing the discounting? And how do you think about pricing into 2026, given what some of your peers have communicated?

Damon Audia:

Yes. No, we’re definitely -- I think the incremental Section 232 items had a relatively modest impact to our overall tariff cost. Again, as we’ve sort of quoted a net tariff number for 2025, I would say we are marginally worse relative to the $0.45 more due to the incremental loss volume that we’re estimating here versus the industry. And so I think that’s sort of a little bit of a challenge for us here.

As we think about the pricing comment for this year, we have seen some increased competitive pricing tension, more in South America and Europe, and that’s what’s forced us to change our outlook from what was up around 1% to somewhere in the range of 0% to 1%.

We will still be net neutral to positive on price versus material costs, and that does include tariffs on a global basis. So we’re still going to be able to cover it, but maybe not as much as we had hoped given the current environment.

As we look into 2026, we’re going to see how the industry dynamics play out. As we’ve said from the beginning, our goal is to limit the cost of the tariffs to us and to the farmers. Where we can’t do that, we know that those costs will be centralized, likely here in North America, and we’re going to look to try to spread pricing as broadly as possible. And as I, again, early look into ‘26, again, I think we’ll -- as a total company, we should be able to cover the material cost and the pricing, but we want to get through the year-end before we give more official outlooks for ‘26.

Operator:

The next question is from Kyle Menges with Citigroup.

Kyle Menges:

Maybe just jumping off from the last question, it would be helpful to just hear you guys elaborate a bit more on the pricing competition you’re seeing, particularly, it sounds like in Brazil and in Europe, just maybe what’s going on there.

Damon Audia:

Yes. I think, Kyle, what we’ve seen is the South American market, especially Brazil, as we said the last quarter, has started to recover. It was the first one of our three major markets into the downturn. It started to recover mainly in the medium and low horsepower segments of the market and influenced a lot by the specialty crop farmers, coffee, citrus, and what we’ve seen is a little bit of a slowdown in those markets here. And so the market is still growing. I would say we were 0% to 5% last quarter. We were probably closer to the high end of that. And as we look at some of the competitive nature down there with some discounting, especially in that segment, it’s reduced our outlook now closer to the lower end of that segment.

Again, I think the markets are still doing well. But just given the push to try to drive volume there, we’re seeing that segment of the market be a little bit more competitive in nature.

Kyle Menges:

Got it. And then -- just on your earlier comments on global retail sales looking like they could be flattish year-over-year next year, assuming that’s more so just talking about unit sales. I’m curious if that includes Precision at all. And it would be helpful just to hear you discuss a little bit the trends you’re seeing in demand for your precision solutions into 2026. And how you feel like you’re positioned in that retrofit market going into next year?

Damon Audia:

Yes. So maybe I’ll touch on the industry comments and then I’ll let Eric elaborate on the PTx business. So -- our outlook for next year is really based on retail unit sales. It’s not really including parts or our PTx business. I think of that more as whole goods sales.

Eric Hansotia:

Yes. And then PTx, we’re hitting all our forecasts this year. It’s going as we would plan it to be at this stage of the cycle. We’re at the trough. So the parts are lower than where we ultimately want them to be. But we’re signing up dealers. We’ve got 90 -- over 90% of our AGCO machines now going out of the factories with Trimble technology. Essentially, if you look at the two channels that we inherited, the Precision Planting and the PTx Trimble channels, we’ve got over 90% of the market covered and everywhere except for Brazil, and that’s in the low 80s, with that dealer network, and we’re working and melting those together.

The effort to end up with combined dealers that have the full portfolio is well underway. We’ve got 50 of those done, target is to have 78 of them by the end of the year. That will cover about 70% of the U.S. market, which is the fastest-growing precision ag business. So just trying to give you a few data points on both channel as well as technology on our product and then new technology. We had our field Tech Days, and PTx launched 11 new innovations this year, well ahead of what we had anticipated when we were putting the business together. So the innovation engine is probably running ahead of schedule. Financials are on track. Channel development is on track.

We’ve got a new leader in charge of PTx. He’s hitting the ground running really well. Has visited many of our global operations in terms of sites and dealers. And so I’m very pleased with how that’s going.

Just as a reminder, retrofit doesn’t go down as much as the rest of the business. It only declines about a third as much as the overall decline of the whole goods. And so we’re seeing -- although it’s down, it’s not down nearly as much and as it recovers, we expect that, that will recover as well.

Operator:

The next question is from Tami Zakaria with JPMorgan.

Tami Zakaria:

I wanted to get a little more clarification on the pricing outlook being changed. Can you help us with which regions or region is driving that reduction in outlook. And I just wanted to make sure, is fourth quarter pricing still positive? Or are we talking about negative pricing?

Damon Audia:

Yes. So Tami, fourth quarter, it will still be positive. If you look at our year-to-date, I think we’re up around 50 basis points, give or take. And so pricing will be up around 1% in the fourth quarter total company wise. Again, if I think about the change in the pricing, again, based on the prior -- one of the prior questions, the change really was driven more in South America and Europe is sort of where we saw the reductions relative to our Q2 outlook for you guys.

Tami Zakaria:

Understood. And my next question is I think I heard you say North America large ag you now expect to be down next year. Can you help us frame what that down means as of right now? Are we talking about flat to down or down to some degree, but less than this year’s 30s. Any way to frame that?

Eric Hansotia:

Yes. Prior to the news of the last two days, we would have said down like, say, single digits, nowhere near as much as this year. But then -- since then, we’ve had a couple of pretty significant positive indicators in terms of farm support for farmers from the government and pricing stability of China buying soybeans. So where that will actually end up is unknown, but it won’t be anywhere near what we saw this year.

We believe we’re at the bottom of a global industry. We believe pricing is probably at about its worst. We think pricing power will be stronger next year. And so I think that ‘25 is probably, in many cases, the worst of the cycle.

Operator:

Next question is from Stephen Volkmann with Jefferies.

Stephen Volkmann:

Damon, can you just give us a little bit of a walk into the fourth quarter? There’s a pretty big margin expansion kind of implied in your guidance. And I’m just curious what are the buckets that kind of deliver that.

Damon Audia:

Yes. I think, Steve, for us. The margins in the fourth quarter should finish up at around 9% or a little bit over 9% to deliver the 7.5% full year. And as we look at some of the improvements, I think Europe, again, fourth quarter is generally a fairly strong quarter for Europe. And so with -- from a volume standpoint -- so we should see the margins tick up there.

Asia Pacific is one of the early -- was in the down market early, and we see that improving. So I think we see a little bit of the margin coming out of there and then South America would be the other one. North America continues to be the challenge. If I think about the margins in North America relative to the third quarter, given the increased level of underproduction, again, we said on the scripted remarks that we were down around 50%, and Q4 will be down, we’ll be cutting production over 50% as we continue to try to focus on that dealer inventory. So I think sequentially, those margins will be even lower here in the north -- in the fourth quarter for North America.

Stephen Volkmann:

Okay. Helpful. And then maybe just to focus on the restructuring program, so the $175 million to $200 million. Is there a benefit of that in the fourth quarter? And then what would the benefit of that be in ‘26?

Damon Audia:

Yes. We -- again, year-over-year, we’re picking up steam as we move through the restructuring actions so there will be some benefit in the fourth quarter relative to last year. That’s embedded in the outlook already.

As I look at next year, you’re going to get the carryover from the original $100 million to $125 million and you’ll get some of the early parts of the incremental $75 million. So next year, as we look at the restructuring benefits, today, I’d say it’s probably in the range of $40 million to $60 million of incremental improvement relative to 2025.

Operator:

The next question is from Mig Dobre with RW Baird.

Mircea Dobre:

I want to go back to the tariff discussion, if we can. And what I’m confused about, frankly, is this interplay between Section 232 and just the normal reciprocal tariffs. And I guess the way I would ask the question when we’re sort of thinking about your guidance for 2025, there was a sort of cadence in the way these tariffs kind of came into play, not much impact in the first half, maybe more impact in the second. You also have FIFO accounting. So I’m wondering, is it fair to think that the impact from these tariffs is actually greater in 2026 than what’s embedded in the 2025 guidance? And if so, is there a way to maybe quantify it for us?

Damon Audia:

Yes. Sure, Mig. So yes, in answer to your question, if we look at the -- there’s a couple of variables to your point. We still have some costs that we have, costs that have flown through our P&L related to the tariff payments we’re making. Some of it is still tied up in inventory. And then we will have the full year run rate of those tariffs, assuming there are no changes.

So again, when we think about that, we’ve also announced that we put price actions in effect in many of our businesses, PTx, parts, whole goods for model year ‘26. And so we have only seen a portion of that, and that’s why we’re sort of giving you that net effect this year.

But if I just try to quantify in absolute terms what the tariff costs are, again, not mitigating with price or other actions. For next year, again, assuming no changes to what’s in effect today, I would tell you that the total tariff costs are less than 1% of my total company sales. So this year, we’re guiding to $9.8 billion. I’d say the total tariff costs on an annualized basis would be less than 1% of that.

Now that would be concentrated here in North America, so the percent would be more. But as we’ve talked about in the past, our philosophy is to try to price in the region where we can. But to the extent we’re not able to pass all of that, given competitive dynamics in that region, we look for opportunities to be strategic and increased prices in other parts of the world to offset that total cost here for the total company.

Mircea Dobre:

Okay. That’s really helpful. And then maybe a quick follow-up on South America. And I don’t know if it is the right way to think about it. But when I’m sort of looking at margin here, your revenue has gradually recovered sequentially through the year. We’ve seen a sequential step down in margin from the second to the third quarter despite revenue being higher. And I’m kind of wondering if this is a function of pricing, as you talked about earlier or if there’s something else going on that we need to be aware of as we think about the fourth quarter?

Damon Audia:

Yes. So I think, Mig, there’s been a couple of things. The mix, if you think about year-over-year and you’re thinking more the mix is, as we talked about the high horsepower segment, despite all of the geopolitical stuff that we’re hearing about Brazil being a beneficiary, we’re not seeing the large ag part of that market pick up yet. And so what we have been seeing is that again, that medium, low horsepower specialty crops, so what you’re seeing year-over-year there is really more of a mix challenge. In the quarter, we had a little bit of a warranty spike year-over-year, nothing significant, but just on a quarter year-over-year basis, warranty was a little bit higher. When I think about the fourth quarter, again, you’re going to see that mix headwind come in, in South America as again, we’re not seeing the large horsepower pick up.

And if you look at the fourth quarter for South America specifically, last year, we called out a special tax benefit for R&D. It was about 1% to 1.5% of a margin lift. That’s not repeating this year. And so those are the two drivers, as I think about the fourth quarter is really the continued mix decline year-over-year and then that one tax benefit that I had in the fourth quarter of 2024.

Operator:

Next question is from Chad Dillard with Bernstein.

Chad Dillard:

A question for you guys on North America. So can you walk through the path to margin recovery? Is there further restructuring that you can do? And then also, I guess, like how much of that headwind is just coming from tariffs?

Damon Audia:

Yes. So Chad, the part of the overall restructuring program that we’re talking about, some of -- a portion of that is in North America. So we will see some marginal benefits of that as we move into next year.

When I look at the margins right now or the negative margins, it’s heavily influenced by the level of underproduction. Again, I think as Eric mentioned, when you look at where we were producing in 2023, the number of hours versus what we’re producing right now in the back half of ‘25, we’re down around 70-plus percent in hours in North America. So when you just think about the cost of those factories running at that lower level of utilization that is a significant drag on the margins.

On top of that, as I said, the tariff costs are centralized here. The team is doing a nice job in trying to offset that. I’d say, on a dollar basis, we’re not offsetting it on a margin basis. So obviously that’s going to be margin dilutive. So the key for us is to get the volume, right? We look at this industry. And I think last year, when you exclude Grain & Protein, we were $2.3 billion or so, give or take. We need to get that volume back up. And whether that’s the industry recovering, whether that’s the continued focus on gaining share, all of those things are going to be critical. I’d say parts is doing quite well but in North America, parts is a little bit weaker year-over-year. So again, that’s a high margin part of the business. So we need, the volume has to start flowing back in North America, and it’s not necessarily a reflection of what we’re doing. It’s more a reflection of the industry. Because when we look at Fendt, we’re actually gaining share here in North America you’re just gaining share on a much smaller pie and you’re not seeing that drop to the bottom line just given the overall industry decline.

Chad Dillard:

Got it. That’s super helpful. And then just secondly, you were talking about your pricing strategy to mitigate tariffs and talking about spreading it, I guess, more globally. I’d love to get a little bit more color on that. I guess what I’m trying to understand is how successful are you seeing pricing stick if you’re looking to expand more globally than narrowly focusing on pricing in North America?

Eric Hansotia:

Maybe I’ll take that one. Our strongest -- our biggest market is Europe, and we continue to grow share there even though we put pricing into that market. South America is probably the opposite. It’s -- like Damon said, it’s the most price competitive right now. And so it’s been the one that’s the most difficult for us to have pricing power at the moment. But big picture, South America is going to come back as the industry comes back.

We’ve had the most success in Europe. Put the price in and gain share at the same time. So our disconnect between where we incur the tariffs and where we offset it has been working.

Remember, there’s a 3-pronged strategy there. Number one is work with our supply chain to minimize the cost impact and moving products around from -- within our supply base or within our manufacturing operations is item number one.

Item number two, is Project Reimagine. We’re going to take about $200 million out of our cost structure on a little over $1 billion base. So that’s a self-help area.

And then only third is the pricing action. And we’ve been really clear all the way along is we’re going to put price around the globe wherever we can, where the market will bear, and that focuses on North America.

Operator:

Next question is from Joel Jackson with BMO Capital Markets.

Joel Jackson:

What’s in your outlook that you expect next year, global sales flat, Europe up, the rest of the markets down a bit. Can you speak to knowing what your inventory levels will be at end this year, what that might mean for underproduction in the various regions we might expect next year?

Damon Audia:

Yes, Joel, obviously I think if we look around the world, Europe, we continue to be in a really good position. You didn’t see much underproduction in Europe this year. And again, given the dealer inventories right now are sitting below our optimal level, I would say, sort of consider that relatively flat year-over-year, again, producing closer to retail or in line with retail, excuse me.

South America, again, the industry is picking up year-over-year. If you remember, we had a lot of underproduction here in the first half of 2025. And so as I think about South America, you probably see some incremental positive from absorption on the full year. It will be first half weighted and then we’ll start to lap the comps that we’re seeing here in the third and fourth quarter, where we’re producing closer to retail.

North America is, again, is a little bit of a wildcard. Again, if you look at what we’ve said with North America large ag potentially being down, dealer inventories at eight months right now hoping to get that closer to our target, that would likely result in some underproduction here in the early part of 2026. But as Eric said, given the recent news with the trade deal, with potential incremental subsidies, in my comment that if that changes the industry outlook for large ag that may help us accelerate or not have to underproduce. But again, North America is still a little bit of a TBD next year.

Joel Jackson:

And then finally, can you maybe talk about what sort of subsidy package, a magnitude might move the needle for your end customers? $5 billion, $10 billion, $15 billion program, where that’s $50 an acre, $100 an acre. Have you thought about sort of what’s needed to move the needle to get farmers to look at capital purchases and not just deleveraging or working capital?

Eric Hansotia:

I think it needs to be over $10 billion. $10 billion to $20 billion, anything in there will get farmers’ attention. Granted, that money is not seen as the same as market-driven profitability. They’re more likely with subsidy money to pay down debt and other things because they’re not sure if it’s going to be sustainable in the next year and the year after. So the, if the trade deal really sticks and there’s a 3-year commitment to purchase 25 million metric tons type purchasing or more, that’s going to drive confidence way more in farmers than will the subsidy.

Operator:

The next question is from Angel Castillo with Morgan Stanley.

Angel Castillo:

Just wanted to go back to maybe one of the earlier discussions on North America margins and tariffs. I just wanted to check, I guess, am I doing the math right based on what you talked about with the 1% of your sales. impact next year that, that kind of implies something approaching or kind of roughly $1 of tariff headwind. So if you could just comment on that.

And then just related to that, I guess, based on what you’re estimating today for kind of the North America outlook fully accepting that there’s a lot of moving pieces still, which quarter would you kind of expect to see the kind of peak pressure in?

Damon Audia:

So Angel, can you, peak pressure in what regard?

Angel Castillo:

In terms of how you kind of spread that tariff headwind, which I’m assuming there’s a little bit of a ramp-up, but can you -- as you kind of work through inventories and the flow-through of that tariff impact on your kind of P&L. So just curious which quarter would kind of be the peak of it before it starts to kind of comp your numbers?

Damon Audia:

Yes. Well I think the first question, again, if our sales right now are $9.8 billion, I said less than 1%. So you’re probably looking at sort of less than $1, call it, closer to $0.80, give or take, depending on how things finalize, again some of these tariffs, as you know are still changing. And those will influence some of the small horsepower tractors that we buy from others that are imported from other countries. So I don’t want to be too precise, but directionally less than that. And again, that doesn’t take into consideration the pricing actions I mentioned as well. So again, when I gave Mig that number, that was the absolute tariff cost. That’s not my net effect to P&L next year because I already have pricing actions in effect in parts, in PTx, for model year ‘26 equipment. And so that net number will be less than that. Again, we haven’t given a specific outlook. We want to see how the fourth quarter unfolds, but it will be a lot less than that absolute number that I’m quoting you for the tariff costs themselves.

As I think about the cadence, we’re starting to already see that flow through our P&L in North America, depending on the product again. As you know we buy a lot of these medium and low horsepower tractors from other companies, depending on the level of inventory that we had in stock and that our dealers had in stock, that’s flowing through over a period of time, coupled with the cost that we’re incurring for some of the raw materials we’re purchasing for our assembly operations here in the U.S.

So again, I think it’s going to phase itself in. As we get into the second quarter, I would think we’d work through most of the inventory that we’ve had, and we’d start to see more of the full effect I’d say, directionally around Q2.

Angel Castillo:

That’s very helpful. And then maybe earlier, I think you had indicated that flat volumes next year would actually reduce your inventory levels by about half a month. And I think your current assumptions was down single digits. I guess, first, can you put a finer point on kind of what that assumption was for North America? Is that -- was it a mid-single digits or high single digits type of decline?

And then if for some reason, I guess, volumes in North America, large ag wind up being closer to down kind of mid-teens, which I think some investors kind of challenge checks suggest that might be a realistic risk. I guess, what’s the sensitivity of your math impact on your inventory levels, if it were to be closer to the mid-teens and how much -- what does that mean for under production next year?

Damon Audia:

Yes. So I mean we haven’t given a specific number related to what we were thinking for ‘26. Again, it’s more -- as we look at the data, as we look at the analytical models running, we’re starting to see it down, I think, as Eric said, sort of in that mid-single-digit range is what we were directionally looking at. I’d rather not speculate right now with all of the recent news that’s come out this week. Again, I think, as Eric said, those are both net positive data points for farmers in North America. And we’re hopeful that, that has more of a positive catalyst as we go into ‘26.

But obviously to the extent it was down, you’re using your mid-teens numbers, we would be forced to keep the underproduction probably longer to continue to reduce the dealer inventories. We want to make sure that we’re not -- that we’re getting that down to that six months as quickly as possible. And again, given the numbers you hear us quoting with production down over 50% again in the fourth quarter, we’re being as aggressive as we can in trying to minimize the putting incremental inventory into the dealer channel here.

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:

Yes. Thank you for joining us today and all these thoughtful questions. AGCO continues to make meaningful progress on our transformation journey.

We delivered a strong third quarter performance with strong margins, disciplined inventory management, accelerated cost reduction and healthy free cash flow generation year-to-date.

I’m really proud of the team for achieving this amid macro volatility by focusing on what we can control in a dynamic environment that always -- and always keeping our eyes on putting the farmer at the center.

In fact, the feedback we’re getting from our farmers is real strong. Our Net Promoter Scores that are all-time highest level in the company’s history. They like the net impact of our products and what we’re doing with our dealers to serve them better.

In the quarter, Europe is our biggest market, continued to provide stability. We know farmers around the world are under pressure. Our priority is supporting them with efficient machines and technology that keep them productive and profitable.

We continue to execute our strategic shifts that sharpen our focus and unlock long-term potential including the TAFE exit, the PTx creation and Product Reimagine.

Our innovation flywheel is spinning faster than ever with new autonomous solutions and the launch of FarmENGAGE, reinforcing us as one of the most progressive leaders in smart farming. And I think you’ll see that on display big time at Agritechnica, the world’s largest ag show coming up here in a week or so. That will be a great way to engage with all of the exciting things that AGCO’s got going on.

Our 2025 financial outlook reflects our confidence in the strategy and the strength of our global team. Even in this challenging environment, we are investing in the future, gaining share, executing with agility and always putting the farmer first. Thank you for your participation today. We really appreciate it.

Operator:

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.