Agco has reported better than expected 2016 results but predicts tough times ahead in key European and North American markets.
The company reported net sales of $US2.1 billion for the fourth quarter of 2016 up 6.9 per cent on the same period 2015.
Net sales for the full year 2016 made $US7.4 billion, down about 0.8pc compared to 2015.
The company said “excluding the unfavorable impact of currency translation of approximately 2.6pc, net sales for the full year of 2016 increased approximately 1.9pc compared to 2015”.
Agco chief, Martin Richenhagen said the past year had been challenging with weakening global market demand for agricultural equipment”.
“Despite these difficult conditions, our solid operational execution during 2016 allowed us to exceed our financial targets and be well-positioned to seek new opportunities for growth,” he said.
“The record grain harvest in the US, combined with healthy crop production across Europe and Brazil, resulted in increased grain inventories and lower soft commodity prices,” Mr Richenhagen said.
North American sales declined throughout the year mainly in the row crop and hay segments with significantly lower retail sales of high-horsepower tractors, harvesters and grain storage and handling equipment.
The hit was less significant in Western Europe.
Low milk prices for dairy producers lessened demand, while sales in the arable farming sector also remained weak due to lower commodity prices.
Mr Richenhagen said Agco’s long-term view “remains positive as increasing global demand for commodities driven by the growing world population, rising emerging market protein consumption and biofuel use” was tipped to improve farm income.
Agco’s APAC net sales increased 21.2pc in the full year of 2016 compared to 2015 - when you exclude current exchange impacts.
Operational income was up approximately $US39.0 million in the full year of 2016 compared to 2015 due to higher sales across the region and increased small tractor production in China.
In 2017 Agco is expecting growth from a revived South American market.
The business’ South American operation returned an operating profit of $US13.6m for the last quarter of 2016, a turnaround on the 2015 last quarter loss of $US4.4m.
Mr Richenhagen expected a boost to the South American market will come from the improving political landscape in Brazil, where a sweep of the political scene has seen the implementation of a more pro-business agenda under new president, Michel Temer.
In Argentina, Mr Richenhagen said an expected boost from "supportive government policies and improved crop production", with cuts to crop export taxes and restrictions would be a big lift to prospects.
The story Agco results hold ground first appeared on Farm Online.
