AGCO Corporation

good day and thank you for standing by welcome to the agco 2021 first quarter earnings release conference call at this time all participants are in the listen only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you will need to press star 1 on your telephone if you require any further assistance please press star 0. i would now like to hand the conference over to your speaker today greg peterson AGCO, Head of Investor Relations. Please go ahead.

Thank you, James, and good morning. Welcome to all of you joining us for AGCO's first quarter 2021 earnings conference call. This morning, we're going to refer to a slide presentation that we've posted to our website. You'll find it at www.agcocorp.com. We'll be using non-GAAP measures in the slide presentation, and those non-GAAP measures are reconciled to GAAP measures in the appendix of that presentation. We'll also be making forward-looking statements this morning, including demand, product development, and capital expenditure plans, and timing of those plans, and our expectations with respect to the costs and benefits of those plans. We'll talk about production levels, share repurchase, dividend rates, future revenue, price levels, margins, earnings, cash flow, tax rates, and other financial metrics. We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2020. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. These factors include, but are not limited to, adverse developments in the agricultural industry, including those resulted from COVID-19, including plant closings, workforce availability, supply chain disruptions, and product demand. There's also risks around weather, commodity prices, and changes in product demand. We disclaim any obligation to update any forward-looking statements except as required by law. We'll have a replay of this call available on our corporate website later today. Moving on, so on the call with me this morning are Eric Kansodia, our Chairman President and Chief Executive Officer, and Andy Beck, our Chief Financial Officer. And with that, Eric, please go ahead.

Thank you, Greg, and good morning. We appreciate your interest in AGCO and your participation on the call today. I'm going to begin my remarks on slide three, where you can see that we had an excellent start to 2021. Our first quarter sales grew nearly 20% on a constant currency basis compared to the first quarter of 2020. The recent rally in commodity prices lifted farmer sentiment, creating higher demand for agricultural equipment in the first quarter. Adjusted operating income was up over 94%, driven by a 300 basis point increase in our adjusted operating margins, with improvement achieved in all of our regions. Favorable pricing helped to offset material inflation in the first quarter. However, we expect to see a more significant impact of higher material costs during the remainder of the year. We are also facing significant challenges with our supply chain as capacity constraints and COVID disruptions continue to impact timely receipt of components for production. Based on an improved market forecast and our first quarter results, we have increased our financial targets for the full year of 2021. In addition to improved sales and margins, our plan includes increased funding for smart farming, precision ag, and digital investments. to drive our strategic ambitions that we outlined to investors earlier this year. Last week, we announced a new capital return framework to enhance the company's ability to return cash to shareholders across a variety of market conditions. The new capital return strategy includes our regular quarterly dividend payments, share repurchases, and an annual variable special dividend to return excess cash. The announcement included a 25% increase in our regular dividend and a $4 special dividend to be paid out on June 1st. Andy's going to have more details on those plans in a few minutes. On slide four, we detail industry unit retail sales by region for the first quarter of 2021. The gradual recovery from the pandemic and reopening of economies have increased the demand for grains. putting pressure on global grain inventories, which are well below last year's levels. Agricultural commodity prices have risen, resulting in more favorable farm economics as well as increased demand for machinery. These improved conditions are expected to generate industry growth across all major equipment markets in 2021. In North America, industry retail sales increased about 31% in the first three months of 2021, compared to the same period in 2020. Sales of low horsepower tractors moved above the prior peak levels, while demand for high horsepower tractors also improved. With the fleet age remaining extended, industry retail sales of North America large ag equipment grew approximately 12% in the first quarter. Industry retail sales in Western Europe also increased in the first quarter of 2021, with growth across nearly all major markets. Higher wheat sales dairy and livestock prices are generating very positive farm economics and improved farmer sentiment. We expect this favorable environment to generate increased equipment demand in 2021. In South America, industry sales increased during the first three months of 2021, driven by improved demand in both Brazil and Argentina, as well as recovery in the smaller export markets. A healthy first crop, as well as favorable exchange rates, are supporting positive economic conditions for farmers who continue to replace an aged fleet. AGCO's 2021 factory production hours are shown on slide five. While our supply chain and production teams have done a great job to minimize the impact, our ability to meet the robust and market demand has become increasingly difficult. Our supply chain has been impacted by COVID-related disruptions as well as capacity constraints due to the surging industrial demand. Currently, our European and Brazilian production facilities are feeling the largest impact. For example, production was suspended at our Fendt factories in Germany last week and will resume on Monday. We are facing supplier bottlenecks and delays in all regions and expect significant challenges in the quarters ahead as we work to meet expected increases in end market demand. Total company production was approximately up 25% for the first quarter versus the same period in 2020. with the largest increase in our South America factories. We are projecting a 10% to 12% increase in full-year 2021 production compared to last year, with most of the increases occurring in the first half of the year. Now, you can remember that we had extensive COVID-related plant shutdowns in the first half of 2020, and then extremely high production schedules in the second half of 2020. Turning our attention to AGCO's order board, As of the end of March, our order board for tractors and combines was significantly higher in North America, Europe, and South America compared to a year ago. I'm going to hand over the call to Andy Beck, who will provide you more information about our first quarter results.