AGCO Corporation

Ladies and gentlemen, thank you for standing by and welcome to the AGCO 2021 Third Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Greg Peterson, Vice President, Investor Relations. Thank you. Please go ahead.

Thanks, Shelby, and good morning. Welcome to all of you that are joining us for AGCO's third quarter 2021 earnings call. This morning, we're going to refer to a slide presentation that you can find posted on our website at www.agcocorp.com. The non-GAAP measures that we'll be using in the presentation are reconciled to GAAP metrics in the appendix of that presentation. This morning we'll make forward-looking statements, including demand, product development and capital expenditure plans, production levels, engineering expense, exchange rate impacts, pricing, shareware purchases, dividends, and future commodity prices, as well as crop production, our supply chain inflation, retail, revenue, margins, earnings, cash flow, tax rates, and other financial metrics. We do 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 company's 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 resulting from COVID-19, which might include plant closings, workforce availability, and product demand. It also includes supply chain disruptions, weather, exchange rate volatility, commodity prices, and changes in product demand. We disclaim any obligation to update any forward-looking statements except as required by law. A replay of this call will be available on our corporate website later today. On the call with me this morning are Eric Ansodia, 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 everyone joining us on the call today. Our third quarter results were highlighted by sales growth and earnings improvement against the backdrop of a very challenging supply chain environment. We continue to experience significant component shortages that are impacting our production volumes. These supply chain disruptions have intensified in recent weeks, and we have reduced our fourth quarter revenue and earnings to reflect our revised production plans. In addition, material and freight cost inflation is increasing, requiring additional pricing to offset its impact. The encouraging news is that despite the global supply chain bottlenecks and inflationary pressures, farmer economics are very, very healthy, and global end market demand remains strong. I would like to strongly recognize and appreciate the entire global AGCO team for their tireless and dedicated work to mitigate these challenging conditions, serve our customers, and maximize our full year results, which will feature strong margin and earnings improvement. Let's start on slide three, where you can see that net sales grew 9% compared to the third quarter of 2020. Adjusted operating income increased nearly 13%, while margins improved about 30 basis points. Our investments in smart farming precision ag and digital solutions are paying off, as we are seeing excellent demand for technology-rich vent tractors, our precision planting solutions, and replacement parts. Agco's precision ag sales are up over 33% so far this year, with strong growth for both our precision planting business as well as our Fuse suite of products. Our healthy balance sheet supports our technology-related investments as well as cash returns to our shareholders. Slide 4 details industry unit retail sales by region for the first nine months of 2021. The financial health of our farmer customers remains strong. Global crop production in 2021 looks to be very good, and agricultural commodity prices continue to support favorable farm income, resulting in increased demand for machinery. These improved conditions are expected to generate industry growth across all the major equipment markets in 2021. In North America, industry retail tractor sales increased about 17% in the first nine months of 2021, compared to the same period in 2020, with industry retail sales of large ag equipment growing by approximately 28%. Rural crop farmers are taking advantage of improved commodity prices and projected healthy income levels to upgrade their equipment. Industry retail sales in Western Europe also increased in the first nine months of 2021 versus supply-constrained levels a year ago. With growth across all major markets, higher wheat, dairy, and livestock prices combined with healthy levels of crop production are generating positive farmer economics and farmer sentiment in the region. In South America, industry sales increased strongly during the first nine months of 2021, driven by improved demand in Brazil, as well as recovery in the smaller export markets. Healthy crop production, as well as favorable exchange rates, are supporting positive economic conditions for farmers who continue to replace an age fleet. AGCO's 2021 factory production hours are shown on slide five. As I mentioned, AGCO continues to face unprecedented supply chain and logistics challenges, as well as material freight cost inflation. Supply chain constraints have intensified in the recent weeks, limiting our ability to increase our production to match the strong end market demand. The scarcity of parts has impacted the company's ability to produce and ship units, and contributed to labor inefficiencies, as well as higher than anticipated raw material and work and process inventory levels. While we expect to reduce our inventories before the end of the year from our current situation, the volatile supply chain environment is requiring us to carry more inventory. Total company production was up approximately 14% for the third quarter versus the very high rate of production in the third quarter of 2020. The largest increases were seen in our North and South American factories. Overall, we are projecting a 20% to 25% increase in full-year 2021 production compared to last year. You'll remember that production ramped up significantly in the back half of 2020, so our growth in the second half of 2021 will not be as large as what we've experienced in the first half of this year. Turning our attention to AGCO's order board, as of the end of September, our order board for tractors and combines was significantly higher in North America, Europe, and South America compared to a year ago. I'll now hand over the call to Andy Beck, who will provide you more information about our third quarter results.