AGCO Corporation

Good day and thank you for standing by. Welcome to the AGCO 2021 Fourth Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. We ask that you please limit yourself to one question and one follow-up. Please be advised that today's call is being recorded. I would now like to hand the conference over to Greg Peterson, AGCO Head of Investor Relations. Please go ahead.

Thanks, Regina, and good morning. Welcome to those of you joining us for AGCO's fourth quarter 2021 earnings conference call. You'll find our slides posted on our website at www.agcocorp.com. The nine gap measures that we're using in these slides are reconciled to gap metrics in the appendix of that presentation. We will make forward-looking statements this morning, including demand, product development and capital expenditure plans, production levels, engineering expense, exchange rate impacts, pricing, share repurchases, dividends, future commodity prices, crop production, supply chain inflation, component deliveries, retail revenue, 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 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 ag industry, including those resulting from COVID-19, including plant closings, workforce availability, and product demand, supply chain disruption, 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. We will have a replay of this call on our website later today. On the call with me this morning are Eric Cansodia, our Chairman, President, and Chief Executive Officer, and Andy Beck, our Senior Vice President and Chief Financial Officer. With that, Eric, please go ahead.

We appreciate your interest in AGCO and your participation in the call today. We'll start on slide three that provides the financial summary. We finished 2021 with a very solid fourth quarter while mitigating supply chain delays and ongoing COVID challenges. I'd like to thank AGCO's 23,000 employees for their hard work that resulted in world-class support for our farmer customers throughout this challenging year. They were focused on the farmer and found hundreds of above and beyond solutions to tough problems. These efforts helped deliver fourth quarter sales growth of 16% with operating margins expanding by 160 basis points on an adjusted basis. For the full year, our net sales reached $11.1 billion. Adjusted operating margins improved 210 basis points to 9.1%, and adjusted earnings per share hit $10.38. These are all records for AGCO in the history of our company. During 2021, we also executed an ambitious investment plan to expand our smart farming solutions and enhance our digital capabilities. We continue to experience significant component shortages that are impacting our production volumes. In addition, material and freight cost inflation remains high, requiring additional pricing to offset its impact. The encouraging news is that despite the global supply bottlenecks and inflationary pressures, farmer economics remain very healthy, and global and market demand remains strong. We expect supportive market conditions to continue into 2022. Our new financial outlook reflects this optimism as we plan to continue to make technology-related investments as well as to return cash to our shareholders. Slide 4 details industry unit retail sales by region for a full year of 2021. Elevated soft commodity prices supported improved farm income in 2021, despite significantly higher farm input costs, and therefore the financial health of our farmer customers remains strong. These favorable farm fundamentals are resulting in robust demand for agricultural equipment as farmers look to upgrade their fleets. In North America, industry retail sales increased about 14% in the full year of 2021 compared to 2020. Industry retail sales of large agricultural equipment growing by approximately 25%. Row 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 full year of 2021 versus supply-constrained levels in the prior year. 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 during the full year of 2021, driven by improved demand in Brazil and Argentina, 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 aged fleet. AGCO's 2021 factory production hours are shown on slide five. As I mentioned, we continue to face supply chain and logistics challenges, as well as material and freight cost inflation. The supply chain issues have impacted our ability to produce and ship units, as well as contributed to labor inefficiencies. In addition, the volatile supply chain environment is still requiring us to keep higher than normal levels of raw material and work and process inventory on hand Total company production was up approximately 24% for the fourth quarter versus the high level of production in the fourth quarter of 2020. The largest increase were seen in South American factories. For the full year of 2021, our production was up 25% compared to last year. Turning to 2022, we currently project production hours to increase approximately 5% to 10% compared to 2021 levels. At year end, AGCO's order board remained extended. Orders for tractors and combines were significantly higher in North America and Europe and approximately flat in South America compared to a year ago. Now just as a reminder, we are continuing to truncate our order board in Brazil at three months to give ourselves more pricing flexibility. I want to spend the last few minutes of my time this morning reviewing our strategic priorities and then highlight some of the recent successes in our precision ag business. You can see on slide six that our strategy is built on delivering value to our farmer customers. By being farmer focused, we develop solutions that truly create value for farmers while building strong, loyal relationships. We are differentiating ourselves by three things. First, consistently delivering exceptional customer experiences at every touch point. Second, maximizing farmers' outcome through high-quality, smart solutions. And third, serving customers where and how they choose through customer-connected distribution throughout the lifecycle. We made real progress in 2021. To help us deliver these exceptional customer experiences in a multi-brand structure, we've organized into global brand teams deployed in each region. To monitor our progress and receive constant feedback on how we are doing, we've launched a net promoter score measurement globally. We're also making progress in our customer-connected distribution. Our CRM solution is being rolled out rapidly on a global basis. We're already covering 83% of our target dealers in our EEM region. North America is going to grow from 7% to 30% in 2022, and ANZ will reach 100% in 2022. Our e-commerce tool set went operational in 2021, both for accessories and parts. In addition, we purchased a company called Creative Sites Media, which specializes in software and app development to further develop our connectivity with our dealers and customers. This is a high-powered team of software and data developers with a great cultural fit to Agco and Precision Plantings. The development of high-quality, smart solutions requires AGCO to accelerate its development of technology, which I'll address on the next couple of slides. Slide 7 outlines the significant progress we made with our precision ag business in 2021. We expanded our capabilities internally by increasing our engineering spend by the largest amount in company history, while also making investments and acquisitions. You can see on this slide that we had a very active year internally with 23 precision ag-enabled product launches, which included some examples like our FentOne solution that connects farmers' office work with their activities on the field. It's getting rave reviews throughout the industry. And our new FentRowGator, the new sprayer, a revolutionary sprayer that enables both pre- and post-emergent application with the same machines. That new Rogator is winning lots of awards and getting tons of attention from our farmers with lots of interest. Externally, we made equity investments in two innovative companies that are helping us with autonomous applications and precision spraying capabilities. During 2021, we also announced four acquisitions that will enhance our capabilities in a number of important areas, including communication, monitoring, sensing, tracking, and controlling devices. We also upgraded our capabilities for smart solutions for livestock farming aimed at increasing productivity of the growers as well as improving animal welfare. Our precision ag investments are translating into sales growth and margin expansion. In 2021, our margin-rich precision ag sales surpassed a half billion dollars, which was 34% higher compared to 2020. Now this puts us well ahead of our announced pace to double precision ag sales in three to five years that we committed to you last year. I think most of you are familiar with our precision planting business, which provides retrofit technology to upgrade a customer's existing planter, resulting in significant yield improvement for the farmer. Since its acquisition in 2017, precision planting has been the growth engine for the retrofit side of our precision ag business. In 2021, precision planting sales grew 44% to over $300 million, significantly outpacing the market. One of precision planting's primary marketing event is their winter conference, which I attended each year. At this mid-January event, thousands of farmers gather, both in person and virtually, to hear directly from engineers and agronomists focused on improving farm operations through product development and research in the field. They have the opportunity to see the latest precision planting technologies. Now, historically, these new products have been focused on planters. Last month at the 2022 Winter Conference, precision planting broke from that tradition and made a big announcement. They are now expanding to address the sprayer market. We are very excited that precision planting Planting will be bringing their vast agronomy talents to help farmers improve their chemical fertilizer application efforts. In the coming years, Precision Planting will be providing retrofit sprayer products ranging from boom priming and recirculation solutions to smart nozzle control systems. In addition, the team is working on vision-based technologies, including a retrofit targeted sprayer system. Just like they've done for smart planters, Precision Planting will be bringing their disruptively fast retrofit solutions to the sprayer market as an economical alternative to OEM solutions. We are very, very excited about bringing these precision ag technologies to our farmer customers, which will also contribute to our growth and margin expansion goals for Agco. I'll now hand the call over to Andy Beck, who will provide you more information about our fourth quarter results.