AGCO Corporation

Ladies and gentlemen, thank you for standing by and welcome to the AGCO 2022 first 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 will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Mr. Greg Peterson, AGCO Head of Investor Relations. Mr. Peterson, please go ahead.

Thank you, Lorenz, and good morning. Welcome to all of you who are joining us for our AGCO's first quarter 2022 earnings conference call. This morning we do have slides we'll refer to, and those are posted on our website at www.agcocorp.com. The non-GAAP measures used in that presentation are reconciled to GAAP metrics in the appendix of the presentation. We'll also make forward-looking statements, including demand, product development and capital expenditure plans, production levels, engineering expense, exchange rate impacts, pricing, shareware purchases, dividends, future commodity prices, crop production, our 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 PIAC reports that we filed from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31st, 2021. 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, including plant closings, workforce availability, and product demand. Supply chain disruption, the war in the Ukraine, 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'll have a replay of our conference call available on our corporate website later today. On the call with me this morning are Eric Cansodia, our Chairman, President, and Chief Executive Officer, and Andy Beck, our Chief Financial Officer. 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. The headline this morning, is that the financial health of our farmer customers continues to be very strong, and demand for AGCO's major end markets remains robust. However, supply chain disruptions and inflationary cost pressures, further compounded by the war in Ukraine, have created an extremely challenging operating environment. Despite these obstacles, AGCO reported record first quarter sales and earnings, resulting in sales growth and margin improvement as compared to the first quarter of the prior year. You can see from slide three that our first quarter sales grew nearly 13% compared to what were record levels the first quarter of 2021. Adjusted operating margins improved by almost 80 basis points as favorable pricing helped to offset most of the material cost inflation in the first quarter. However, we expect continued headwinds from higher material costs during the remainder of the year. The market remains receptive to our strong product lineup and technology. We have raised our pricing outlook for the full year. Our customers' growing interest in AGCO's precision ag solutions is supporting strong order boards. We expect healthy market conditions to continue, and our new financial outlook for 2022 reflects this optimism. We have increased our sales and earnings forecasts, and expect to generate significant free cash flow this year. The strong performance supports our technology-related investments aimed at advancing our digital capabilities and growing our precision ag business. We will also continue to return cash to our shareholders. Last week, we announced a variable special dividend of $4.50 per share, as well as a 20% increase in our regular dividend. Slide four details industry unit retail sales by region for the first quarter of 2022. Elevated grain prices are supporting healthy farm income this year despite significantly higher farm input costs. The underlying demand for agricultural equipment remains strong. Despite the favorable conditions, supply chain constraints limited global industry production and the corresponding retail sales in the first quarter. As you can see, industry retail sales in the first quarter of 2022 were actually below last year's levels in Europe and North America as a result of the restricted production. North American industry retail tractor sales were down approximately 1% in the first three months of 2022 compared to last year. Lower sales of smaller tractors, which declined from record levels in 2021, were partially offset by increased sales of high horsepower tractors. Despite continued strong demand, retail sales of large row crop agricultural equipment, now this includes tractors, combines, and sprayers, was 11% below the first quarter of 2021 due to supply chain constraints, which limited deliveries. We still expect strong 2022 demand in North America. Industry retail tractor sales in Western Europe, which also were restricted by supply chain challenges, decreased by approximately 6% in the first three months of 2022 compared to strong levels in the first quarter of 2021. Farmer sentiment has been negatively impacted by the war in Ukraine, as well as input costs and inflation. However, forecasts for healthy farm income in Western Europe are expected to support solid retail demand for equipment, throughout 2022. In South America, industry sales increased during the first three months of 2022 in both Brazil and Argentina. Strong crop production levels as well as elevated commodity prices are supporting positive economic conditions for farmers who continue to replace an aged fleet. AGCO's 2022 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. 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 hours were up approximately 6% for the first quarter of 2022 versus the high level of production in the first quarter of 2021. For the full year of 2022, we currently project production hours to increase approximately 5% to 10% compared to 2021 levels. At quarter end, AGCO's order board remained extended. Orders for tractors and combines were significantly higher in North America and Europe, and were down modestly in South America compared to a year ago. Now remember, we are continuing to truncate our order board in Brazil at three months to give ourselves more pricing flexibility. I want to take a few minutes to provide an update on our precision ag business, which is one of our more important growth opportunities. We have been focused on building our precision ag capabilities over many years and have developed a broad and highly competitive offering with much more to come in the future. In addition to the significant development work within our precision planting business and our few smart farming teams, we completed a number of targeted acquisitions in the past year to further our capabilities in key areas to help us meet our ambitious technology roadmap. Yesterday, we announced the acquisition of JCA Industries, which specializes in electronic systems and software development to automate and control agricultural equipment. JCA will support AGCO's delivery of machine automation and autonomous systems that improve farmer productivity. We are seeing strong interest in our FUSE OEM precision ag solutions as farmers are looking to capture increased yields and to contain the cost of expensive inputs, like fertilizer and diesel. More of our Agco machines are leaving the factory with advanced precision ag features, like our FENT-1 and our FENT-TI headland. Our precision planting business was impacted by supply chain issues in the first quarter. However, we remain confident in the growth opportunities from our new product pipeline, as well as our unique retrofit approach. Retrofit allows customers to utilize the latest technology with a lower investment. Precision Planting introduced a new family of Retrofit sprayer products during the first quarter at our winter conference. They launched vision and application technologies that include vision guidance, vision scouting, vision weed ID, and targeted spraying technology. They also launched two other Retrofit smart spraying options, Reclaim Boom Priming and Recirculation, and Symphony Nozzle Control System. We are looking forward to showcasing our precision ag capabilities at our technology event in Germany in late June. I'm going to close my comments by highlighting our progress with sustainability. Last month, we published our sustainability report, which you can find on our website. I hope you'll take some time to read through it and note the progress we've made. We've put sustainability at the heart of our corporate purpose, farmer-focused solutions to sustainably feed our world, and are taking actions across our brands and regional operations to advance sustainability within our company, as well as for agriculture in general. Sustainability shouldn't be a burden on farmers, but an enabler. We are committed to helping farmers adopt tools and practices that are as good for the planet as they are for our businesses. We are also taking action with respect to governance. We've established a sustainability committee on our board of directors in April. The new committee will provide important oversight and guidance for our sustainability efforts. Slide seven highlights some of our sustainability progress. I'm not gonna go through all of these items, but we'll mention a few. We've converted 32% of our operations to renewable energy sources, with a goal to reach 60% or more by 2025. Energy intensity is another key area for us. And for 2021, we reported an 8% reduction in our intensity. The health and safety of our employees has been a top priority for us, especially throughout the pandemic. So we're pleased to announce that we've had a 12% reduction in our incident rate in 2021. With that, I'll hand it over to Andy, who will provide details on our first quarter results.