AGCO Corp Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Stephen Volkmann - Jefferies LLC - Analyst : Hi. Good morning, guys. Thank you. Damon, I'm just going to start off with your Q1 commentary. I guess the implication there would be North America probably has a negative margin in the first quarter, but I don't want to put words in your mouth. Can you just give us a sense of how you're thinking about the profitability by region in the first quarter?

Question: Stephen Volkmann - Jefferies LLC - Analyst : Okay. Understood. And then as a follow up, I'm trying to get a sense, if you could remind me, of your total North American sales. How much of that is basically sourced in Europe?

Question: Stephen Volkmann - Jefferies LLC - Analyst : Great. Okay, that's helpful. I'm good. I'll pass it on. Thanks.

Question: Tami Zakaria - JPMorgan Securities LLC - Analyst : Hi. Good morning. So my question is on the EME margin. It was quite impressive on a 17% sales decline, and you're seeing low double-digit operating margin in the first quarter. So given the cost savings there, how should we think about the mid-cycle margin for that region when volumes do inflect in the future?

Question: Tami Zakaria - JPMorgan Securities LLC - Analyst : Got it, okay. That's all I had. Thank you so much.

Question: Kristen Owen - Oppenheimer & Co., Inc. - Analyst : Hi. Good morning. Thank you, for taking my question. I wanted to follow up on Tami's question about the margin recovery in Europe, particularly in the fourth quarter and how we think about that flowing through to 2025? Just specifically, can you give us an update on the reorganization at BayWa? Anything else that you might call out that's helping to contribute to that recovery? Thank you.

Question: Kristen Owen - Oppenheimer & Co., Inc. - Analyst : Great, thank you. And then my follow up is related to the free cash flow outlook for 2025. I mean, you mentioned some of the inventory that you want to wind down in the first half of the year. But against the comments that this may be the trough in 2025, how do you think about the working capital in the back half of the year if there's some anticipation that we could see maybe a little bit of volume recovery next year?

Question: Kristen Owen - Oppenheimer & Co., Inc. - Analyst : Thank you so much.

Question: Jamie Cook - Truist Securities, Inc. - Analyst : Hi. Good morning. I guess two questions. Damon, first, a similar question on South America, given we start off the year negative and just the volatility in the margins, how are you thinking about margins for the full year and sort of the cadence? And then I guess my second question, obviously, you guys announced some restructuring actions that you started, I think, last summer. Given the weakness in the markets, anything more that we're contemplating? And then last, finally, just what's the expectations on PTx in your guidance in terms of sales and profits, if any? Thanks.

Question: Jamie Cook - Truist Securities, Inc. - Analyst : Thank you.

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Yes, hi. Good morning, everyone. Eric, I'm wondering if you can just expand the comments you made in the prepared remarks on the company's philosophy on upfront pricing versus subscription pricing within the context of one of your competitors doing aftermarket guidance kits with heavy aftermarket pricing. Can you just talk about what feedback you're hearing in the market, and just your broader philosophy on upfront versus subscription? Thanks.

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Super. And then in terms of the South America performance in the quarter, I wasn't surprised. Can you just talk about what the run rate you expect to be in 2Q, 3Q of that business? I appreciate the -- a little bit of 150 basis points benefit in the fourth quarter, but can you talk about once production cuts are done, what's the margin trajectory that you folks expect to be on this year?

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Okay, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, AGCO.N - Q4 2024 AGCO Corp Earnings Call

Question: Kyle Menges - Citigroup Inc. - Analyst : Thanks, guys. Just wanted to ask a little bit about just anything that you guys or we should be thinking about with upcoming elections in Germany

Question: Kyle Menges - Citigroup Inc. - Analyst : Thanks. That's helpful. And then I just wanted to touch on the Trimble top-line synergies you're thinking about in 2025. And I think, if I recall correctly, I think you guys have talked about 450 or so Premier Precision planting dealers in North America, but only 50 or so selling Trimble. So just could you help us frame the opportunity there? And do you anticipate getting the 400, basically adding sort of self-Trimble? And how many do you think could be added this year? How fast do you think that can happen? And what do you think of their overall willingness and ability to start carrying Trimble as well?

Question: Kyle Menges - Citigroup Inc. - Analyst : Got it. That's helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, AGCO.N - Q4 2024 AGCO Corp Earnings Call

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : Good morning, and thanks for taking my question. I just wanted to go back on the PTx. I think there was a discussion around the sales maybe expectation this year. But just curious if you could kind of overlay the expectations on operating income for 2025? And maybe just expand on the impairment charge. It sounds like some of the adoption rates on penetration or position that you're seeing is still good. So just to what extent are you seeing any kind of deterioration around that relative to PTx in particular?

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : That's very helpful. Thank you. And then maybe I just wanted to go back to the comment, I think, on free cash flow. Just the confidence to be able to kind of reach that 75% to 100% conversion. Can you just unpack that a little bit more? I think, again, you made some comments around that earlier, but I just want to understand, given the kind of 50% conversion in the last couple of years. And I think we've heard from other peers, maybe timing around pool fund cash payout, just anything that might be impacting or might be a risk? And then just how you think about that confidence on that 75% to 100%?

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : Very helpful. Thank you.

Question: Mike Feniger - BofA Securities Inc. - Analyst : Hey, guys. Thank you for squeezing me in. Can you just help us understand with North America? I know you touched on this earlier with -- if there are tariffs with Europe, does it change any of your thought process or strategy when we think of Massey? And any big shifts there that allow you to be kind of flexible or how to think about that with North America, if we do start seeing more of this tariff conversation pick back up?

Question: Mike Feniger - BofA Securities Inc. - Analyst : Fair enough. And just lastly, guys, I realize the production cuts are really helping trying to make that progress on the inventory side. You mentioned North America, I think it was nine months versus a target of six. I'm curious how we think about the used side, if you're seeing progress there? And how you kind of help facilitate on the used side as I know you guys are making progress on the new side of the inventory? Thank you.