AGCO 2024 Analyst Day Highlights and Analysis
On Thursday, December 19th, AGCO held its 2024 Investor Day in New York.
The 2024 year has been challenging in the equipment industry, with AGCO coming off its Q3 2024 financial results of $2.6 billion in revenue, a 24.8% decrease compared to $3.5 billion in Q3 2023, an announcement of further decreased production and margins, plus forecasts for continued challenges throughout 2025.
The event was focused on showcasing their efforts on innovation and technology and sharing their vision for the future, so that is where much of the emphasis below will be.
AGCO 2024 Analyst Day Presentation - AGCO
Snapshot
Presentation
AGCO CEO Eric Hansotia started out emphasizing AGCOs patent catalogue, stating that they have doubled their patent portfolio in last 5 years.
As of 2024, AGCO Corporation holds an intellectual property portfolio, with a total of 6,586 patent documents, including both applications and granted patents. The portfolio encompasses 2,803 unique patent families, with 2,090 patents granted and 713 applications pending.
AGCO has increased its R&D expenditure by 60% since 2020, with about 65% focused on smart machines and clean energy since 2021 (chart below only to Q4 ‘21):
AGCO has been making a major push to grow Fendt and, I think, done a good job of positioning it at the high end of the market, using the tagline “Leaders Drive Fendt:”
AGCO has been emphasizing “farmer focused,” which I continually come back to as a mediocre message.
In an April 2024 interview, CEO Eric Hansotia stated the following to DTN:
AGCO intends to be the most farmer-focused company in the industry. We're going to serve every single farmer. We're going to serve the farmer that already has a piece of equipment that wants (a) retrofit upgrade, we'll serve the farmer that wants a new piece of equipment from one of our OEM partners, or a new piece of equipment from one of our brands. The whole notion here is bringing the two best teams together to innovate faster, innovate more all the way around the crop cycle to solve some of the toughest problems in farming, and then also develop the strongest precision ag tech dealer network.
There is nothing inherently wrong with the statement. My concern is that it says nothing specific.
I will start with the first sentence: “AGCO intends to be the most farmer-focused company in the industry”
I often think about a quote from legendary strategist Roger Martin that says the following:
One of my core premises is that in strategy, if the opposite of your strategy (e.g. we are customer centric) is stupid on its face (I.e. we ignore our customers entirely), then it isn't a strategy choice. It is a choice to simply be non-stupid.
I did not add in that example. That is a direct Roger Martin quote, which is almost exactly what was stated by Eric Hansotia, and continually emphasized during the AGCO event.
AGCO states that to illustrate they are a farmer focused company, they are going to use Net Promoter Scores. No metric is perfect, but NPS has been questioned as to whether it is correlated and drives business results. Fundamentally though, if a company is effectively solving problems for its customers many key business metrics will increase: revenue, loyalty, upsell/cross sell opportunities etc.
Financials and Forecast
AGCO reinforced it’s targets for 2029, including much higher margins over the time period:
The increased margin forecast is due to the exit of the GSI (bin) business, which were the lowest margin portion of their business, along with the higher Trimble margins (Trimble averaged ~35% margins in the segment before the acquisition).
They first need to get through 2025:
AGCO also emphasizing what has been done from a margin perspective until the current downturn:
In order to improve margins further, they are cutting jobs, both hourly and salaried and working on SG&A efficiency:
It’s not entirely fair to compare AGCO to CNH Industrial or John Deere given their other business segments, but when comparing SG&A to their largest equipment competitors, they are noticeably poorer: