AGCO Corporation 2026 Q3 Earnings Call

Thanks, and good morning. Welcome to those of you joining us for AGCO's third quarter 2026 earnings call. This morning, we will refer to a slide presentation that is posted on our website at www.agcocorp.com. The non-GAAP measures used in this slide presentation are reconciled to GAAP measures in the appendix of that presentation. We will make forward-looking statements this morning, including statements about our strategic plans and initiatives, as well as their financial impacts. We will discuss demand, product development and capital expenditure plans, and timing of those plans, and our expectations concerning the costs and benefits of those plans and timing of those benefits. We will also cover future revenue, crop production, and farm income production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics.

All of these forward-looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the safe harbor included on Slide 2 in the accompanying presentation. Actual results could differ materially from those suggested in these statements. Further information concerning these and other risks is included in AGCO's filings with the SEC, including its Form 10-K for the year ended December 31, 2025, and subsequent Form 10-Q filings. AGCO disclaims any obligation to update forward-looking statements except as required by law. We will make a replay of this call available on our corporate website later today. On the call with me this morning are Eric Hansotia, our Chairman, President, and Chief Executive Officer; Indira Agarwal, Senior Vice President and Chief Financial Officer. With that, Eric, please go ahead.

Thank you, Greg. Good morning, everyone, and thank you for joining us. Since our last call, the industry environment has become even more challenging, with additional pressure on farmer economics across our major regions. Higher input costs, particularly diesel and fertilizer, lower grain production in Europe following drought conditions, higher interest rates, and continued pressure on commodity prices have weighed on farmer sentiment and further softened industry demand. Global demand is now at its weakest level in more than a decade. We continue to believe the industry is at the trough of the cycle, with some recovery coming in 2027. Equipment fleets have been aging for several consecutive years, with our estimates showing that the tractor fleet is matching its oldest average age in the last couple of decades. Growing replacement needs should provide additional tailwind as market conditions improve.

This data gives us confidence that market demand improvement is in front of us. We are managing through this environment with strong operational discipline. Our third-quarter results reflect the fact that we are focused on what we can control, aligning production with retail demand, actively managing dealer inventories, and taking structural costs out of the business. These actions are helping improve channel health and strengthen AGCO's cost position as we navigate the trough cycle and position the company for the recovery. At the same time, we continue to strengthen the market position of our premium brands and expand our precision agricultural offerings. We are navigating today's market conditions while continuing to invest and maintain momentum behind our Farmer-First strategy. Net sales for the quarter were approximately $2.3 billion, 8.6% lower compared with the prior year. Adjusted earnings per share were $1.05, compared with $1.35 in the prior year period.

Reported earnings per share were $0.75, compared with $4.09 last year. Operating income was $116.1 million for the quarter, reflecting results 23% below the third quarter of 2025. Adjusted operating margin was 6.1%, down 140 basis points, primarily reflecting lower sales and lower factory absorption from the reduced production volumes. Structural cost actions, ongoing business optimization benefits, disciplined pricing, and certain IEEPA tariff refunds recognized during the quarter helped offset the impact. Our Project Reimagine cost efficiency actions are delivering measurable results, and we remain on track to realize $60 million-$70 million of cost and productivity benefits in 2026. As we address these near-term challenges, we remain firmly focused on the farmer. That starts with understanding their everyday needs, securing labor, managing input costs, and getting the most from their equipment.

Our solutions help farmers automate tasks and accomplish more with the resources they have, all with the goal of improving their profitability. Slide 4 provides an overview of industry unit retail sales by regions through September. Across our major markets, demand remained well below historical mid-cycle levels and now below the previous trough as elevated input costs and pressure on near-term farm profitability continue to drive cautious equipment investment. In North America, tractor retail sales, excluding compact tractors, were 9% lower year to date, and combine sales were 10% lower. The largest change continued to be in the higher horsepower categories. Commodity prices and evolving conditions surrounding trade and export demand continue to influence farmer profitability.

We are also seeing more selective purchasing activity in the lower horsepower categories as higher interest rates continue to influence discretionary purchases among rural lifestyle customers. In Western Europe, tractor retail sales were 1% lower through September, including a 9% decline in the third quarter, while combine sales were 2% lower year to date. Hot and dry weather created yield variability across large parts of the region, while softer crop economics and elevated input costs weighed on farmer sentiment. Relatively healthy livestock and dairy economics and an aging equipment fleet continue to support replacement demand. Still, we expect industry demand to remain challenged through the balance of the year, influenced by uneven crop economics, elevated input costs, and cautioned farmer sentiment. In Brazil, tractor retail sales were 17% lower year to date and combine sales were 38% lower.

Higher interest rates, constrained credit conditions, soft farm economics, and broader economic and policy uncertainty led farmers to delay equipment purchases. Despite the current pressure, Brazil remains a strategically important agricultural market, supported by its significant production base and growing importance to global grain supply. Across all these markets, near-term demand remains under pressure, but the structural fundamentals for agricultural investment remains unchanged. Food demand is rising, equipment fleets are aging, and farms must produce more with limited resources. That keeps farmers focused on controlling costs, improving yields, and getting more productivity from every acre and machine. Those conditions reinforce our commitment to continue investing in precision agriculture, automation, and other solutions that allow farmers to improve productivity and returns. Slide 5 shows AGCO's factory production hours.

We continue to use production as an active lever to align wholesale activity with retail demand and support the health of our dealer channel. In the third quarter, production hours were approximately 19% lower year-over-year, with the largest reductions in EME and Latin America as marketing conditions weakened during the quarter. Our fourth quarter production is designed to support our dealer channel with full-year production hours projected to be approximately 5% below 2025. This reflects our measured approach to aligning production with current retail demand. Turning to dealer inventories. In EME, dealer inventory remained below our four-month target, both inventory units and the forward retail outlook declined during the quarter. In Latin America, dealer inventory was just under five months of supply, above our three-month target and up from approximately three and a half months at the end of the second quarter.

The increase in months of supply was driven almost entirely by the lower forward retail outlook, while inventory units increased modestly. We are reducing production and shipments to reflect current market demand and improve channel balance. In North America, we maintain dealer inventory levels just below seven months compared with our six-month target, with modest movements in both units and forward retail outlook. We remain focused on disciplined execution of our production and shipment plans to further improve channel health. As we continue to optimize dealer inventories through the balance of the year, we expect 2027 production to be close to retail demand in North America and EME. Latin America continues to experience uncertainty, and we will continue to prioritize restoring and sustaining channel health by calibrating production as conditions develop.

Earlier this month, we brought analysts and investors to Stewart Farms, just outside of Chicago, for our annual technology event, putting AGCO's technology strategy in the spotlight. We highlighted how we design our business around the farmer. Farmers are working to address three fundamental challenges: securing labor, making better use of their data, and improving profitability. AGCO brings together three complementary capabilities to help address those challenges. First, our premium brands provide purpose-built machines that fit each farming operation rather than a single equipment ecosystem. Second, PTx delivers retrofit first, mixed-fleet technology, allowing farmers to adopt new capabilities without waiting for a machinery trade or development cycle, proving the value in their operation and expanding adoption over time. And third, FarmerCore brings the dealership closer to the farmer through mobile, digital, and on-farm service solutions, providing support when and where it's most convenient for the farmer.

The result is a model that gives farmers flexibility in how they buy equipment, how they adopt technology, and how they are served. Slide seven shows how these capabilities translate into practical solutions across the crop cycle. In planning and preparation, FarmENGAGE, Panorama, and Aurora connect technology, data, and machines across brands. FarmENGAGE supports mixed-fleet planning and task management. Panorama brings agronomic and machine data together. And Aurora makes that information easier to access and use through voice- and text-based AI. PTx planting technologies are helping farmers place seed more precisely in the soil, something traditionally left to chance. It has been one of the industry's toughest challenges, and our team is a leader in bringing this breakthrough seed orientation tech to farmers. In application, the Symphony product family brings greater precision to crop protection, helping farmers target inputs more effectively and reduce unnecessary application.

In harvesting, our industry-leading OutRun autonomy solution helps address labor constraints and improve execution during narrow operating windows by enabling autonomous grain cart and tillage operations. Across every stage, FarmerCore, our unique distribution approach, supports machine performance, uptime, and farm insights by bringing digital tools, parts, service, and support closer to the farmer, online and on the farm. Together, these solutions demonstrate the strength of our approach. Practical technology that works across mixed fleets, addresses real farmer challenges, and creates attractive growth opportunities for AGCO. Before I finish, I want to thank Damon Audia for his outstanding leadership as AGCO's Chief Financial Officer. Over the past four years, Damon helped guide AGCO through a period of significant transformation, strengthened our financial discipline, and helped shape our strategy.

Damon has now taken on the role of President of PTx, Corporate Strategy & Distribution, where he is leading the next phase of growth for our precision ag business. I am pleased to have Damon's enterprise perspective and strategic focus driving it forward. I am also very pleased to welcome Indira Agarwal to her first earnings call as AGCO's Chief Financial Officer. Indira has hit the ground running, and I appreciate the leadership, perspective, and energy she has already brought to the role. With that, I will turn over the call to Indira for a deeper review of the financial results.