AGCO
#<UNK>, as usual when you ask questions to get my straightforward answer, I would think that we didn't place the guidance because we want to be conservative and careful here.
When it comes to South America, we speak, of course, more optimistic when we are there and talk to the media in order to try to motivate farmers to get out of the depression.
And it looks like it's too early to talk about 2017, but it looks like as if Brazil bottomed out and potentially will look better next year.
Yes.
This quarter, we're about close to $13 million.
Next quarter, we're expecting it to be around somewhere between $14.5 million to $15 million.
So as a percent of sales year over year, it's up about 0.2, 2 points on the margin.
So that is an impact.
That will probably be a little higher than our run rate next year, but our run rate will be up about $10 million on an annual basis because of the Cimbria acquisition.
It will.
SG&A will be up because we'll be adding Cimbria into our results in the fourth quarter, as a percentage of sales probably won't make much of a difference though.
Well, we're still working those price increases and probably not ready to give out any numbers at this point, but for sure we've talked with our marketing teams about monitoring the steel price increases, and understanding that we need to make sure our pricing offsets that completely next year.
So that'll be our intent, but we don't have firm numbers to give you yet, <UNK>.
My idea is that the industry would need something like 5%.
It will be difficult for sure, but on the other hand we also, let's say, everybody is hit by inflation, as <UNK> mentioned steel and things like that, so we need it.
yes.
So, <UNK>, the increase you saw in inventories, most of that was not related to Brazil.
Most of that'll take place in the fourth quarter.
We had about, yes, we had about half of that increase was related as a function of currency and the other half was acquisitions.
So, we do expect to offset, as you said, about $80 million of inventory build in the fourth quarter that'll take place in Brazil.
We hope to offset a good part of that in reductions in both North America and Europe.
It'll be probably throughout 2017, I would say mainly first half.
It will be longer than just the first quarter, though, <UNK>.
Yes.
We don't want to talk too much about 2017 yet, but we feel, of course, I do, and my take on Europe right now is it will be flattish I would call it.
So we looked into the various markets and it's a very mixed picture as usual, so some markets well do better and some will be more difficult.
So therefore, I think Europe already this year was rather stable and I'm expecting the same also next year.
No, I would say, what ---+ let's say, I talked about the overall blended view, and part of that view is that France will most probably go down and other markets will go up slightly, so therefore the mixed picture.
That wouldn't have had any impact on our specific results.
I think there were some unusual activity in some of the industry demand numbers.
I think most of that'll get washed out here in the fourth quarter.
Yes, the high-horsepower tractor month supply is probably fairly similar, but it is coming down, and so we're making progress there.
Overall, the overall month supply as we said, we haven't made as much progress because it's being offset by some new product introduction inventory that on a low-horsepower side that's going into the market.
So we've lowered our dealer inventory in North America through the first nine months by about 15% or so.
And then on the high-horsepower side, it's over 20% reduction.
So we're making progress, but as the market continues to soften, that makes it a continuous process that we're going through.
We'll check our progress at the end of the year and determine what further actions if any we need for next year.
Morning
Morning.
Well, <UNK>, in the third quarter, we did have some lower margins.
I think one of the main reasons was the mix was different.
We had some high margin business outside of Brazil that was in the third quarter of 2015, which we didn't get in 2016.
So it's kind of unusual geographic mix change there.
And then also, we did expect to get some of the price increases that we were focusing on in Brazil.
In our results in the third quarter, we didn't get as much as we had expected.
And that's offsetting some of the material cost inflation that we're seeing in the market.
And so as a result, our margins were a little tighter than we wanted them to see.
We're hoping to make more progress here in the fourth quarter on our margins.
Well, in Brazil, our incrementals are typically a little lower.
We're not as vertically integrated in Brazil.
But everything being equal, they should be over 20%.
We've got a lot of activity going on in Brazil next year with new products with the Tier 3 models coming in.
And so it will be ---+ we have to go through all that detail to see where we end up and we'll be able to share more of that in our <UNK>cember Analyst Meeting.
Well, Rob, for us, we can, and I usually speak for us.
We're in the process of introducing our new Global Series.
So we're in the process of adding dealers.
So, for us, that tends to increase our numbers.
I can't really speak for the other guys.
We have seen a slowdown in the commercial hay business, which that category of tractors lends itself somewhat and then also we see those tractors sold into kind of residential, construction and more general economy, weekend farmer kind of activity.
So, some of that relates probably to some slowing down in the general economy as well.
Well, I think what we're seeing in that market right now is certainly a pullback in demand in the grain storage equipment net.
Usually everyone is focusing just on the silos, but a lot of that business is also in the conditioning, drying equipment, also the conveyance equipment as well.
So there are multiple aspects to that.
What we're seeing is a significant pullback in the conditioning equipment because the harvest have been quite easy and the grain has been relatively dry.
So the hours on the equipment don't require any replacement this year.
We're also seeing a pullback in commercial activity as some of the big processors are pulling back on CapEx right now.
And so as we look forward, I think there is still a stable amount of on-farm storage demand and equipment for on-farm, but also very important in this is the activity levels and the commercial area, ports, processors and their project CapEx.
And that's where we're hoping to see some recovery at some point, but that's the main reason why we're down right now.
Sure.
We're running a little behind in most of the markets, but also we're performing better on the material cost side as well.
So it's not really impacting our margins too significantly.
It's a competitive environment in all of the markets we're participating in.
I would say the main reason for the decline is the, as I said, delay in some of the pricing that we're expecting to get in South America.
I mean, your point's right that the pricing is heavier there than our other markets, and we are expecting some sales increases there, but for the most part, we had expected that.
And so we pulled back a little on our expectation on Brazil pricing.
And that's the main source of the slight change in the pricing guidance that we gave.
I would say, it is a little more challenging, but for the most part the farmers are still doing quite well in Brazil.
With the real weakening and a lot of their ability to export their crops, their margins are probably better than farmers in other parts of the world.
And so from that standpoint, I think there is a healthy sector down there.
Also, the sugar sector is kind of recovering at this point because the prices in sugar are way up.
And so there are some more positives right now in the market.
So I would expect that to carry through into the credit availability as well.
This is, as you know, the most advanced and most efficient and lowest lifetime cost conventional wheel tractor in the world.
We developed it for mainly the markets of Europe and Eastern Europe, but saw quite some traction and interest from American farmers.
We actually will sell about 100 or so this year.
We could sell more if we could produce more.
So it's a pretty good start and I think this tractor helps in various area.
One, it helps to improve our brand image.
Two, I think this low weight and low soil pressure tractor will change the market in America quite a bit from this big four-wheel-drive articulated into more intelligent solutions.
And therefore, we are optimistic that this will also see growing demand in the years to come.
Yes.
There was some modest one-time costs, but it was offset by the income that we got for the 20 or so days of the year.
So there was no real impact to our bottom-line results because of that.
No, we're obviously working on our 2017 budgets and projections right now with them.
So it's early days in getting our plans together there, but there's nothing that we've seen so far to change our expectation.
Nothing new.
Yes.
So, <UNK>, it's probably pretty self-explanatory, but the tax benefits that the farmers have had this year are being minimized just by the fact that the harvest was so bad and their income levels are going to be down.
So much like Section 179 in the US kind of ran out of steam that's kind of what we're seeing in France.
In general, you could say that there's a trend towards bigger and higher horsepower equipment in tractors and combines in Brazil.
We also basically try to get more intelligence by showing the new Fendt tractor in this market, which did get a lot of attention.
So I think within the next year, you will see the average horsepower getting closer to what we have already in the US or in Europe.
And with regard to the market trends, I think that our team in Brazil believes that there has been some increased demand in 2016 as a result of buying ahead of the higher priced Tier 3 equipment, but they don't believe it's that substantial.
So I think there's a modest pull forward, but nothing that should impact significantly 2017.
Sure.
The receivables, as you say, typically would come down a little, mainly it's a geographic mix issue.
And we have, as you know, in our footnotes, you can read about the fact that a lot of our receivables are transferred to AGCO Finance, our retail finance subsidiary, a JV that we have, that's not consolidated, so a lot of those receivable do come off our books.
We saw a ---+ our gross receivables are actually down, but the amount that we sold into AGCO Finance and was down is in more than our gross receivables are down, so that makes the net receivables go up.
So I would assume most of that'll get sorted out here in the fourth quarter and won't be a full-year impact to our cash flow.
Sure, <UNK>.
We're in the middle innings of getting that factory ramped up.
During 2016, we're very close to having almost all the models that we're going to produce in that factory be released, but certainly not having them in all our markets ready to be sold for a full year.
So that should be a help for us in 2017 and a help for our factory in 2017.
Don't have the volume improvements yet for 2017, but it'll be another step up in volume and another step up in margins that we would expect as a result.
In terms of market shares, it's still early days.
As I said, we're not getting ---+ we don't even have all the products introduced yet.
But we are making progress in our market share in the low-horsepower sector as a result of these new models and we expect that to continue.
I think the impressive part is when you visit the factory that this is again we learned from other investments we made like the big Fendt factory in Germany, the factory in China is better again.
The layout would allow us to assemble Fendt tractors there in theory.
So it's a state-of-the-art super efficient factory, and you will like what we are doing there in the future.
Yes.
We're addressing that with our Board in the next few meetings and we'll have more information on what our plans and new authorizations will be in our Analyst Meeting in <UNK>cember.
So that's on the table for discussion, and we certainly expect to continue to do share repurchases, some of that needs to be balanced with our new acquisition and additional debt we just took on, so something that we'll determine in the next month or so and report back to you.
We also, just to let you know, we manage our interest of visitors into China by inviting them for very authentic food.
So, you're welcome to come and visit.
Thanks, <UNK>.
Bye.
