Agricultural equipment maker AGCO Corp. (AGCO) revealed third quarter financial results on Tuesday, with profit and revenue tumbling on weak demand. Looking ahead, the company also provided its guidance for the full year, which is in line with current expectations of analysts.
The Duluth, Georgia-based company's third-quarter net income attributable to AGCO Corp. and subsidiaries declined to $11.1 million or $0.12 per share from $99.0 million or $1.01 per share a year ago.
Excluding restructuring and other infrequent expenses, third-quarter net income was $12.0 million or $0.13 per share, compared to $99.0 million or $1.01 per share in the third quarter of 2008.
On average, 14 analysts polled by Thomson Reuters estimated earnings of $0.04 per share for the quarter. Analysts' estimates typically exclude special items.
Third-quarter net sales dropped 32.7% to $1.4 billion from $2.1 billion in the comparable quarter last year. Excluding unfavorable currency translation impacts of 5%, net sales decreased 27.7% compared to the same period in 2008. Analysts expected net sales of $1.37 billion for the quarter.
Gross profit dropped to $241.4 million from $380.1 million in the year ago quarter, impacted by lower production volumes and a weaker product mix, partially offset by the impact of reduced workforce levels and cost containment initiatives.
Income from operations declined to $34.0 million from $141.7 million in the comparable quarter last year. Lower net sales, reduced gross margins, and the negative impact of currency translation contributed to the decline in income from operations.
Segment wise, revenue from North America dipped to $292.1 million from $440.4 million. Revenue from South America eased to $331.6 million from $466.6 million. Revenue from Europe, Africa, and Middle East segment slid to $720.1 million from $1.11 billion last year. Revenue from Asia Pacific operations dropped to $59.9 from $69.6 million in the year-earlier quarter.
Martin Richenhagen, chief executive officer of AGCO, said, "Our third quarter results were impacted by weak markets and significant production cuts aimed at reducing our company and dealer inventories. Expectations of lower farm income in 2009 and the lingering effects of constrained credit in some markets have negatively impacted our business. We are facing softening end market demand in Western Europe and North America, partially offset by stabilizing markets in South America. The priority for the remainder of the year continues to be lowering our investment in working capital in order to better align us with current market demand."
For the nine-month period, the company reported net income of $1.09 per share and adjusted net income of $1.12 per share. These results compare to reported and adjusted net income of $2.91 per share in the same period of 2008. Net sales for the period decreased 23.8% to $4.8 billion compared to the same period in 2008.
For the full year 2009, AGCO has earnings target in the range of $1.30 to $1.50 per share. Net sales is expected to range from $6.4 billion to $6.6 billion, including unfavorable currency translation impacts in the range of $500 million to $600 million. On a consensus, analysts currently expect earnings of $1.42 per share on revenues of $6.46 billion for the full year.
The company expects full-year earnings to be impacted by lower sales and production volumes, engineering expenses for new product development and Tier 4 emission requirements, and working capital reduction efforts.
The company said reduced farm income expectations and the weak global economy have dampened worldwide industry demand for farm equipment with no improvement expected in the fourth quarter.
In North America, demand from the professional farming segment is expected to continue to soften. Demand in Brazil has begun to stabilize, resulting from government-supported finance incentives, but lingering impacts of the drought continue to hurt sales in Argentina. Weakening farm economics in Western Europe are expected to continue to reduce industry sales in key markets, the company said in a statement.
AGCO is gaining $0.02 or 0.07%, and is trading at $28.67 on a volume of 194 thousand shares on the New York Stock Exchange.
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