South America's tractor market is to revive this year,
bucking the trend of a world mired in "market difficulties", Agco
said, as the ag machinery maker unveiled better-than-expected results and
forecast some further profits growth.
Agco, the maker of Massey Ferguson and Fendt machinery,
forecast industry tractor sales, by vehicle, in South America rising 10% in
2017, after a 6% drop in 2016.
The forecast contrasted with expectations of at best a flat
market in Europe, and an estimate of a further, 5-10% drop in industry volumes
in North America.
And it tallied with a forecast from rival CNH Industrial,
which last week forecast rise of about a 15% in industry tractor sales in Latin
America this year, with similar growth expected for the combines market.
Back in the black
Martin Richenhagen, the Agco chief executive, said that, as
regards global ag machinery prospects for this year, "industry conditions
are expected to remain near the bottom of the cycle… in key markets".
However, while Agco forecast "softer industry demand
across North America and Europe" in 2017, this would be "partially
offset by growth in South America", where the group had already itself
seen a recovery in its own fortunes.
Agco's South American operation returned to an operating
profit of $13.6m for the October-to-December quarter, from an operating loss
of $4.4m a year before, on revenues of $308.1m – up 64% in dollar terms, or
9.7% excluding currency moves.
Mr Richenhagen flagged the boost to the market from
"the improving political landscape in Brazil", where the impeachment
of former president Dilma Rousseff has led to the implementation of a more
pro-business agenda, under her successor Michel Temer.
Signally, Moody's data last week showed net investment flows
into Brazilian funds totalling R$109.1bn last year, a six-year high, and
compared with figures of R$2bn for 2015 and R$1bn for 2014.
Central bank data show a buoyant close to 2016 for foreign
direct investment in Brazil, with the total for December hitting a record high
for that month of $15.4bn, taking the total for 2016 to $78.9bn, a rise of 6%
year on year.
In Argentina, Mr Richenhagen flagged the market boost from
"supportive government policies and improved crop production", with
cuts to crop export taxes and restrictions implemented by the government of
Mauricio Macri seen as a big boost to prospects.
Agco reported overall earnings for the October-to-December
quarter flat at $61.2m, with the impact of a 6.9% rise to $2.09bn in sales offset
in part by higher engineering costs and larger tax payments.
However, underlying earnings, at the equivalent of $0.84 per
share, beat market expectations by $0.13 per share.
"Despite… difficult conditions, our solid operational
execution during 2016 allowed us to exceed our financial targets and be
well-positioned to seek new opportunities for growth," Mr Richenhagen said.
However, the group was cautious in its forecast for earnings
for 2017, seeing earnings per share reaching $2.50, only marginally higher than
the underlying $2.47-per-share result achieved last year.
Agco shares stood $0.02 higher at $63.13 in lunchtime deals
in New York.