The global market for farm machinery is to continue weakening for the rest of 2009, thanks in part to volatile crop prices, Agco has warned in a statement cutting its forecasts for full-year results.
The US tractor maker, reporting a 56% slump in second-quarter earnings, said its sales had been hurt by tight farm credit, and global recession which had had a "major impact on farmer sentiment".
In addition, volatility in commodity markets had "increased the level of uncertainty around farm income", Martin Richenhagen, the Agco chairman and chief executive, said.
"Farmers remain conservative with their equipment investments."
Industry demand for farm equipment would "continue to soften" for the rest of 2009, after an April-to-June quarter when tractor sales had fallen by double-digit percentages in the Americas and Europe, with Argentine volumes slumping by 57%.
"In South America, dry weather conditions and reduction in planted acreage and crop production are expected to produce significantly lower industry volumes," Agco said.
The group sliced its forecast for its own full-year revenues from a range of $6.7bn-$7.0bn to $6.5bn-6.8bn, even though currency losses would be roughly $150m less severe than originally thought.
The best hope for earnings was cut from $2.50 a share to $2.25 a share, although Agco kept the worst case forecast at $2.00 a share.
'Weakening order trends'
The revision came as Agco revealed earnings of $57.4m for the second quarter, on revenues down 17.9% at $1.80bn.
"We experienced weakening order trends throughout the second quarter," Mr Richenhagen said.
The group said it had cut machinery production by 35% year on year, with staff numbers down 17% during 2009, in an effort to improve its performance, adding that it would continue to prioritise measures to reduce costs and inventories.
On Wall Street, Agco shares stood $0.28 lower at $31.28 in early deals.