RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Agco shares plunge as it warns that downturn 'will persist'

Twitter Linkedin eCard

Agco shares tumbled after the machinery giant warned that "difficult" markets, which have driven its South American division into the red, were to "persist through 2016", heralding a bigger profits drop than investors have forecast.

Shares in the maker of Fendt and Massey Ferguson equipment dropped more than 11% in morning deals in New York, wiping more than $400m from the group's stockmarket value, and underperforming a weak performance by Wall Street shares, which stood down 1.3%.

The slump followed the release of results which, while showing that the group's earnings had fallen in line with market expectations in the October-to-December quarter, "market difficulties" would drive a further drop profits in 2016 to the equivalent of $2.30 per share.

That is, besides being well below the $3.24 per share reported for 2015, beneath the $2.40 per share that investors have factored in.

'Difficult global industry conditions'

"Looking forward to 2016, market conditions are expected to remain challenging in key markets," said Martin Richenhagen, the Agco chief executive, flagging the dent to farmers' incomes from lower agricultural commodity prices.

"We expect difficult global industry conditions to persist through 2016, with farmers delaying purchases and industry inventory levels being managed down."

The group added, that "softer industry demand for farm equipment across all regions and the unfavourable effects of foreign currency translation are expected to negatively impact Agco's sales and earnings for 2016".

'Extremely low demand'

Agco was particularly downbeat over sector prospects in the Americas, seeing tractor sales volumes in North America, which "progressively declined throughout" 2015, falling by a further 10-15% this year.

In South America too, where "industry demand deteriorated significantly throughout" 2015, the tractor market will shrink by 10-15% in 2016 - although this represents an improvement on last year's 28% decline.

Indeed, sector sales in South America plunged by 40% in the October-to-December period, fuelled by weakness in Brazil – a bogey market for many agricultural suppliers, thanks to economic uncertainty and a weak currency which has sent prices of imported goods soaring.

"In Brazil, demand was extremely low due to weakness in the general economy, funding interruptions in the government financing programme and softness in the sugar sector," Mr Richenhagen said.

Regional breakdowns

Agco's South American division sank to a $4.4m loss in the October-to-December quarter, from a $39.8m profit a year before, on sales down 55% at $188.3m.

North American earnings tumbled by 77% to $7.0m, on revenues down 21% at $434.5m.

However, Europe, Agco's biggest division, a relatively small profits drop, of 1.1% to $132.7m, on revenues down 11.9% at $1.21bn.

"Industry retail demand declines from 2014 levels were less significant in Western Europe," Agco said.

Profits fall

Group earnings for the quarter were, at $62.1m, down 20% year on year.

Underlying earnings per share, at $0.80, were in line with market expectations of a $0.79-per-share figure, although sales, down 21% at $1.96bn, came in a little shy of the $2.03bn that investors had expected.

Agco shares stood 10.8% lower at $43.10 in midday deals.

By Agrimoney.com

Twitter Linkedin eCard
Related Stories

Will protein prices fight back against fat in dairy markets?

Prices of fats remain elevated against protein values in dairy - at a time when the opposite is true in markets for oilseed products

World phosphate, potash shipments to grow in 2018, helped by Chinese needs

Mosaic forecasts further demand expansion, as it heralds a "transformational year" for its own fortunes, after a 2017 marred by a one-time tax charge

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069