CAPITAL GOODS: AGCO (AGCO Baa2/BBB-[P]/NR): 2Q24 Results

Weak outlook for agricultural machinery is well known due to lower food commodity prices pressuring farmers’ cash flow, particularly affecting South America. Nonetheless, material downward changes to guidance here, with negative read across for larger € issuers CNH Industrial and Deere as well.

• Revenue missed by 7%. Despite already depressed expectations, sales missed across regions with South America particularly bad.
• Adj. EBIT missed by 11%. Margin was better than 1Q but still a touch lower than expected.
• Further production hours cuts are planned for 2H. FY24 Unit tractor sales are now expected to drop 10-15% in North America (10% previously) and 25-30% in South America (20% previously). That’s resulted in a 7% cut to revenue expectations, 5% below consensus. 
• FCF was better YoY at -$328mn vs -$602mn mainly due to lower WC buildup. 
• FY24 FCF outlook has been cut to $450-600mn, a 33% reduction at mid-point. On the positive side, leverage is low (less than 1x a FY23) but will uptick.
• Webcast 15.00 BST https://edge.media-server.com/mmc/p/2s9sr9dj/