CNA Financial (TG:CNH)
Historical Stock Chart

From Jun 2019 to Jun 2024

Agco Corp. (AG) said Tuesday that global sales of farm equipment would fall even more than expected as it cut its 2009 profit forecast by more than 27%.

The U.S.-based company is the global number-three maker of tractors and combines by sales but the largest player in South America, where it now expects industry sales to fall by 25% to 35% compared with last year.

The combination of falling commodity prices, weaker crop demand and currency shifts is crimping demand for everything from tractors to seeds and fertilizers following a prolonged sector boom.

Tight credit conditions have also been a factor, notably in South America, despite the launch of government-backed credit programs.

Agco had previously forecast a 20% to 30% industry sales decline for the region, where it compares with CNH Global N.V. (CNH) and Deere & Co. (DE).

Tractor sales fell 60% in drought-racked Argentina during the first quarter, said Agco, though they climbed 3% in Brazil as demand for smaller equipment was buoyed by state-backed loan programs.

Agco expects sales in North America to fall 15% to 20% this year, compared with a 5% decline forecast previously. Sales in Western Europe are expected to fall 10% to 15% this year.

The Duluth, Ga.-based tractor and combine maker reported first-quarter net income of $34 million, or 36 cents a share, down from $59 million, or 59 cents a share, a year earlier. Net sales in the quarter fell 12% to $1.57 billion.

Wall Street analysts expected Agco to earn 23 cents a share on sales of $1.56 billion, according to Thomson Reuters.

Agco trimmed its profit forecast for the year. It now sees earnings per share in a range of $2 to $2.50, down from a forecast of $3 to $3.25 previously. Agco expects sales for the year to be $6.7 billion to $7 billion. The company expects unfavorable currency exchange rates to lower sales this year by 11%.

Agco has turned its focus toward developing higher horsepower tractor models used in large-tract farming, particularly in the U.S.

"I think our focus on the professional farmer is the right strategy," Chairman and Chief Executive Martin Richenhagen said during a conference call. "Those products have higher margins and the farmers act more like investors."

Agco shares were recently down 2.6% at $23.61.

-By Bob Tita, Dow Jones Newswires; 312-750-4129