AGCO CORP /DE

AGCO Corporation is a global leader in agricultural machinery and precision agriculture technologies, driven by a Farmer-First strategy that delivers value through its differentiated leading brands, Fendt, Massey Ferguson, PTx and Valtra. The company distributes most of its products through approximately 2,800 independent dealers and distributors in approximately 140 countries. The agricultural equipment industry is highly cyclical, influenced by farm income, farm land values and debt levels, financing costs, acreage planted, crop yields, weather conditions, demand for agricultural commodities, commodity and protein prices, agricultural product demand, general economic conditions, and government policies, tariffs and subsidies. Global industry demand for farm equipment, driven by farm income, declined in 2025 in most major markets compared to 2024.

The agricultural industry is highly competitive, with two principal competitors on a worldwide basis being Deere & Company and CNH Industrial N.V. The company also faces regional competitors around the world that have significant market share in a single country or group of countries, and the industry is attracting technology-focused companies and start-up ventures as technology increasingly impacts all aspects of the crop cycle. Key factors influencing a buyer's choice of farm equipment include the strength and quality of a company's dealers, the quality and pricing of products, dealer or brand loyalty, product availability, terms of financing and customer service.

AGCO generates revenue primarily through the manufacture and distribution of agricultural equipment and replacement parts, with sales recorded at the point in time when title and control have been transferred to an independent dealer, distributor or other customer. The company also provides retail and wholesale financing through its finance joint ventures with Rabobank. A relatively insignificant amount of revenue is recognized on an over-time basis from extended warranty and maintenance contracts, certain precision technology services and subscriptions, and certain installation revenue associated with the sale of grain storage and production systems.

The company's product portfolio is organized around tractors, which comprised 66% of net sales in 2025, 61% in 2024, and 61% in 2023. Combines represented 2% of net sales in 2025, 3% in 2024, and 4% in 2023. Hay tools and forage equipment, planters, implements, precision agriculture solutions and other equipment accounted for 11% of net sales in 2025, 10% in 2024, and 12% in 2023. Application equipment represented 2% of net sales in 2025, 3% in 2024, and 3% in 2023. Replacement parts comprised 19% of net sales in 2025, 16% in 2024, and 13% in 2023. Grain storage and protein production systems represented 0% of net sales in 2025, 7% in 2024, and 7% in 2023, reflecting the divestiture of the majority of that business. The PTx brand represents the precision ag portfolio, combining Precision Planting and the PTx Trimble joint venture to deliver mixed-fleet precision agriculture solutions. In 2025, the company launched FarmENGAGE, a new mixed fleet digital platform, and unveiled additional Outrun autonomous solutions for tillage and fertilization.

In 2024, the company fundamentally shifted its portfolio through the PTx Trimble joint venture and the divestiture of the majority of its Grain & Protein business. On April 1, 2024, AGCO completed the acquisition of Trimble's OneAg business through the formation of the PTx Trimble joint venture, in which AGCO owns an 85% interest and Trimble owns a 15% interest, for total purchase consideration of $1,910.0 million ¹. On November 1, 2024, the company completed the sale of the majority of its G&P business for a purchase price of $700.0 million ², receiving net proceeds of $630.7 million ³ and recognizing a loss on sale of business of $507.3 million ⁴. In 2025, the company continued the restructuring program announced in 2024 in response to increased weakening demand in the agriculture industry, focused on reducing structural costs, streamlining the workforce, and enhancing global efficiencies. On July 9, 2025, the Board of Directors authorized a new share repurchase program authorizing the company to repurchase up to $1.0 billion ⁵ of common stock. In November 2025, the company entered into accelerated share repurchase agreements with two financial institutions to repurchase an aggregate of $250.0 million ⁶ of shares, receiving approximately 1,997,204 shares ⁷ initially. In February 2026, the company received an additional 333,755 shares ⁸ upon final settlement of those ASR agreements.

Net sales for 2025 were $10,082.0 million ⁹, 13.5% lower than 2024, primarily due to lower sales volumes from softer industry sales and the divestiture of the majority of the G&P business, partially offset by favorable currency impacts. Net income attributable to AGCO Corporation for 2025 was $726.5 million ¹⁰, or $9.75 per diluted share ¹¹, compared to $(424.8) million ¹², or $(5.69) per diluted share ¹³ for 2024. Income from operations was $595.7 million ¹⁴ in 2025 compared to $(122.1) million ¹⁵ in 2024, with the improvement driven by decreases in restructuring and business optimization expenses and SG&A expenses, partially offset by lower sales and production volumes.

Global industry demand for farm equipment, driven by farm income, is expected to be relatively flat during 2026 in most major markets compared to 2025. Net sales are expected to modestly increase in 2026 compared to 2025, resulting from positive pricing, favorable currency translation and sales mix. Operating margins will reflect the impact of higher net sales, positive pricing, relatively flat production volumes and continued cost controls, partially offset by tariff headwinds.

The company's growth strategy is centered on its Farmer-First strategy and precision agriculture technologies. The PTx brand represents the precision ag portfolio, combining Precision Planting and the PTx Trimble joint venture to deliver a global-leading mixed-fleet precision agriculture platform. In 2025, the company launched FarmENGAGE, a new mixed fleet digital platform designed to deploy work plans, track fieldwork and collect test data from all machines on the farm regardless of brand. The company also unveiled additional Outrun autonomous solutions for tillage and fertilization, with the tillage application currently in beta testing and the fertilization application in alpha testing, building on the Outrun autonomous grain cart solution which is currently in production. These offerings provide autonomous capabilities for Fendt and certain competitive machines across three of the five major stages of the crop cycle.

The company is focused on operational efficiencies to build a more resilient business. In 2025, the company continued the restructuring program announced in 2024 in response to increased weakening demand in the agriculture industry, focused on further reducing structural costs, streamlining the company's workforce and enhancing global efficiencies related to changing the company's operating model for certain corporate and back-office functions and better leveraging technology and global centers of excellence. Additionally, the company is reimagining its business operations globally with efficiency initiatives and structural changes of processes including offshore, automate, and outsource. The company estimated that it would incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million ¹⁶ in connection with the initial phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs, with a substantial portion incurred by the end of fiscal year 2025.

The company's manufacturing and assembly operations are intended to optimize capacity, technology and local costs, balancing manufacturing resources with externally-sourced machinery, components and/or replacement parts. The company's AGCO Power division produces diesel engines, gears and generating sets, specializing in off-road engines in the 75 to 500 horsepower range. The company purchases some fully manufactured tractors from Tractors and Farm Equipment Limited, SDF S.p.A., Carraro S.p.A. and Iseki & Company, Limited. On April 26, 2024, the company gave notice to TAFE that it was terminating all of its commercial relationships with TAFE.

Capital expenditures for 2025 were approximately $247.9 million ¹⁷ compared to $393.3 million ¹⁸ for 2024. On July 9, 2025, the Board of Directors authorized a new share repurchase program authorizing the company to repurchase up to $1.0 billion ¹⁹ of common stock, which has no expiration date. As of December 31, 2025, the remaining amount authorized to be repurchased was approximately $785.0 million ²⁰, which has no expiration date. During 2025, the company declared and paid cash dividends of $1.16 ²¹ per common share. On January 15, 2026, the Board of Directors declared a regular quarterly dividend of $0.29 ²² per common share to be paid on March 16, 2026.

The company's outlook is based on current assumptions regarding a number of factors including demand, currency stability, pricing and market share gains. The recent announcements of significant trade policy and tariff actions by the U.S. government continue to create significant uncertainty and potential risks for the business. Increases in tariffs have raised the costs of inputs used in manufacturing products, impacting cost of goods sold, and higher tariffs may lead to increased after-tariff sales prices. The impacts of the tariffs may be partially mitigated as a majority of sales and manufacturing takes place outside the United States, but there can be no guarantee that the company will be able to fully offset the impact of these tariffs. The imposition of retaliatory tariffs from other countries on exported products could negatively affect sales and marketplace access in those countries.

The company's success depends entirely on the vitality of the agricultural industry, which is cyclical and affected by numerous factors including farm income, commodity prices, weather conditions, and government policies. The AGCO Finance joint ventures, which are controlled by Rabobank and dependent upon Rabobank for financing, finance approximately 50% of the retail sales of the company's tractors and combines in the markets where the joint ventures operate, creating significant concentration risk. The company has substantial goodwill of approximately $1,898.8 million ²³ as of December 31, 2025, and the annual impairment test indicated the fair value in excess of the carrying value of the PTx North America reporting unit was approximately 16% ²⁴, making it susceptible to impairment if assumptions change. The company is exposed to foreign currency risk, with the most significant transactional exposures being the Euro, Brazilian real and Canadian dollar in relation to the U.S. dollar, and the Euro in relation to the British pound. The company has operations in highly inflationary economies including Turkey and Argentina, where the monetary assets of the Argentina operations denominated in pesos were approximately 85.0 billion pesos (or approximately $58.7 million) ²⁵ as of December 31, 2025, and the company recorded losses of approximately $80.4 million ²⁶ related to the devaluation of the Argentine peso in December 2023. The company has a substantial amount of indebtedness, with a debt to capitalization ratio of 35.8% ²⁷ at December 31, 2025, and is subject to restrictive covenants that require maintenance of certain total debt to EBITDA and interest coverage ratios.

Management's message emphasizes the company's position as a global leader in agricultural machinery and precision agriculture technologies, driven by a Farmer-First strategy that delivers value through differentiated leading brands. The forward-looking outlook states that global industry demand for farm equipment is expected to be relatively flat during 2026 in most major markets compared to 2025, with net sales expected to modestly increase in 2026 compared to 2025 resulting from positive pricing, favorable currency translation and sales mix, and operating margins reflecting the impact of higher net sales, positive pricing, relatively flat production volumes and continued cost controls, partially offset by tariff headwinds. The strategic priorities emphasized for the period ahead include continuing the restructuring program focused on reducing structural costs and streamlining the workforce, advancing precision agriculture technologies through the PTx platform and autonomous solutions, and maintaining a focus on operational efficiencies to build a more resilient business.