Farm equipment maker AGCO Corp. will keep investing in developing countries while bracing for a slow 2014 that its leaders believe will bring lower commodity prices and slight demand declines in the developed world.
The Duluth-based company makes and sells most of its products overseas, with North Americaas a whole accounting for only about a quarter of the $10.8 billion in total sales generated in 2013.
That represented an increase of 8.3 percent from the previous year after accounting for money lost translating earnings into U.S. dollars. Global profits stood at $597.2 million, up 14.3 percent from 2012.
Europe, Middle East and Africa – mainly Europe – is AGCO’s top region, accounting for more than half of its sales, but its tractors, combines and grain-storage equipment are finding more and more willing buyers across the developing world.
Sales in Asia, led by China and Australia, grew 13.3 percent to $507.9 million in 2013.
South American sales were even more brisk, up 21.8 percent within the region. Negative currency impacts brought the rate down to 9.9 percent and the total to about $2 billion. Brazil andArgentina were the hot markets, presumably as large farms invested in giant harvesting machines. Combine unit sales in South America were up 35 percent compared to 2012, the company reported.
AGCO has repeatedly referenced Africa as a promising growth region for global agriculture companies, given its vast swaths of arable land and low current levels of mechanization. AGCO has a tractor factory in Algeria, a parts warehouse in South Africa and a model farm project inZambia.
Though slight declines tempered strong European sales overall, AGCO sees former Soviet countries in Eastern Europe and Central Asia as fertile ground for future growth. AGCO applaudedRussia’s move to join the World Trade Organization in 2012 and launched a joint venture with a Russian firm in 2013.
“We expect to continue investing in new products and technology, as well as devoting significant resources to enhance our presence in the (Commonwealth of Independent States) region, China and Africa,” Martin Richenhagen, chairman, CEO and president said in a statement. “Our plans in 2014 also include investing in our production facilities to improve efficiency as well as in higher technology products that will make farmers more productive and more profitable.”
European operations benefited from improved efficiency, which led to greater output at the company’s Fendt plant in Germany and lower costs.
With global market expected to be down for the year, AGCO expects to earn moderate profits in 2014 by offering competitive pricing and wresting market share from competitors.
See the full earnings release here.