AGCO is one of the world's leading agricultural machinery companies, with a number of internationally renowned agricultural machinery brands such as Challenger, Fendt, Massey Ferguson and Valmet, as well as manufacturing plants for tractors and other products in China. In 2023, the world's agricultural machinery sales market and product supply chain are still in the post-pandemic recovery period, but AGCO has been able to buck the trend and create impressive business performance.
In 2023, AGCO achieved record net sales, earnings per share and adjusted operating margin. Reported net sales were $14.4 billion, up about 14% from the previous year. Reported earnings per share were $15.63 and adjusted earnings per share were $15.55, an increase of approximately 31.7% and 25.2%, respectively, from 2022. Adjusted operating margin reached 12%, an increase of many basis points compared to 2022, and the original margin increased to a slightly higher margin of 10%, which was a milestone at the time. At the end of 2023, it reported an adjusted operating margin of more than 10.5% for the sixth consecutive quarter. This performance illustrates how AGCO is structurally transforming its business while approaching its medium-term operating margin target of 12%.
AGCO's continued strong performance is also rewarding shareholders. In 2023, the full-quarter dividend increased by 21% from the previous year to $0.29 and a special variable dividend was declared for the third consecutive year, reflecting a sound financial position.
Accelerating the acquisition of intelligent technology innovation enterprises, expanding the income of precision agriculture products and services, and expanding the operation of parts and components are all measures taken by AGCO to deal with the cooling-off period market, which have a enlightening effect on mainland agricultural machinery enterprises, and some aspects are worth thinking about.
Highlight the core brand business
AGCO sees these results as a response to the implementation of the "Farmer First" strategy, and has prioritized the expansion of the full range of global Fent brands, the expansion of its precision agriculture business, and the development of parts and services.
Of the three, the biggest contributor in 2023 is the globalization and full line of product launches of the Fendt premium brand. AGCO continues to increase its market share outside of Europe by gradually expanding its distributors. In North America, market coverage has increased from about 40 per cent to about 80 per cent over the past five years and is expected to increase to 95 per cent in the next few years; Expansion comes with growth. Notably, in 2023, the Fendt brand saw its sales in these markets grow by more than 90%, almost ahead of its five-year growth target of $1.5 billion.
The power of precision innovation
Technological innovation and the development of new products are the key foundations for business growth. Since 2020, AGCO has increased its investment in engineering and research and development (R&D) by 60%, with 65% focused on smart machines and clean energy. The introduction of new patents and new products is accelerating – the number of first patent applications is more than 90% higher than in the previous five years.
AGCO is also passionate about making a positive contribution to society and the environment, and recently announced a new carbon reduction goal to reduce Scope 1 and 2 emissions by 55% by 2033 and 90% by 2050.
In addition to reducing the company's own emissions, AGCO and its brands are committed to sustainably maximizing farmers' impact and value through products and technologies, including automation features that support smart agriculture, tractors that reduce soil compaction, and AGCO Power CORE engines that run on sustainable fuels. A climate transition plan is also being developed, which will detail how it intends to decarbonize AGCO's operations and value chain, manage climate-related risks, and execute strategies to mitigate those risks.
Optimize your portfolio
Another way AGCO is transforming its business is by optimizing its legacy brands. In the case of Massey Ferguson, in the past three years, it has increased its profitability by 90% in revenue through the launch of new products, the transformation of its dealer network, the improvement of product quality and the development of brand experience for farmers.
The most significant milestone in AGCO's technology development in 2023 is the agreement to acquire an 85% interest in Trimble's agricultural assets and technology portfolio. This is the largest agtech deal in the company's history and the largest ever in history. With the acquisition of the company, AGCO is expected to be able to offer a full range of autonomous solutions for every stage of the crop cycle, providing farmers with a more comprehensive range of technology offerings, including guidance, autonomy, precision spraying, connected farming, data management and sustainability.
Also in 2023, AGCO acquired digital assets through an agreement from Farm Facts GmbH, a leader in farm management information software, which provides farmers and service providers with software to generate field action plans from prescription drawings to guideline creation, a move that will further strengthen AGCO's capabilities in the precision agriculture segment.
Investing in startups, incubators, and higher education and research institutions is an important way to drive innovation. To that end, AGCO established AGCO Ventures to formalize its approach to sourcing and funding new and early-stage technologies, with a focus on agricultural technologies, environmental and alternative fuel sources, and information management and analytics to support farmers around the world.
Drive new growth in the global parts business
The third area of focus for profitable growth is the global component business. In North America and Europe, AGCO leads the industry in part fill rates (putting the right parts in the right place when farmers need them) and will expand into the market in South America as a next step.
AGCO is also helping dealers be more proactive in providing service and parts by expanding its digital capabilities and leveraging the growing number of connected machines, which currently total about 75,000. The company's digital tools can reflect problems before they arise in farm operations, and when the company shares this information with farmers, it can help farmers stay productive while working in the field. In addition, connecting dealers with digital tools that allow them to manage inventory and have the right parts available over the counter for farmers when they need them has led to an average growth of 9% in the parts business over the past four years, twice as fast as in the past four years.