AGCO's annual harvests may be smaller than those of major rivals John Deere and CNH Global, but it reaps some healthy profits worldwide. AGCO makes tractors, combines, hay and forage tools, sprayers, and replacement parts for agricultural end uses. It sells through a global network of some 3,100 dealers and distributors spanning 140 countries. It also builds diesel engines, gears, and generators through its AGCO Sisu Power unit. Its four core machinery brands include Massey Ferguson, Challenger, Valtra (Finland-based), and Fendt (Germany). The company offers financing services to retail customers and dealers via a venture with Dutch company Rabobank.
AGCO has operations in Argentina, Austria, Brazil, Canada, Denmark, France, Germany, Ireland, Italy, the Netherlands, Sweden, the UK, and the US. It also has a presence in Australia and Asia. Europe accounted for around 53% of its total revenue in 2011; South America generated 21%, while the US accounted for 15%.
Sales and Marketing
AGCO distributes its products primarily through a network of independent dealers and distributors, who are responsible for retail sales to the equipment's end user in addition to after-sales service and support of the equipment. Distributors also sell its products through a network of dealers supported by the distributor. Sales are not dependent on any specific dealer, distributor, or group of dealers.
AGCO's extensive global reach has enabled it to enjoy impressive growth over the last few years. From 2010 to 2011, its total sales surged by 27%, peaking at around $8.8 billion, its highest revenue total in at least 10 years. The company's profits also reached historic levels in 2011, soaring by more than 150% to $583 million.
The sizable growth was due to sales increases in all geographical segments, company acquisitions, and a favorable impact of currency translation. Pricing, higher production volumes, and cost control initiatives helped to produce the higher gross margins.
The company is targeting China and Russia as areas for growth and continues to focus on developing technologically advanced equipment to solve the myriad challenges facing farmers, such as population growth, changing diets, and scarcity of land. AGCO has introduced a line of products that incorporate technologies in machine control and precision farming. Auto-Guide (Satellite) Navigation and FIELDSTAR offer hands-free steering navigation assistance. Its e3 SCR (selective catalytic reduction) engine injects an organic compound into the exhaust stream that increases the fuel efficiency of the engine while reducing emissions. AGCO Tractors offer high-power PowerMaxx CVT (continuously variable transmission), as well as diesel engines, which multiply the efficiency of harvesting and farming equipment.
Mergers and Acquisitions
Strategic acquisitions have supported AGCO's momentum. In 2012 it acquired a 60% share in Santal Equipamentos for $31 million. Headquartered in Ribeirão Preto, Brazil, Santal Equipamentos manufactures and distributes sugar cane planting, harvesting, and handling equipment across Brazil. In 2011 AGCO scooped up its remaining 50% stake in Laverda S.p.A., a JV that manufactures mid-range combine harvesters for sale in the Europe/Africa/Middle East region. Later that year, AGCO acquired GSI Holdings from Centerbridge Partners for roughly $928 million. GSI manufactures grain conditioning and drying, material handling, and bulk storage equipment. The company also makes poultry and swine feeding, confinement, and environmental control systems. – less