AGCO, Your Agriculture Company, a worldwide manufacturer and distributor of agricultural equipment, reported net sales of approximately $2.6 billion for the fourth quarter of 2018, an increase of approximately 2.6% compared to net sales of approximately $2.5 billion for the fourth quarter of 2017. Reported net income was $1.26 per share and adjusted net income, which excludes restructuring expenses, costs associated with the early retirement of debt and a tax gain related to U.S. tax reform, was $1.31 per share for the fourth quarter of 2018. These results compare to reported net income of $0.55 per share and adjusted net income, which excludes restructuring expenses and a tax charge related to U.S. tax reform, of $1.10 per share for the fourth quarter of 2017. Excluding unfavorable currency translation impacts of approximately 4.7%, net sales in the fourth quarter of 2018 increased approximately 7.3% compared to the fourth quarter of 2017.

Net sales for the full year of 2018 were approximately $9.4 billion, an increase of approximately 12.6% compared to 2017. Excluding the favorable impact of currency translation of approximately 0.1%, net sales for the full year of 2018 increased approximately 12.5% compared to 2017. For the full year of 2018, reported net income was $3.58 per share and adjusted net income, which excludes restructuring expenses, costs associated with the early retirement of debt and a tax gain related to U. S. tax reform, was $3.89 per share. These results compare to reported net income of $2.32 per share and adjusted net income, which excludes restructuring expenses, a non-cash expense related to waived stock compensation and a tax charge related to U.S. tax reform, of $3.02 per share for the full year of 2017.

Highlights

• Reported fourth quarter regional sales results⁽¹⁾: Europe/Middle East (“EME”) +5.4%, North America -0.1%, South America -12.6%, Asia/Pacific/Africa (“APA”) +11.4%

• Constant currency fourth quarter regional sales results^(1)(2)(3): EME +9.5%, North America +0.8%, South America +0.9%, APA +16.4%

• Generated approximately $596 million in cash flow from operations and approximately $393 million in free cash flow⁽³⁾ in 2018

• Share repurchase program reduced outstanding shares by approximately 3.1 million during 2018

• Full-year earnings forecast for 2019 remains at approximately $4.60 per share

“AGCO delivered solid results in 2018 while making important investments to position us for future success,” stated Martin Richenhagen, AGCO’s Chairman, President and Chief Executive Officer. “Sales growth across all of our regions and solid operational execution allowed AGCO to meet its financial targets for 2018 and deliver improved results compared to 2017. We are growing our business by delivering the broadest product offering in the industry. We provide full-line smart farming solutions to our customers throughout the agricultural production cycle, starting with soil preparation and cutting-edge smart planting, through spraying and harvesting, and ending with grain storage and protein production equipment. AGCO will continue to invest in new products, new technology, improved distribution and enhanced digital capabilities in order to improve our margins and produce higher returns on our invested capital. Looking forward to 2019, we are forecasting further earnings improvement as industry conditions trend positively and we benefit from our cost reduction strategies targeted at purchasing actions and factory productivity, as well as new product development.”

Market Update

“Another year of strong global crop production kept commodity prices at relatively low levels and pressured farm income,” continued Mr. Richenhagen. “Global industry sales of farm equipment in 2018 were mixed across AGCO’s key markets, with future demand dependent on factors such as commodity price development as well as government trade and farm support policy. The USDA is projecting 2019 farm income to be down modestly in the United States compared to 2018. While low horsepower equipment sales may begin to be under pressure from their historically high levels, high horsepower equipment sales are expected to continue their gradual recovery. Industry equipment demand decreased modestly across Western Europe in 2018. Farm income was negatively impacted by reduced crop production across parts of Western Europe and lower milk prices in the first half of the year. Lower demand across most of the European markets was partially offset by growth in the United Kingdom. Farm economics are expected to improve modestly across Western Europe in 2019, driven primarily by favorable wheat prices and more normal crop production. Based on these assumptions, we expect sentiment to remain positive and 2019 demand to be stable across the European markets. Industry equipment demand in Brazil improved in the second half of 2018 after more positive terms for the government financing program were announced. Market growth in Brazil was offset by weaker demand in Argentina in response to a weak first harvest and poor general economic conditions. Industry demand in 2019 in South America is expected to be improved compared to 2018. Higher retail sales in Brazil are expected to be partially offset by lower sales in Argentina. Our long-term global view remains positive. Increasing demand for commodities, driven by the growing world population, rising emerging market protein consumption and biofuel use, are all expected to support elevated farm income and healthy conditions in our industry.”

Regional Results

North America

Net sales in the North American region improved approximately 16.2% in the full year of 2018 compared to 2017, with no significant impact from currency translation. Acquisitions benefited sales by approximately 5.7% in 2018. Sales growth was strongest for sprayers, hay tools and grain storage equipment. Income from operations increased approximately $36.2 million for the full year of 2018 compared to 2017 due to the benefit of higher sales and margin improvement.

South America

South American net sales increased approximately 4.5%, excluding unfavorable currency translation impacts, in the full year of 2018 compared to 2017. The improvement was primarily driven by higher sales in Brazil partially offset by weaker demand in Argentina. Income from operations in the fourth quarter of 2018 increased $9.7 million compared to the same period in 2017, although the impacts of material cost inflation and costs associated with transitioning to new products with tier 3 emission technology contributed to a decrease in income from operations of approximately $25.5 million for the full year of 2018 compared to 2017.

Europe/Middle East

AGCO’s EME net sales increased approximately 13.3% in the full year of 2018 compared to 2017, excluding favorable currency translation. Acquisitions benefited sales by approximately 2.3% during 2018 compared to the full year of 2017. Sales growth was achieved in the key markets of the Germany, France and the United Kingdom. Income from operations increased approximately $107.8 million for the full year of 2018 compared to 2017 due to the benefit of higher sales and margin improvement.

Asia/Pacific/Africa

Net sales in AGCO’s Asia/Pacific/Africa region, excluding the negative impact of currency translation, increased approximately 10.2% in the full year of 2018 compared to the same period in 2017. Sales growth was driven primarily by Australia and China. Acquisitions benefited sales by approximately 1.7% during the full year of 2018 compared to 2017. Income from operations improved approximately $0.8 million in 2018 compared to the full year of 2017 due to the impact of higher sales.

Outlook

Global industry demand is projected to improve modestly in 2019. AGCO’s net sales for 2019 are expected to reach approximately $9.6 billion reflecting improved sales volumes and positive pricing, offset by unfavorable foreign currency translation impacts. Gross and operating margins are expected to improve from 2018 levels, reflecting the positive impact of pricing and cost reduction efforts. Based on these assumptions, 2019 earnings per share is targeted to be approximately $4.60.