Manufacturers report double-digit declines in second quarter

Second quarter earnings reports are being released, and the numbers tell the tale of farm equipment manufacturers and dealers struggling to maintain sales of new iron.

AGCO — the parent company of Fendt, Massey Ferguson, Gleaner, and Challenger — and Caterpillar both reported net sales down compared to the same time last year.

AGCO says net sales for the second quarter were approximately $2 billion, a decrease of approximately 17.2 per cent compared to the second quarter of 2019.

Martin Richenhagen, AGCO’s president and chief executive officer, says second quarter production in Europe and South America was impacted by COVID-19-related supply disruptions.

“Our second quarter results demonstrated strong execution as we overcame COVID-19 related production disruptions in Europe and South America in order to deliver a solidly profitable quarter. Margin improvement in our North American, South American and Asia/Pacific/Africa regions highlighted our results,” he explains. “While all our factories are now open with strong order boards heading into second half of 2020, we still face a demanding environment to manage our manufacturing, supply chain and aftermarket operations. In addition, end-market demand has been negatively impacted by the pandemic, but is proving to be resilient as farmers look to replace their aged fleet.”

Caterpillar reported a 31 per cent decrease compared to the $14.4 billion that was reported a year earlier.

The company says a persistent decline in demand for its equipment as a result of the COVID-19 pandemic caused dealers to cut machinery and engine inventories by about $1.4 billion in the three months ended June 30, versus an increase of about $500 million a year earlier.

Meanwhile, the largest Case IH dealer in Canada — Rocky Mountain Equipment — reported a 12 per cent drop in new equipment sales in the second quarter, but overall sales rose nearly 10 per cent thanks to a massive 43 per cent jump in used equipment sales.

“Through a concerted effort to focus on used equipment sales we have achieved a methodical and orderly reduction of equipment inventory. This is highlighted in the year-over-year equipment inventory reduction of $114.8 million,” noted RME.

RME reported a nearly $2.3 million increase in earnings (EBITDA), from around $6 million last year to $8.2 million in the second quarter of 2020. In addition, RME said it received about $4.6 million through the Canadian Emergency Wage Subsidy program in March and April.

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