Andy Beck. Senior Vice President and CFO

Transcription

1 Andy Beck Senior Vice President and CFO 1

2 Agenda Operating margin progress AGCO Finance update Capital allocation 2014 Preliminary outlook 2

3 Executing Consistent Strategy Investing in technology / new products Reducing costs and optimizing working capital Improving ROIC Growing the GSI platform Improving distribution Expanding in developing markets 3

4 IMPROVING MARGINS Focusing on ROIC Improvement ROIC Roadmap developed to drive improvement Invested Capital Margin Margin expansion biggest opportunity Fixed Capital Working Capital Revenue Costs 4

5 IMPROVING MARGINS Roadmap to Achieve Margin Target Adjusted Operating Margin ~10% 6.9%* 7.2%* 8.0%+ 1 Material cost savings 2 Productivity 3 New products 4 Mix / Other 4.8%* 3.6%* E * Reflects adjusted results, which exclude restructuring and other infrequent items. See reconciliation to GAAP metrics in the appendix of this presentation. 5

6 I M P R O V I N G MARGINS Material Cost Improvement: Global Purchasing Excellence + Best Cost Country Sourcing Key Global Initiatives Focus Results The Global Purchasing Excellence (GPE) program Common components Common suppliers Best-cost country sourcing China Eastern Europe India Cumulative Material Savings ~$130M ~$240M 2013E 2014E 2015E 6

7 IMPROVING MARGINS Productivity Manufacturing Optimization Key Initiatives Utilizing six sigma and lean manufacturing Implementing lean office for: sales administration back office AGCO Production Systems Cumulative Savings ~$30M Results ~$50M 2013E 2014E 2015E $50M in annual savings by

8 IMPROVING MARGINS Cost Effective New Products Centurion Update New Global HP Series Replaces Many Diverse Current Products Current Products Converging to one Modular Tractor Family Centurion C1 Light 55-75HP C2/C3 Medium HP C3/C4 Heavy HP ~ $1 Billion in global sales Expected sales and margin improvement to produce $60-80M of annual income 8

9 Centurion Production Begins in 2014 A Key Step 1. Beauvais, France 2. Suolahti, Finland 4. Changzhou, China 8. Manisa, Turkey (TAFE) 5. Mogi das Cruzes, Brazil 3. Linnavuori, Finland 7. Chennai, India (TAFE) 6. Canoas, Brazil 9

10 Our Longer Term Module Strategy: The HHP Tractor and Combine Platform Standardized Components Advantages More effective use of R&D Fewer parts Reduced material costs Improved quality Better brand differentiation 10

11 The Global Platform and Module Opportunity To Simplify Today s Complexity Percent Reduction in Components Electronic controls Hydraulic components Front axels Climate controls Cab supports 90% 80% 70% 60% 50% Within AGCO, opportunity for significant complexity reduction has been identified on the level of individual sub-modules 11

12 Common Platform and Modular Strategy Leverage Common Parts while Maintaining Brand Differentiators From Independent vehicle designs To Significant share of common parts Commonality of Parts Less More 12

13 Agenda Operating margin progress AGCO Finance update Capital allocation 2014 preliminary outlook 13

14 Solid, Growing Finance Business Managed Portfolio ($B) ~$9.3B JV with Rabobank based in the Netherlands among the world s highest rated banks 49% owned by AGCO $3.6B Funded by Rabobank ~$9.3 billion portfolio Growing market share Robust financial performance E 14

15 AGCO Finance A Closer Look Y/E 2013E By Product By Region 15% Wholesale Floor-plan 31% N. America 43% Western Europe 85% Retail Financing 23% S. America 3% Australia/ New Zealand 15

16 Agenda Operating margin progress AGCO Finance update Capital allocation 2014 Preliminary outlook 16

17 Capital Deployment Priorities Capex Invest in facilities Invest in new products Capital Deployment Maintain Balance Sheet Maintain investment grade credit rating Bolt-on Acquisitions Opportunistic approach to add to product offerings or geographic reach Return Cash to Shareholders Share repurchase Dividends 17

18 Capital Expenditures Investing for Growth Continuing to Invest 2014 Capex Components $ M ~Flat New Products IT / Other Capex $129M Dep. & Amort E 14E Manufacturing 18

19 Capex Outlook 2014 Peak Capital Expenditures $ M ~Flat Capex expected to peak in 2014 China factory construction Tier 4 final Continued emphasis on new products E 2014E 2015E 2016E 19

20 2014 Capital Allocation Plan Repatriation Opportunity The Opportunity Total 2013E Y/E Cash Balance ~$900M Expecting to utilize all U.S. tax losses by the end of 2013 New U.S. tax position + tax planning creates tax efficient repatriation opportunity Repatriation of ~$800M from AGCO s foreign subsidiaries expected in December 2013 $500M Share Buy Back $200M of Convertible Debt Operational Needs Changing U.S. tax structure creates a repatriation opportunity 20

21 Returning Cash to Shareholders Cash to be Returned to Shareholders Dividend Initiated in 2013 Ambition to grow Share Repurchase New $500M share repurchase program 21

22 Agenda Operating margin progress AGCO Finance update Capital allocation 2014 Preliminary outlook 22

23 2014 Preliminary Market Outlook Regional Market Outlook Industry Unit Retail Tractor Sales (Volume in Units) N. America S. America Western Europe ~232K Down 0-5% ~145K Down 0-5% ~83K Down ~5% 2013E 2014E 2013E 2014E 2013E 2014E 23

24 2014 Preliminary Assumptions Summary Stable Sales softer end markets ~2% pricing impact of currency translation expected to be neutral 3% ($10M) increase in engineering expense for new product development, Centurion, platform and tier 4 emission requirements Gross margin improvement ~$10 million of start-up expense associated with China operations Effective tax rate 34-35% 24

25 2014 Preliminary Outlook 2014 Estimates Sales Gross margin $10.8B to $11.0B Up ~ 50 bps EPS ~$6.00 CAPEX Free Cash Flow* $400-$425M ~$250M+ * Free cash flow is defined as net cash from operations less capital expenditures. See reconciliation to GAAP metrics in the appendix of this presentation 25

26 Key Messages Today Committed to Improving Shareholder Returns Positioned for Growth in Attractive Markets Executing a Successful Strategy 26

27 Appendix 27

28 Non-GAAP To GAAP Reconciliation $M Years Ended December 31, E (1) Net Sales 6, , , ,962.3 (2) Adjusted Income from operations ~10, Restructuring and other infrequent (income) expenses (0.7) 0 Income from operations as reported Adjusted operating Margin 3.6% 4.8% 6.9% 7.2% ~8.0%+ (1) (2) See Company financial statements for notes 28

29 Non-GAAP To GAAP Reconciliation $M (except per share amts) 12 months ended Dec E Earnings Per Share (1) Earnings Per Share (1) As adjusted $1.24 ~$6.00 Restructuring and other infrequent expenses As reported $0.99 ~$6.00 (1) After tax. Rounding may impact summation of amounts. See accompanying notes in the Company s press release. 29

30 Non-GAAP To GAAP Reconciliation Free Cash Flow $M Projected Year Projected Year ended ended December 31, December 31, Net cash provided by operating activities $ $ 675+ Less: Capital expenditures ( ) ( ) Free cash flow $ 200 to 250 $ 250+ Note: Free cash flow is defined as net cash provided by operating activities less capital expenditures. 30

31 2013 Investor Meeting December 17,