Agriculture Company Earnings Summary 2Q 2021

Key Takeaways

• Most companies cite very strong demand trends and a positive outlook over the remainder of 2021 and into 2022.
• Increased raw commodity costs (steel, copper, etc) will result in higher manufacturing costs and higher equipment prices.
• Supply chains are constrained for certain components. This may lead to shortages and/or reduced production for certain products. Semiconductors remain an issue.

North American farm equipment demand is very strong, driven by higher commodity prices. Some order books for larger equipment now extend into 2022.

Manufacturers are faced with rising input costs due to higher prices of steel, copper and other commodities. This may lead to higher machinery costs in coming quarters as these costs flow through to buyers.

Company Outlooks

Toro

"Robust sales continued throughout the quarter in both our professional and residential segments," said Richard M. Olson, Chairman and CEO of Toro. "As we capitalized on the current demand environment and focused on serving our customers, our dedicated team and channel partners demonstrated extraordinary resolve in navigating global supply chain challenges.

"We delivered double-digit net sales growth for the second quarter in a row for the professional segment, with continued strength in landscape contractor and golf markets worldwide, increased pre-season shipments of BOSS snow and ice management products, and higher demand for rental and specialty construction equipment and Ventrac products. Residential segment net sales were also up double-digits on top of a very strong third quarter last year, driven by increased retail demand for zero-turn and walk power mowers. Customers are excited about our new and enhanced products across both segments, including our expanding line of battery-powered offerings. Our continued investment in key technology areas underscores our commitment to provide a broad range of innovative and sustainable solutions."

"As we enter the final quarter of our fiscal year, we anticipate continued strong demand for our innovative product offerings, and are encouraged by the benefits we are realizing from our productivity and synergy initiatives," added Olson. "We continue to align our actions with market dynamics and are prudently managing expenses for what is likely to be a challenging supply chain, inflation and labor environment into next year.

"We saw a continued strength in landscape contractor and golf markets worldwide. Higher pre-season shipments of both snow and ice management products, and strong demand for our rental and specialty construction equipment, and then track products.

Titan Machinery

"Equipment demand momentum continued through our second fiscal quarter with our equipment revenues increasing 35% versus prior year. The current environment is supported by our healthy inventory position and robust demand, along with continued strength in our parts and service business," said David Meyer, Titan Machinery’s Chairman and Chief Executive Officer.

"From a segment perspective, our Agriculture business was well-positioned and produced exceptional growth as high commodity prices are offsetting drought conditions in areas of our footprint."

"The business climate for farm equipment is extremely healthy, primarily due to the continued high prices for Ag commodities. As a result, the strong financial performance we delivered in Q1 continued into our second quarter," said Bryan Knutson, Chief Operating Officer.

"While we are managing through the supply side challenges and yield reducing drought conditions in some of our markets, demand for new and used equipment is very strong. The existing Ag equipment fleets are not only requiring parts and service repairs are being upgraded to models with newer technology. Meanwhile, Section 179 tax deductions are further supporting demand as customers look to offset higher net farm incomes."

"We currently have customer commitments for the majority of our new machinery orders being shipped in Q3 and Q4 of FY 2022, and we're also finishing pre-sell customer orders for production slots into the first half of FY 2023. There is currently a very strong demand for used equipment, which is reflected in our improved inventory turns and margins. Finally, the most recent USDA WASDE report was bullish for commodity prices and provides us incremental confidence in raising our full year fiscal 2022 modeling assumptions."

John Deere

"Our strong results, driven by essentially all product categories, are a testament to the exceptional efforts of our employees and dealers to keep our factories running and customers served while enduring significant supply-chain pressures," said John C. May, chairman and CEO.

"Looking ahead, we expect demand for farm and construction equipment to continue benefiting from favorable fundamentals," May said.

"In the U.S. and Canada, we expect industry sales of large Ag (high horsepower tractors and combines) equipment to be up about 25% for the year, reflecting improved fundamentals in the Ag sector. At this point, we anticipate producing in line with retail demand for the year, keeping inventory levels relatively tight heading into Fiscal year '22," said Brent Norwood, Manager of Investor Communications.

"As it relates to small Ag & Turf (utility tractors, lawn and garden), we expect industry sales in the U.S. and Canada to be up about 10%. While our shipments schedules imply production roughly in line with retail demand, our net sales for small Ag & Turf products are up higher than the year-over-year change in retail sales as activity recovers from significant underproduction in 2020."

"Moving on to Europe. And the industry forecast is -- the industry is forecast to be up about or between 10% to 15% as higher commodity prices strengthen business conditions in the arable segment, and dairy prices remain resilient, even as margins show some pressure from rising input costs."

"At this time, we have opened our Manheim tractor order book through the second quarter up 2022, filling all production slots through that time period. In South America, we expect industry sales of tractors and combines to increase about 20%."

"The combination of higher commodity prices, strong production, and a favorable currency environment, have boosted the profitability of farmers, driving orders through the remainder of the year and into the first quarter of fiscal year 2022, which is as far as we've allowed the order book to grow."

Cervus Equipment

Cervus is a leading equipment solutions provider to customers in agriculture, transportation, and industrial markets across Canada, Australia and New Zealand. Throughout our territories and across our diverse markets, Cervus dealerships are united by the sales and support of the market-leading equipment our customers depend on to grow their business. The Company operates 64 Cervus dealerships and is the authorized representative of leading Original Equipment Manufacturers (“OEMs”) including: John Deere agricultural equipment; Peterbilt transportation equipment; and Clark, Sellick, Doosan, JLG and Baumann material handling equipment.

"(In Canada) increases in U.S. and Canadian equipment orders, compounded by supply chain disruptions, have resulted in delayed deliveries and extended lead times for equipment."

"In Australia, global demand remains strong for agriculture commodities with favorable weather conditions continuing to support crop prospects and pasture production for the next growing season. Equipment availability (in New Zealand and Australia) has been able to keep pace with customer demand in both regions, but impending constraints still linger through the supply chain."

View Cervus Equipment Dealers

Linamar (MacDon)

"MacDon markets are up as is market share in all core products, driving a strong sales performance there as well. In both cases, performance was constrained by supply chain issues and impacted as well by FX headwinds, but demand is clearly back," said Linamar CEO Linda Hasenfratz.

"In the agricultural business, we are seeing a very optimistic outlook in North America, in particular, for double-digit growth this year after a soft 2020. Q2 combine retails in North America were 10% up from prior year, with the strong showing in Canada, which was up 22% and the U.S. up 7%."

"Market demand is strong, helping to drive an excellent recovery for us at Linamar. Market pressures from supply chain shortages are creating challenges but we are managing them and at the same time growing market share and generating cash. We are confident in a sustained period of excellent market demand once the supply chain issues are resolved."

Kubota

Farm & Industrial Machinery (farm equipment, agricultural-related products, engines, and construction machinery) revenue increased by 31% year-over-year.

North America sales of tractors and construction machinery increased significantly mainly due to strong demand along with trend in move to suburbs despite delay in production and shipment caused by port congestion and labor shortages.

Europe sales of construction machinery, tractors, and engines increased due to a recovery from sluggish sales along with the infection spread of COVID-19 in the prior year.

Japan sales increased by 10.9% from the same period in the prior year due to a recovery from adverse reaction from rushed demand before a tax increase.

CNH Industrial (Case IH and New Holland)

"Despite ongoing supply chain challenges and inflationary pressures, the continued strength of our end markets in conjunction with aggressive pricing activity, margin expansion initiatives, and solid teamwork propelled us to record second quarter earnings. Our industry is clearly in a cyclical upturn and the sound fundamental performance of our businesses and operations is enabling us to capture much of the benefit. This robust environment contributed to growth across AG, CE, and C&SV order books, which also reflected the excellent Q2 performance of each of these businesses," noted Scott Wine, CEO CNH Industrial.

North America tractor demand was up 3% for tractors under 140 HP, and up 49% for tractors over 140 HP; combines were up 10%. In Europe, tractor and combine demand were up 31% and 13%, respectively. South America tractor and combine demand were up 38%. In Rest of World tractor and combine demand increased 38% and 12%, respectively.

"We do anticipate more cost pressure (in the second half) than the first half," said Wine. "The AG machinery industry remains strong, extending the themes we saw last quarter, including rising commodity prices, growing trade with China and the replacement of aging agricultural machinery fleets."

"High horsepower tractor sales were impressive across all regions up almost 50% in North America and nearly 25% worldwide. While in combines, the demand continues to improve with all markets growing over 10% versus 2020. Compared to 2019, both tractor and combine industry volumes were up across all regions except in combines in Europe, which were relatively flat."

"We are confident that the Agriculture segment will continue to outperform through 2021 giving – given our existing order backlog, which now extends well into 2022."

AGCO

"Our second quarter results were highlighted by strong margin performance across all regions resulting in the achievement of record earnings per share,” stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. "Focused execution and proactive pricing actions by the AGCO team mitigated the impact of the difficult supply chain environment, which was compounded by escalating material cost inflation."

"Our second quarter sales and production were up significantly from the second quarter of last year when extended COVID-related shutdowns in both Europe and South America interrupted our operations. Favorable farm economics are supporting increases in replacement demand and market response to our technology-focused products remains extremely positive. In particular, strong growth in Fendt high-horsepower tractors, Precision Planting products and our global parts business contributed to the margin expansion. With order boards significantly ahead of last year, we have further increased our net sales and earnings forecast for 2021."

"Elevated prices of agricultural commodities are supporting healthy farm economics. These conditions are expected to generate growth in industry demand across all major markets in 2021."

"North American industry retail sales of low horsepower tractors improved compared to last year, while demand for high horsepower tractors showed considerable strength. An extended fleet age and favorable commodity prices contributed to industry retail sales growth of North American large agricultural equipment of approximately 24% in the first six months of 2021."

Polaris

North American retail sales decreased 28% for the quarter compared to uncharacteristically strong retail sales last year, driven largely by low product availability due to supply chain constraints limiting production. On a two-year basis, retail sales were up 14% over second quarter 2019 pre-COVID levels

"‘Think Outside’ is resonating with new and current customers alike with continued strong demand and second quarter results that beat last year’s COVID-impacted quarter as anticipated. Even more notable, we delivered double digit sales and earnings increases compared to our pre-COVID results from the second quarter and first half of 2019. All of our segments performed extremely well, posting strong increases in both sales and profitability in the face of a challenging supply chain and increasing input cost environment. While supply chain-related headwinds and higher input costs will continue into the second half of the year, the Polaris team’s operational dexterity and nimble approach has been nothing short of spectacular. I remain confident in our ability to meet the product demands of our dealers and consumers and deliver value for our shareholders," said Mike Speetzen, Chief Executive Officer of Polaris Inc.

"As a result of this and continued strong consumer demand, our dealer inventories are at the lowest levels in decades"

"The powersports industry has experienced significant demand, and that trend continued into the second quarter... market share gains continued in the second quarter with gains in both ATVs and side-by-sides"

Valmont (Valley irrigation)

"Sales growth was led by significantly higher sales in the Irrigation segment, as strong global agricultural market fundamentals continue to drive positive farmer sentiment," said Stephen G. Kaniewski, President and Chief Executive Officer.

North American irrigation sales of $156.1 million increased 58% compared to 2020. Sales growth was led by higher volumes and higher average selling prices due to continued strength in agricultural markets.

Lindsay (Zimmatic irrigation)

"Healthy agricultural market fundamentals and positive grower sentiment continue to drive increased global demand for irrigation equipment," said Randy Wood, President and Chief Executive Officer. "At the same time, raw material inflation and other supply chain issues continue to create challenges and margin headwinds. Our teams have responded well and effectively managed through these dynamic market conditions in order to support our customers."

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