AGCO reported its results for the second quarter ended June 30, 2023 by saying it had record net sales of $3.8 billion, which was an increase of 29.8% year-over-year, and a record operating margin of 13%. The company raised is outlook regarding full-year sales, operating margin and earnings per share.
Excluding unfavorable foreign currency translation of approximately 0.8%, net sales for Q2 2023 increased approximately 30.6% versus the same period last year. Reported net income was $4.26 per share for the quarter compared to $2.37 per share in Q2 2022, and adjusted net income — which excludes restructuring expenses and an update to the estimated cost of participation in a Brazilian income tax amnesty program — was $4.29 per share versus $2.38 per share in Q2 2022.
Regionally, North American sales rose 34.7%, a percentage point behind the Europe/Middle East region, which had the highest sales growth for Q2 2023.
For the first half of 2023, net sales rose about 27.1% year-over-year to approximately $7.2 billion. When excluding an approximate 3.0% impact in unfavorable currency translation, net sales grew about 30.1% compared to the same period in 2022. Reported net income for the first half was $7.36 per share versus $4.40 in the first six months of 2022, and adjusted net income, which excludes restructuring expenses and an estimated cost of participation in a Brazilian income tax amnesty program, was $7.80 per share compared to $4.77 in the first half of 2022.
North American tractor sales in the first half of 2023, excluding compact tractors, dropped 2% year-over-year due to weaker sales in smaller tractors but partially offset by improved sales of high-horsepower tractors, which increased approximately 13% year-over-year in the first six months of 2023. North America industry retail tractor demand for 2023 is expected to be relatively flat compared to 2022.
Combine sales in North America grew 57% compared to the first six months of 2022, mostly as a result of improving supply chains.
North American net sales for the first half of 2023 saw growth of 33.8% year-over-year, excluding the negative impact of currency translation. This was primarily a result of increased sales of high-horsepower tractors, combines and application equipment coupled with the positive effects of pricing to mitigate inflationary cost pressures. Results in the first half of 2022 were negatively impacted by a cyberattack. Income from operations for the first half of 2023 was approximately $133.5 million higher, with operating margins expanding over 500 basis points compared to the same period in 2022. Operating income benefited from higher sales and production, positive net pricing and a favorable sales mix.
AGCO said it expects its net sales for 2023 to be approximately $14.7 billion, reflecting improved sales volumes and pricing. The company projects gross and operating margins to improve from 2022 levels, reflecting the impact of higher sales and production volumes as well as pricing and a favorable sales mix. These improvements are expected to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives. Based on these assumptions, AGCO is targeting 2023 reported earnings per share at approximately $14.82 and adjusted earnings per share at approximately $15.25.
