Dear fellow shareholders, employees, customers, and partners,
Pressure on the world’s farmers has never been greater. Our population continues to grow towards ten billion people by 2050; demand for animal protein is rising which requires more feed production; biofuel demand is also increasing; and the acreage available for farming is decreasing. This pressure is compounded by the higher cost of inputs and societal demand for more sustainable farming practices and outcomes.
Technological innovation and adoption are the solution to alleviating the enormous pressure farmers face. AGCO and its brands are laser focused on delivering innovative solutions that alleviate farmer pain points while simultaneously contributing to a more sustainable future.
2022 Performance
As farmer demand for AGCO technology remained high across the crop cycle, our focus throughout 2022 was maximizing production to support our farmers. Helping farmers sustainably feed our world is core to our purpose. The urgency of that purpose was underscored by the war in Ukraine and its resulting impact on the global food supply.
Helping farmers sustainably feed our world is core to our purpose.
Although our production was temporarily affected by a ransomware cyber attack in May, our team worked around the clock to restore operations and minimize disruptions. Thanks to our team’s efforts, commitment, and resiliency, we delivered record volumes to farmers in 2022.
Helping farmers sustainably feed our world is core to our purpose.
AGCO achieved record results in 2022 supported by demand for our new technology to replace aging fleets, favorable farm economics and constrained industry production. During 2022, AGCO reported net sales of approximately $12.7 billion, an increase of approximately 13.6% compared to 2021. Adjusted operating margins expanded over 120 basis points to 10.3%, due to robust demand and favorable pricing that helped to offset significant inflationary pressures. Reported net income per share was $11.87 and adjusted net income per share was $12.42, an increase of approximately 0.2% and 19.7%, respectively, from 2021. Free cash flow was approximately $450 million, as compared to $390 million in 2021. Given these strong results, we increased our quarterly dividend 20% to $0.24 per share per quarter, and we paid our second special variable dividend of $4.50 per share. These results are further evidence that our farmer-first strategy and accelerated investment in precision ag technology are providing meaningful results for farmers and shareholders.
Executing our Farmer-First Strategy
Our strategy is simple: deliver exceptional customer experiences that align with brand promises; empower farmers to interact with our brands at every stage of the customer journey online, at a dealer, or both; and deliver high quality, smart solutions that produce sustainable agronomic and economic value to farmers.
Seeking and responding to farmers’ feedback is the foundation of creating exceptional customer experiences that meet and exceed their expectations. One tool we have implemented across our global brands is Net Promoter Score (NPS). NPS measures whether a customer would recommend AGCO to others and includes additional questions to understand the factors that impact their answers. We are actively leveraging this farmer feedback to make improvements across our business which resulted in a 2022 NPS that improved over 10% versus 2021 and was well beyond our target.
Our dealers are essential partners in delivering the customer
experiences our farmers require. We have raised performance
expectations across our global network and have implemented a global
standard scorecard to increase accountability. Recognizing that
farmers want to perform an increasing number of activities online, we
have continued to deploy digital tools across parts, service and
financing while digitizing the customer experience. Together, these
activities are changing the game—enabling us to serve farmers wherever
and however they prefer.
Farmers play an essential role in addressing ongoing food security and
the effects of climate change. Technological innovation and adoption
are key to meeting current and future farming challenges, and AGCO’s
vision is to be farmers’ most trusted partner for industry-leading
smart farming solutions.
We are continuing to innovate and grow our business in those areas that deliver significant value to farmers and margin-rich growth to our shareholders:
- Expanding Fendt in North and South America brings a world-class, full line product portfolio to the world’s most demanding farmers. Fendt innovation was recognized across the crop cycle, including tractors, planters, sprayers, and hay equipment. Leveraging the new AGCO Power CORE engine, the new Fendt 700 Vario Gen 7 was named Tractor of the Year at EIMA, one of the major agricultural trade shows in the EME region.
- Global parts and services innovation increases parts availability and enables proactive service while delivering high margins and reducing cyclicality. AGCO is an industry leader in parts fill rate, which helps keep farmers in the field farming.
- Precision agriculture innovation delivers meaningful economic and agronomic value to farmers, enabling a more sustainable future by increasing yield while minimizing inputs and impact. Turbocharged by our 2021 acquisitions, our precision agriculture business continues to be one of our key innovation engines, delivering retrofit solutions across the crop cycle that make machines from any brand and almost any vintage smarter today, while enabling new capabilities in our brand portfolio. Expanding their farmer-first mindset beyond retrofit, Precision Planting announced Radicle Agronomics™. Radicle Agronomics™ brings a new generation of tools to professional agronomists that enables accelerated, automated soil sampling on the farm. This game-changing innovation enables better nutrient management, environmental stewardship, and farmer profitability. In 2022, our precision agriculture sales grew to approximately $700 million, which was a 29% increase over the prior year. We are well on track to achieve our recently increased goal of $1 billion in revenue by 2025.
Ongoing Commitment to Governance
We welcomed one new director to our Board of Directors in 2022 further progressing our Board refreshment program. David Sagehorn, retired Chief Financial Officer at Oshkosh Corporation, brings extensive experience in technology-rich vehicle production to our Board. We also established a Board committee focused on sustainability. Chaired by Bob De Lange, Group President, Services, Distribution and Digital at Caterpillar, Inc., this dedicated Committee acknowledges the positive impact the agriculture industry and AGCO can make in addressing global climate change and food security. This new Committee will provide keen input on environmental and social matters.
Accelerating Impact
We are focused on delivering winning outcomes for our farmers, our shareholders, and our employees. We are transforming our culture and employee experience to make AGCO the employer of choice in the agriculture industry. Just as we listen and respond to customer feedback, we listen and act on employee feedback. In 2022, more than 19,000 AGCO employees shared their voice on how to make AGCO the best place to grow a meaningful career.
Fortune favors the bold, and now is the time to accelerate our impact. Farmers face immense challenges, and technological innovation is the best opportunity to address them. We are innovating across our brand portfolio to enable farmer success today while providing sustainable outcomes for future generations.
I am proud of how the AGCO team has achieved another year of record results for our farmers, their fellow employees, and our shareholders. Together, we are advancing the future of AGCO and agriculture.
Thank you for your ongoing trust and partnership.
Sincerely,
Eric Hansotia
Chairman, President and Chief Executive Officer