Esther Osinaiya

Esther Osinaiya, on behalf of Angel Castillo, asked about the quarterly cadence of tariff impacts for 2026, specifically whether it would be more heavily weighted in the first or second half. She also inquired about any limiting factors that might prevent AGCO from underproducing to a greater degree to address excess inventory.

Answer

Eric Hansotia, Chairman, President, and CEO, clarified that the $65 million incremental tariff impact for 2026 would be heavily weighted in the first half of the year, with the balance rolling into Q3 and Q4 being somewhat neutral. This is due to the timing of tariffs implemented in 2025 and existing inventory levels. Regarding underproduction, Mr. Hansotia stated there are no inhibitors to reducing production. He explained that the complexity arises from the diverse product portfolio (e.g., planters, combines, various horsepower tractors), each with different market dynamics influencing production adjustments and dealer inventory levels. He confirmed that AGCO does not have take-or-pay contracts with suppliers that would restrict production cuts.

Esther Osinaiya asked about the drivers behind the stronger seasonal norm quarter and whether the exit rate into next year suggests a stronger outlook than the preliminary guide implies for pricing or overall performance.

Answer

SVP and CFO Michael Petro explained that the stronger seasonal norm, particularly in gross profit, is driven by cost measures implemented in Q2 and Q3, which are bearing fruit in Q4. He stated that the mid-single-digit pricing guide for next year is appropriate, incorporating carryover and January 1 increases, and the exit rate is consistent with remaining disciplined.

Esther Osinaiya, on behalf of Angel Castillo, asked about the drivers of the stronger seasonal norm quarter and whether the exit rate into next year suggests stronger performance than the preliminary guidance implies for pricing and gross profit.

Answer

Michael Petro, SVP and CFO, explained that cost measures implemented in Q2 and Q3 are beginning to yield results in Q4, leading to a better sequential change in gross profit. He confirmed that the mid-single-digit pricing guidance for next year incorporates both carryover pricing and planned January 1 increases, with the exit rate being consistent with expectations.