Commodity prices down | Shares have fallen 10 percent since October
(Reuters) — Agriculture machinery maker Agco Corp. warned of weak demand this year because of reduced farm income.
The company is forecasting current quarter earnings well below Wall Street expectations.
Economic uncertainty in Europe, coupled with a slowdown in de-mand from U.S. farmers, has weighed on Agco as corn prices continue to slide, pressured by a record crop in 2013.
Lower prices would mean a drop in total farm cash receipts. Farmers with less cash cannot spend as much on equipment, even if they have to harvest a lot of corn.
Deere & Co. said in November that it expected its business to suffer as a result of softer commodity prices in 2014.
“Lower commodity prices relative to 2013 are expected to result in reduced farm income and softer industry demand across the developed agricultural equipment markets in 2014,” said Agco, which sells its products under the Massey Ferguson, Fendt, Valtra and Agco brand names.
It expected first quarter sales volume to be down, largely because of a slower start to the year, particularly in Brazil.
The company forecast earnings of 70 to 75 cents per share for the current quarter.
Analysts on average were expecting a profit of $1.12 per share, according to Thomson Reuters.
The company said it expected growth to be flat this year and forecast earnings of $6 a share on revenue of $10.8 to $11 billion.
The company had reported a profit of $6.01 per share on revenue of $10.79 billion for 2013.
Agco said net income attributable to the company and its units rose 36 percent to $139.3 million, or $1.40 per share, in the fourth quarter from a year earlier.
Net sales increased six percent to $2.86 billion, inching past the average analyst estimate of $2.85 billion.
The company’s shares have fallen 10 percent since it reported a weak third quarter profit in October.