Good morning. My name is Tiffany, and I'll be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2018 First Quarter Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Greg Peterson, Head of Investor Relations, you may begin your conference.

Thank you, Tiffany, and good morning. Welcome to those of you joining us this morning for AGCO's First Quarter 2018 Earnings Conference Call. This morning we will refer to a slide presentation that is posted on our website at www.agcocorp.com. We will use non-GAAP measures in our presentation and those measures are reconciled in the appendix of the presentation to GAAP metrics. We will make forward-looking statements including demand, product development, capital expenditure plans and timing of those plans, acquisition, expansion, and modernization plans, and our expectations with respect to the costs and benefits of those plans, production levels, share repurchases, dividend rates and our future revenue, price levels, earnings, and cash flow, along with our tax rates and other metrics. We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission including the company's Form 10-K for the year ended December 31, 2017. These documents discuss important factors that could cause actual results to differ materially from those contained in our forward-looking statements. We disclaim any obligation to update any forward-looking statements except as required by law. A replay of this call will be available on our corporate website. On the call with me this morning is Martin Richenhagen, our Chairman, President and Chief Executive Officer; and Andrew Beck, our Senior Vice President and Chief Financial Officer. And with that, Martin, please go ahead.

Good morning, and thanks for joining us on the call this morning. I'll begin my remarks on slide three where you can see that we had a good start to 2018. Our first-quarter sales grew by about 14% on a constant currency basis compared to the first quarter of 2017, with higher sales across all our regions except South America. Adjusted operating income more than doubled driven by a 120 basis point increase in our adjusted operating margin. AGCO capitalized on strengthening industry demand in North America and healthy industry conditions in Western Europe, delivering sales and margin improvements in those regions and better-than-expected sales and earnings growth for the company. Our weak results in South America reflect the challenging industry environment, lower levels of production, as well as the transition costs associated with localizing newer product technology in our Brazilian factories. We expect our results in South America to improve substantially throughout the course of the year. I'm pleased to tell you our products are performing well in the global markets and we are continuing to invest in initiatives that will drive long-term benefits and raise the efficiency of our factories, improve our service levels, and strengthen our product offerings. We have raised our outlook for the full-year to reflect our confidence in the market recovery we are seeing, especially in North America and Western Europe. During the first quarter, we also continued our annual dividend increases by raising our payment by 7%, compared to the first quarter of last year. Slide four details industry unit retail sales results by region for the first quarter of 2018. Difficult start to the growing season in many of the regions has resulted in mixed industry demand across our markets. In North America, row crop farmers are beginning to replace their equipment…

Thank you, Martin, and good morning to everyone. I'll start on slide six, which looks at AGCO's regional net sales performance for the first quarter of 2018. AGCO's sales increased approximately 14%, compared to the first quarter of 2017, excluding the positive impact of currency translation, which benefited sales by approximately 9%. Acquisitions positively impacted sales by approximately 7% in the first quarter of 2018, compared to the first quarter of 2017. The Europe/Middle East segment reported an increase in net sales of approximately 14%, excluding the positive impact of currency translation, compared to the first quarter of 2017. Excluding acquisition related sales, the Europe/Middle East sales were up about 10.5%. Sales growth was the strongest in Germany, the UK and France. Sales in North America increased approximately 30%, excluding a favorable impact of currency, compared to the levels experienced in the first quarter of 2017. Precision Planting, which was acquired in the third quarter of 2017, contributed approximately 16% of the sales growth in the seasonally – in its seasonally strong first quarter. Increased sales of mid-range and high horsepower tractors and sprayers provided most of the organic growth. AGCO's first quarter 2018 net sales in South America decreased approximately 13%, compared to the first quarter of 2017, excluding negative currency translation impacts. Significantly weaker demand in Argentina and Brazil drove most of the decline. Net sales in our Asia/Pacific/Africa segment increased about 9% in the first quarter of 2018 compared to 2017, excluding the positive impacts of currency translation and the benefit of acquisitions. Sales growth in China and Australia accounted for much of the increase. Part sales were approximately $313 million for the first quarter of 2018 and were up about 4% compared to the same period in 2017, excluding the positive impact of currency. Slide seven…

Your first question comes from the line of Jamie Cook with Credit Suisse. Your line is open. [05Q2D7-E Jamie Cook: Hi. This is actually Themis on for Jamie. Maybe if we could start with profitability in South America and talk about in a bit more detail. Recognizing of the headwinds that you did call out for Q1, how should we think about the remaining quarters, and what sort of improvement are you assuming in your outlook? And also, maybe as we think about a more normalized year, maybe 2019 with less local investments, where do you think margins can get to like in South America?

Yeah, we're expecting, as we said, improvements in our South America performance throughout the year. We still forecast that we'll have a negative impact in the second quarter, but then be fairly strongly positive in the second half of the year. We still think that the market will be on the weaker side in the first – in the second quarter because of the weather conditions that we had in Argentina and Southern Brazil, but we do think the second half market will be stronger. A lot of customers, we believe, in Brazil are waiting for the FINAME rate improvements that we expect beginning July 1, and so there's some delay there. And so, we do expect the market to improve. Our margins, we expect to get to above mid-single digits by the second half of the year.

What we hear from other industries like seed, fertilizers, and pesticides, their business is up and they're seeing pretty good improvements, which basically, of course, is logical because you can't postpone the acquisition of seeds, for example, while you can do that with farm equipment. So therefore, we might be a little later here. This is the market, but internally at AGCO, we look into a major core process redesign initiative with important improvements of our footprint and our cost situation. [05Q2D7-E Jamie Cook: Got it. That's helpful. And then my follow-up on your adjusted EPS outlook for the year, you delivered strong numbers in the quarter and a lower tax rate, I think, is now also helping full-year numbers. So, I'm just curious why we're raising by only $0.20? Is there may be some conservatism in your numbers? Or are there incremental headwinds for the remaining quarters that hadn't been contemplated before?

We are typically conservative to the extent to be too cautious once in a while. When you do the calculation, you see that there is some opportunities. You add the first quarter and the guidance and then you figure out that the third quarter and the fourth quarter is expected to come in at about $1.02 to $1.04 depending on whether you use the $1.25 or the $1.30, which makes it look rather conservative compared to previous years. [05Q2D7-E Jamie Cook: Understood. I'll get back in queue. Thank you.

Your next question comes from the line of Andrew Casey with Wells Fargo. Your line is open.

This is Jorge Pica on the phone for Andy. Can you talk about some of these margin and cost headwinds that you're facing right now, both in Q1 and for the remainder of the year?

Well, the main headwinds, let's say we had some higher than usual rate increases in some European countries but they, basically, they go into our pricing. And then the only headwind we see is basically coming from steel. But overall, steel demand is lower than in previous years, so that means all this excitement about steel prices might come back to normal again. We did initiate steel price related price increases so, therefore, I don't think that we have a big impact cost-wise. Andy?

Yes, as you noticed, we did increase our pricing estimates. We were at 1.5%. Now we're saying 1.5% to 1.75% and that reflects our increased forecast relating to steel price impacts. And that we expect to have pricing to offset that. So that's not impacting our overall forecast for the year, but it does imply that we need to get that pricing in for the balance of the year.

So, Andy, do you expect pricing to cover all of the material costs and other related increases? Is that the primary mechanism?

Yes. Yes, we do.

Okay. I think that's it. Thank you very much.

Your next question comes from the line of Larry De Maria with William Blair. Your line is open. Larry T. De Maria - William Blair & Co. LLC: Hi. Thank you. Good morning. I guess first quick question is can you maybe quantify, you said orders were up in the regions but on a global basis, where do orders stand? And maybe by those regions, the magnitude of the increases?

Sure, Larry. We're up mid-single digits in North America right now, up double-digits in Europe, little down in Asia and up substantially in South America but off of a very low...

As previously mentioned.

Very low base. So overall, we're up double-digits on orders right now. I think that reflects pretty much what our outlook's saying is that we're seeing some improvement in the North America market as well as the European markets staying relatively strong at this point. Larry T. De Maria - William Blair & Co. LLC: Okay. But orders up double-digits in Europe, wouldn't that imply better-than-flat year-over-year?

Well, I think it does reflect that customers, our dealers and our customers, are wanting to make sure that they can get their units on time, so I think it's they're focused on availability of product. I'm not sure that reflects completely what the market on a retail standpoint will be. As we said, we're starting out pretty strong. The first quarter was up. We do have it being a slightly down in the second half because of some declines potentially in the dairy livestock sector. But we'll wait and see. There could be some opportunity there.

To simplify, I believe the market is up. Larry T. De Maria - William Blair & Co. LLC: Gotcha. Thank you, Martin and Andy. Then secondly, Martin, you mentioned a major improvement in footprint and cost situation. I believe you mentioned that was specific to South America. Can you help us understand? Because it's obviously a lot of noise this year and there was some noise last year, but are we talking about a 200 basis point improvement to your operating margins, as we think about annualized basis? Or just how do we think about what kind of actual improvements you're putting in there that are going to translate into bottom line improvement in next year and beyond?

We just kicked off that project some weeks ago, so we didn't communicate any target or objectives yet.

No, Larry, what we're looking at is, again, some improvement in the second half of the year. Overall for the full-year, we're talking about an improvement of probably about 100 basis points or so in margins, but that implies a pretty strong second half of the year. And what we're doing is really working on all aspects of our costs. So, within operating expenses, SG&A type cost, but also a lot of work on our product cost. As you know, we've localized a lot of new product into Brazil and we are still working with supply base and relocating a lot of that supply base into Brazil, looking for lower cost on the new products. The exchange rates with the Brazilian real weakening has impacted our results as well because we're importing more than we were previously, so we need to localize more and more parts to get those costs in line. And then also on a pricing standpoint, we expect to get some pricing to offset some of the local inflationary costs that we're seeing. Larry T. De Maria - William Blair & Co. LLC: Gotcha. So, put another way, though, in 2013, you had peak sales and margins in South America. Presumably would have a much relatively significantly higher peak margins in South America, given the stuff you're doing. Is that fair to say?

Well, I think we're looking for gradual improvement year-over-year and expect to – we're still working on localization of the low horsepower sector now, but we still have a lot of work to do there. And so, I think our focus is gradual improvement over the course of the next couple years to get back to those strong margins that you refer to. Larry T. De Maria - William Blair & Co. LLC: Okay. Thank you.

Our overall margin target is 10% and we do everything in order to get there. Larry T. De Maria - William Blair & Co. LLC: Okay. Thank you.

Thanks, Larry.

Your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open. Corinne Jenkins - Goldman Sachs & Co. LLC: Hi. This is Corinne Jenkins on for Jerry Revich. I was hoping we could talk about the drivers of the margin improvement you saw in North America this year, just kind of the moving pieces there.

Sure. So, the margins were up in the first quarter. A lot of that, as we talked about, was the higher revenue. We did have our benefits of the Precision Planting acquisition which, as you would understand, is a very seasonally strong first quarter business, because it relates to the planting sector. And so, that was the main driver of the margin improvement was the additional benefits of Precision Planting. Overall, we're looking for about 100 basis point improvement year-over-year in North America for the full-year. One of the things that's driving against our margins is the impact of exchange rates. We're an importer of materials from, and products from, Europe and as well as China. And those exchange rates, while benefiting us on translation, are hurting us on a margin basis, particularly in North America. And so that's impacting our overall margins and our margins in North America. Otherwise, we'd be better than that 100 basis point improvement. Corinne Jenkins - Goldman Sachs & Co. LLC: All right. And then can we go back to the conversation about pricing and raw material costs. 25%, or the 250 – sorry, 25 basis point increase doesn't seem pretty modest given the raw materials inflation we're talking about. So, can you just talk a little bit more about how you're thinking about that?

The raw material inflation is also modest because there might be some increase in steel prices but as a total percentage of a product we typically sell, it's a kind of moderate, it is a moderate impact in a way. So that's all taken care of by the price increases you describe as modest.

And also, there's a lag from the effect of when the steel increases until it hits our results. We have contracts outstanding that are typically three to six months and then...

70% of our steel demand for this year is covered, and only 30% could be the subject of theoretical price increases.

So we're not getting a full-year impact, I think is the other point to make. Corinne Jenkins - Goldman Sachs & Co. LLC: Okay. Thank you.

Your next question comes from the line of Ann Duignan with JPMorgan. Your line is open.

Hi, good morning. This is Tom Simonitsch on behalf of Ann Duignan. Could you quantify the expected inventory build in Europe and Brazil into year-end?

Yes, it's about somewhere in the $70 million to $80 million range.

Okay. Thank you. And you say you underproduced retail sales in 2018 in North America. Is it fair to assume you'll be producing in line with retail in other regions?

Yes.

Okay. Great. I'll pass it on. Thank you.

Thank you.

Thanks, Tom.

Your next question comes from the line of Sebastian Kuenne with Berenberg. Your line is open. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Yeah, hi, gentlemen. My first question is regarding North America. It looks like you have strongly outperformed the market if you adjust for currency and M&A. Could you tell us where you took market share, and by what scale? And also, would like to know if this is driven by the product launches you had last year? And maybe you can give some examples of those successes, let's say?

Sure. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): May be you can help this one.

So, if you look at our sales improvement in first quarter in North America is up 30%. Acquisitions were 18% of that increase. So, as I've stated before, the Precision Planting acquisition was very instrumental in the improvement in our sales and our results in the first quarter. But if you take out currency and acquisitions, we are still up over 10% in North America. And as you rightfully pointed out, I think it relates to a lot of new products, particularly in the sprayer area and our new tractor that we introduced in the first quarter this year. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): That's the Challenger MT tractors?

Yes.

Yes, Challenger. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): What about the Challenger 1000? Let's say, the Defense products that you launched in the U.S. What's the situation there? How is the uptake there?

Doing very well, better than expected. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Okay. And market share, what do you see there at the moment in terms of gains?

Slightly up. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Okay. Then I have a question regarding the Fendt tractors that you basically import to North America and also the Massey Ferguson that come from China and France. With the 15% headwind that you have on currency, I assume this is all included in your calculation? And you still confirm that you expect a 100 bps margin increase in North America. Is that correct?

That's correct. As you point out, the importation of those products into the U.S. are impacting the margins, but we're also getting higher production levels, cost improvements from our other initiatives that are driving that overall margin improvement that we're looking for.

Andy, just share a number with us. How much, let's say, the percentage of imported revenues versus domestic in the U.S., about?

We import about...

20%, 25%

Yeah, 25% is imported in the U.S.

From either Europe or Brazil

Or China.

Or China. Europe is not really extremely relevant. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Understood. Then I would like to have – if you could give me an update on the platform implementation. I think for low output it's all done, it's all in China. For mid-term or mid-range output, you are still converting in France the way I understand it, the Massey Ferguson, the Valtra and the Challenger. What is the situation then on the big tractors? At the moment it looks like you have a Fendt, and you have Challenger, those go together. But then you have the big Valtra and Massey Ferguson which also go together, but there's no common platform for those. Is that correct? And what's your plan there?

That's not correct. We work on platform solutions in all horsepower categories. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): So, you will combine Fendt and Massey Ferguson as well on one platform at some point?

Platform solution doesn't mean that you combine. Platform solution means you use as many common parts as meaningful, and that's what the plans are, and that's what we will do. And then of course you have 100% platform solution when you look into the Fendt 1000/Challenger 1000, that's virtually the same product. That's a 100% platform solution.

Thank you, Sebastian. We're going to move on. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Yeah, okay. Thank you.

Thank you.

Your next question comes from the line of Seth Weber with RBC Capital Markets. Your line is open.

Hey. Good morning, guys.

Good morning, Seth.

Good morning. I wanted to take another crack at the South American margin discussion. So, based on what you're saying about the FINAME role, rate decrease in July, it sounds like second quarter demand is potentially pretty soft again. And so, I imagine second quarter in South America is going to lose money. Is that a fair assumption?

That's what, Andy, said.

Yes, Okay. Sorry. I missed that. Which I think implies something like a 6% or 7% margin for the back half of the year. I guess is that the right way to think about it? And then my real question is, is that the run rate margin that we should be thinking about for 2019 for the South America business? So, there's a lot in there, but that's sort of the spirit of the question.

Yes. That's what we have forecasted right now. I think...

The answer is yes and yes.

Okay. And is it possible to – I think somebody earlier was trying to get at this question, but is it possible to sort of splice out how much of that is reflecting these transition costs going away? And how much of it is coming from volume?

I don't have that, Seth, but good proportion of it is volume. So, I'd say probably half and half would be volume versus getting our costs better aligned with material cost pricing, all those things that I mentioned.

I think in this year's forecast or guidance, it's mainly volume.

Okay. And then maybe, Andy, just going back to the pricing, the modest uptick in pricing increase that you're looking at for this year, are those effectively steel surcharges? Or is that a mix issue? Or is there any color on how you're getting higher pricing here for the rest of the year?

We're not going out with new price lists or anything like that. With the amount of price change we're talking about, it's typically done through changes in discount programs, the pricing that's off of the dealer net or the list price.

Perfect. That makes sense. Thanks very much, guys.

Thanks, Seth.

Your next question comes from the line of Michael Feniger with Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. There's clearly a lot of concerns of headlines about certain tariffs (40:08). I know this is probably more of an April question, but have you seen anything in your order book or recent trends that shows any impact from this trade rhetoric on farmer purchasing decisions?

No. I don't think so. I think farmers are watching commodity prices very carefully. Obviously, very interested in how getting their planting done in North America and seeing how they think their crops are going to be this year, but we don't see anything where, at least to this point, orders are being impacted by thinking about trade or anything like that.

Great. I think you guys are targeting, I think you said a 50 basis points operating margin expansion for the full-year. In Q1, you guys had a great start to the year, up 130 basis points or so. Just how should we think about the cadence through the year? I know you don't give full-on guidance. Just how do we think about that maybe for Q2 versus second half?

Our production levels are a little flatter here in the second and third quarter, and we also have heavier operating expense and engineering costs in the second and third quarter. So, we're looking at a little flatter margins in second and third quarter, and then pretty strong margin improvement in the fourth quarter, because of the timing of, as I said, some expenses that we have. So, that gets us back to about the 50 basis point improvement for the full year.

Okay. That makes sense. And I think you guys mentioned dealer inventory improving. I was just hoping if you guys – I don't know if you guys did with your comments before, do you quantify it? And how do you guys think that's playing out by the end of the year?

So, we're targeting on – you said dealer inventory, right?

Yes.

Dealer inventory, we're targeting another 10% to 15% reduction in the absolute amount of dealer inventory in North America by the end of the year, and that we hope will get us to position where we're very comfortable with our dealer inventory, and we can be selling back wholesale at retail again. And then, in Europe and in South America, our dealer inventories are in relatively good shape, and so we're not expecting any management of the inventory levels at this point.

So Andy, just to be clear, does that mean by 2019, you'll be in a position for North America to be producing in line with end user demand? Is that fair to say?

That would be our target at this point. Yes.

Okay. I appreciate that. And then, I guess, just lastly from my side is raising prices to offset steel, that makes sense. Is that on a global basis? And are you seeing other competitors raising prices, too, your other big competitors, to try to offset this higher raw material environment? Thanks.

This is on a global basis. And we would love to see price discipline in our industry, and that varies by country and by competitor.

Okay.

Thanks, Mike.

Thank, guys. Bye.

Our final question comes from the line of Joe O'Dea with Vertical Research Partners. Your line is open.

Hi. This is TJ Toro on for Joe. Just a follow-up on pricing, just curious, to what extent do early order programs have on pricing capability for the year? And then I guess secondly to that is, how much can you flex marketing discounts up and down to influence that?

Yeah, a lot of times you, obviously, predict your order board with pricing, and so you can see sometimes if customers know a price increase is coming. Then they'll order in advance of that in order to protect and get that lower price. So, I think that's happening right now, and reflects that with the strength of our order board. But again, as we noted, that the steel increases are actually have a lag impact and so most of the impact's coming in the second half of the year for us. So that timing coincides with when we'll be likely to get price increases in with our customers. Also, the discount programs, there's a lot of latitude there. So, within the movements that we're talking about there's plenty of room to change discount programs to reflect the price increases we need.

Great. Thank you very much.

I will now turn the conference back over to our presenters.

Thank you, Tiffany. We want to thank everyone for your participation today and for your interest in AGCO. I will be available later today for any follow-up questions. Thanks, and have a great afternoon.

This concludes today's conference call. You may now disconnect.