Good morning. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2019 Second Quarter [ph] Earnings Release Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Greg Peterson, Head of Investor Relations. Sir, you may begin your conference.

Thank you, Carmen, and good morning. Welcome to all of you joining us for AGCO's first quarter 2019 earnings call. We will refer you to a slide presentation this morning that is posted on our website at www.agcocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP metrics in the appendix of that presentation. We will make forward-looking statements this morning, including demand, product development and 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 and timing of those benefits. We will also discuss production levels, share repurchases, dividend rates and our future revenue price levels, earnings, cash flow, tax rates and other financial 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, 2018. This document discusses 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. We will have a replay of this call available on our website later today. On the call with me this morning are Martin Richenhagen, our Chairman, President, and Chief Executive Officer, and Andy Beck, our Senior Vice President and Chief Financial Officer. And with that, Martin, please go ahead.

Thank you, Greg, and good morning. We appreciate your interest in AGCO, and your participation in the call today. I begin my remarks on slide 3, where you can see that we had a good start to 2019. Our first quarter sales grew approximately 7% on a constant currency basis compared to the first quarter of 2018. Adjusted operating income was up over 65%, driven by a 190 basis point increase in our adjusted operation -- operating margin with margin improvement achieved in our Europe, Middle East, North American and South American regions. In addition, our products are performing very well globally, and we are continuing to invest in initiatives that will drive long-term benefit from raising the efficiency of our factories, improving our service levels and strengthening our product offerings. We increased our outlook for the full year on the basis of our first quarter performance, our market projections for 2019 as well as our positive market forecast. During the first quarter, we continued to return cash to shareholders by completing a $30 million stock repurchase program. Last week, we also announced an increase in our quarterly dividend of about 7%. Slide 4 details industry unit retail sales by region for the first quarter of 2019. Global farm equipment demand continues on the slow recovery path following an extended period of decline. North American industry retail tractor sales decreased in the first 3 months of 2019 compared to the same period in 2018. Planting across much of U.S. farm belt is delayed due to cold wet weather and related flooding. Farmers concerns over the lingering trade disputes with China, and the resulting increase in soybean inventories has impacted replacement demand from whole crop farmers. In Europe, relatively warm weather has been positive for the development of winter wheat crop…

Thank you, Martin, and good morning, to everyone. I'll start on Slide 6, which looks at AGCO's regional net sales performance for the first quarter of 2019. AGCO's sales increased approximately 7% compared to the first quarter of '18, excluding the negative impact of currency translation, which will erode sales by approximately 7%. The Europe/Middle East segment reported an increase in net sales of approximately 13%, excluding the negative impact of currency translation compared to the first quarter of 2018. Sales growth was the strongest in France, the United Kingdom and Spain and benefited from the timing of production scheduled in Europe. Sales in North America declined approximately 1%, excluding the unfavorable impact of currency translation compared to the levels experienced in the first quarter of 2018. Lower sales of tractors and grain and protein production equipment were mostly offset by growth in the sales of application equipment as well as hay and forage equipment. AGCO's first quarter 2019 net sales in South America decreased approximately 3% compared to the first quarter of 2018, excluding negative currency translation impacts. Weaker demand in Argentina and lower production associated with our ongoing product transition in Brazil contributed to the decline. Net sales in our Asia/Pacific/Africa segment decreased about 10% in the first quarter of 2019 compared to '18, excluding the negative impact of currency translation. Lower sales in Asia and Australia produced most of the decrease. Part sales were approximately $302 million for the first quarter of 2019, and were up about 4% compared to the same period in 2018, excluding the negative impact of currency. Slide 7 examines AGCO's sales and margin performance. AGCO's adjusted operating margins expanded 190 basis points in the first quarter of 2019 compared to the same period last year. Margins benefited from higher sales, increased production,…

[Operator Instructions] Your first question comes from the line of Jerry Revich with Goldman Sachs.

Hi. Good morning very one. This is Ben Burud on for Jerry.

Good morning Ben.

Good morning. Just wanted to start with the beat versus guide, so obviously, a strong beat versus The Street, but your guidance does not really flow through the entire beat. So just to ask, is this general conservatism given the uncertainty facing the industry? Or have you internally lowered your expectations over the balance of 2019?

I would call it generally general conservatism as usual.

Yeah, Ben, I think when you look at how we performed in the first quarter, there were some items that we would recognize as timing versus what we had originally expected, particularly, on some of our engineering expense and marketing expenses. And we also got up to a better start on some of our European sales than expected. So some of that will wash back out in the second and third quarters, and so we expect some of that to kind of come back. We absolutely feel like margin improvement is on track that we targeted. And as you also know, we lowered the tax rate slightly because we had a little bit of a benefit here in the first quarter. So in our minds, this is not a reduction in the back half of the year.

The other thing, Ben, to remember is that, exchange actually got a little bit tougher for us, our exchange rate. And so if you look, we adjusted that to be a 3.5% impact on our top line. So that alone is probably $0.08 to $0.10 of headwind. So if you factor that and we feel like our guidance is on track.

I still think we have a chance to over deliver as we do usually.

Got it, got it, definitely appreciated and just touching on the U.S. China trade discussions. They seem to have -- seems to be heading in the right direction in the recent weeks. Can you guys kind of give us an idea of how you see a recovery playing out? If we think about the prism or the spectrum, excuse me of quick snapback versus a longer-than-expected normalization trade flows? Can you kind of give us how you would see it playing out?

I think there will be most probably not a quick snapshot, as you call it, but also not a very long recovery. So I think, what happens here, the damage, which our administration has created to the relationship between American farmers and Chinese consumers is severe, and we need to see how fast they basically come back, because in the meantime, they found solutions outside the U.S. So that's not a given, but I'm hopeful that we will be back in business soon.

Thanks, Ben. Operator we would like to have a limit of one question per caller and if the callers have additional questions they can get back in queue. So thanks and lets go the caller.

Your next question comes from the line of Ann Duignan with JP Morgan.

Thank you. I would like to think hard about what my one question is. I've got to ask many questions, Martin you know that.

You could also say something nice today.

Okay. Okay. Let's talk about GSI. Maybe you could give us a little bit more color on the grain and seed performance versus the protein performance. And what do you think that the outlook for both of those businesses are; a, on grain and seed, given global expansion of production of crops? And then on the protein side, you don't -- given what's going on in China, do you see upside for protein equipment in the rest of the world to make up for the lack of pork in China? That was a long one question. I apologize.

Yes. Okay. Ann, so as we mentioned in our comments, what we're seeing is, we had some increase in sales in our grain side of our business and declines in protein equipment. What's unusual about that or I want to make sure you understand is, a lot of the growth in grain really came from outside the U.S. So it came in Europe, primarily, but also in Brazil. What's happening in North America is, we did have a decline in the first quarter. We think some of that is timing, because of the cold wet weather and a lot of projects are being delayed so far. And that's also impacted our protein business in the U.S. So we're interested to see how second quarter goes, and whether some of these projects kick in and that should help our business recover here in second quarter, third quarter in our grain and protein business, particularly the grain business. But we are seeing some improvement in Brazil and Europe in that. In terms of what's happening on the protein side. We're -- we've had a nice run and some production expansion, particularly in the U.S. in swine production. And we're seeing a lot of these projects come to an end. So we've expected to see some decline in protein production equipment, and that's what we're seeing. Overall, the situation should continue to improve in North America on grain. We think it will be softer in protein. When you look at what's happening with the situation in China, with the reduction in the swine population, that's a very significant event, which short-term will have the impact on potentially soybean prices. Also have a -- we're also seeing it actually improve the price of swine in other markets. So that's helping producers. So there are a lot of pros and cons on this. Long-term, we think that it will be positive for our business and that, one, there need to be a replacement some of this protein demand and the fastest way to do that typically with egg and poultry. And so we're expecting to see some improved demand in that area. And then secondly, once we get past the crisis, the China market will, we think, upgrade their equipment in order to have equipment that helps prevent this from happening again. And because of that, we expect to see some growth in that market in the long term. So I would say, some short-term issues, but long-term opportunities associated with that.

Short question and a shorter answer.

Your next question is from the line of Jamie Cook with Credit Suisse.

Hi, this is actually Themis on for Jamie. Just a question on your margins, which were very healthy in the quarter. Could you give us some more color around what you're assuming by segment for the year? I know you said in the prepared remarks, margin expansion across all segments, but any more color on that? And for South America, in particular, are we still looking for it to be breakeven in Q2?

Okay, Themis, good morning. In terms of our regional margins, we are looking for, as Andy said, expansion across all the regions. Normally, as we looked across in the 50 to 100 basis points across the regions, it will be more than that. In South America, we're -- right now we're saying it's probably going to be closer to 300 basis points. So thank you, sir.

Your next question comes from the line of Saree Boroditsky with Jefferies.

Good morning. Congratulations on the strong start to the year. I wanted to see if you can give us an update on the performance of precision plans in the quarter, as I believe the first quarter is usually a seasonally strong for that business?

Sure. We had good quarter and Precision Planting sales were relatively flat in the first quarter, and our earnings were fairly consistent. We are making some additional investments to grow the business outside of the U.S., and we are expecting and did see growth in both Europe and in South American, our sales in the first quarter. We expect to see that for the full year, as we build infrastructure in Europe to be in that market where Precision Planting wasn't in existence at all. And in South America, it's going quite well and we're seeing a lot of demand improvement in that market, as farmers in Brazil are anxious to take advantage of the Precision Planting technology. So say, relatively flat versus the prior year, but good prospects for growth outside the U.S. this year.

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

Hi guys, thanks for taking my question. Just on Europe. It continues to outperform on the margins. I think you said that there was some benefit in production on timing. You mentioned in March, I think, the orders were potentially down. So can you just help give us a little bit more color on how we should think about that margin expansion going through 2019?

We have a major initiative we work on globally regarding margin improvements in all markets. In Europe, we are maybe performing little better, and the reason is our strong market share and the very good brands we have there, and the very good, also, reliable distribution network. So, therefore, I think Europe shows a little bit what we also plan to do in other geographical areas.

In terms of our orders, we did mention that they were down at the end of the first quarter compared to last year. And part of that is that, last year, if you recall, we had issues with suppliers. And so with that, our order board extended a bit. So the supplier situation has improved as we've gone over the last couple of quarters. So that was part of it. And then also last year, we had a bit heavier list of new product introduction. So that entered into the order flow. So we are looking for kind of a flat year in Europe, which is very common. So not a lot of, in terms, of change in the way those orders are right now.

Your next question comes from the line of Joe O'Dea with Vertical Research.

This is TJ Toro on for Joe. Just in Europe, it's another quarter of impressive organic growth relative to the market. You've introduced a few new products last year to build out the offering and an IDEAL combines next year. I guess, is it fair to assume this level of outperformance will continue through the rest of the year? Or like will there be a pause until the IDEAL launch?

Yes. I would agree. So we can expect something -- hopefully something similar for the rest of the year. And the IDEAL in testing and with the first results we get from external expert, but also from our dealers is really outperforming the industry.

Your next question is from the line of Chad Dillard with Deutsche Bank.

This is George Koulouris on for Chad. I wanted to ask about the impact of the flooding in North America in terms of how that impacted trends, how you see it trending in the second half of the year? And also anything on GSI margins relative to last year?

Sure. A lot of that flooding, George, was kind of along the rivers. If you think about the Missouri and the Mississippi rivers that border like Nebraska and Iowa and then in between Iowa and Illinois and so there is around those rivers definitely saw some extensive flooding. If you look at the overall acreage or percent of the farm belt that was impacted, it's a relatively small number. Probably a bigger deal just in terms of planting and the impact on where we are with the North American crop has just been the overall wet cold weather. So we are delayed with planting. And if you look year-over-year, and if you remember, last year we had similar conditions, cold wet spring. So year-over-year we're about where we were last year. Last year, we had a good recovery there, warm, dry weather. Following that, there was spring and we caught up with planting. So that could very well happen this year. The jury is still out. But right now, if you look relative to where like a 5-year average is, we are behind in terms of planting. So that's what everybody is watching and...

Okay. While, I fully agree with what Greg said, we feel very sorry for those farmers, which have been hit and we basically offer special solutions in those areas.

There are no further questions at this time. I would like to turn the call back over to Greg Peterson for closing remarks.

Thanks Carmen and we appreciate your interest in AGCO. And if you have additional questions today we will be available to take those. Thanks again and have a great day.

Thank you again for joining today's conference. This does conclude today's call. You may now disconnect.