AGCO achieves solid margins and free cash flow despite a 5% sales decline, emphasizing strategic execution and cautious optimism for future growth.

Good day and welcome to the AGCO third quarter 2025 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today's presentation, there will be an opportunity to ask questions. In consideration of time, please limit yourself to one question and one follow up. To ask a question you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations. Please go ahead.

Thanks Gary and good morning. Welcome. To those of you joining us for AGCO third quarter 2025 earnings call, we will refer to a slide presentation this morning that's 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 the presentation. We will make forward looking statements this morning including statements about our strategic plans and initiatives as well as our financial impacts, demand, product development and capital expenditure plans and timing of those plans and our expectations for for the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates and other financial metrics. All of these forward looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the safe harbor included on Slide 2 in the accompanying presentation. Actual results could differ materially from those suggested in these statements. Further information concerning these and other risks is included in AGCO filings with the SEC, including its Form 10K for the year ended December 31, 2024 and subsequent Form 10Q filings. ADCO disclaims any obligation to update any forward looking statements except as required by law. We'll make a replay of this call available on our corporate website later today. On the call with me this morning is Eric Hansodia, our Chairman, President and Chief Executive Officer and Damon Adia, our Senior Vice President and Chief Financial Officer. With that Eric, please go ahead.

Thanks Greg and good morning to everyone joining the call today we delivered a strong third quarter performance underscoring the effectiveness of our strategic execution and the resilience of our global team. While macro conditions continue to be volatile, we benefited from a more favorable regional mix and stayed laser focused on what we can control. Our disciplined approach to production and cost management continues to position us well in this environment. Thank you to the entire AGCO team for their continued focus in these two areas. We remained agile in the face of a complex and evolving landscape and our people have been instrumental in helping us navigate this uncertainty, maintaining our momentum and continuing to put farmers first. Net sales were $2.5 billion, down approximately 5% year over year or up nearly 6% when excluding grain and protein business divested last year. Strong growth in EME led the quarter, which continues to be our largest, most stable and most profitable region. Near record global crop production in 2025 are leading to elevated grain inventories and putting pressure on commodity prices. While farm income is being supported by increased government assistance in the U.S. crop margins remain tight and farmers around the globe remain cautious on capital spend during this industry downturn. We are staying focused on executing our strategy, supporting our dealers and customers, and investing in technologies that will drive long term growth. We also continue to look for every opportunity to limit the impact of tariffs on our farmers. We are closely monitoring evolving tariff policies and government support programs around the world while continuing to engage with suppliers and adjust our supply chain. We continue to assess and implement price increases where appropriate and feasible. For the quarter. Consolidated operating margins were 6.1% on a reported basis and 7.5% on an adjusted basis. Our results reflect strong execution by our teams. We maintain solid margins through disciplined operational performance, favorable regional mix and continued progress on our restructuring initiatives. This consistency underscores the effectiveness of our strategy and our commitment to delivering long term value. Notably, we achieved these margins despite another quarter of significant production cuts in North America as part of our ongoing efforts to destock the dealer channel. When comparing third quarter of 2025 to the same period last year, production was down nearly 50%. In North America, production levels are actually down nearly 70% from 2023. In addition to making further progress on reducing dealer inventories, we've also decreased company inventories. This continued discipline is reflected in our working capital improvements and free cash flow generation during the nine months of the year, which was approximately $453 million up compared to the same period in 2024. Slide 4 provides an overview of industry unit retail sales by region for the first nine months of 2025. The Global Farm equipment market continues to face significant headwinds. Brazil remains slightly up compared to the third quarter of 2024, driven primarily by demand for smaller and mid sized tractors coupled with favorable trade dynamics. Despite record soybean harvests and potential trade benefits, demand for larger equipment has yet to show meaningful improvement. High financing Costs and political uncertainty are expected to continue constraining demand in 2025, but the early signs of recovery point to a modest increase in 2026. In North America, tractor sales declined 10% in the first nine months of 2025 compared to the same period in 2024, with the steepest drops occurring in the high horsepower categories. Driving this behavior is the significantly lower grain export demand, global trade uncertainty and continued high input costs. We expect these pressures to persist, particularly with the demand for larger equipment. Recent announcements of government support are expected to support net farm income, which may help unlock future equipment investments. There are also potential upsides if further progress can be made on top of the trade agreement that was announced earlier this week between the US and China for Western Europe, tractor sales were down 8% during the first nine months of 2025 compared to the same period one year ago. The industry experienced double digit percentage decreases across most markets. Demand and mix are expected to remain soft through the remainder of the year as lower income levels weigh on farmers and correspondingly large tractors. As AGCO's largest and most strategically important region, Europe continues to deliver stable demand that is less cyclical than other markets with strong and consistent operating margins. Its performance provides valuable balance to our global portfolio, helping us to offset fluctuations in other markets, including those influenced by evolving US Trade dynamics. We remain confident in the region's ability to support our long term growth, especially as precision ag grows there. Combine sales continue to decline across all three regions, with North America experiencing the largest year over year drop at 29% amid industry wide pressures. AGCO is performing more resiliently than in previous downturns and remains well positioned for the long term growth. Looking ahead to 2026, current commodity prices and fundamental uncertainties continue to impact the global ag industry outlook. Positive market factors including livestock and dairy prices, the replacement cycle and government payments are being offset by geopolitical tension, tariff impacts and difficult farm economics which include elevated borrowing costs and rising input costs. Given the combination of all of these factors, there's increasing likelihood of markets being relatively flat in 2026, with North American Large Ag down and Europe and South America modestly up. This view confirms our assessment that the global industry is at the trough. Slide 5 outlines AGCO's factory production hours. To ensure year over year comparability, we've excluded grain and protein production hours from the 2024 baseline. Third quarter production hours were up approximately 6% year over year, driven by a favorable comparison in Europe where quarter 3rd 2024 was impacted by the prolonged factory shutdowns as well as increased output in South America. In contrast, North America production was down over 50% again this quarter, reflecting our continued focus on reducing dealer inventories in response to soft market demand. And as I mentioned, production levels are actually down nearly 70% from 2023. Looking ahead, we now expect full year 2025 production to be down approximately 15% versus 2024, a slight revision from our prior estimate of down 15 to 20% primarily due to stronger quarter three output in EME. Rightsizing inventory in North America remains a top priority while Europe and South America will continue to see production effectively aligned with retail demand. Looking at regional inventory breakdown in Europe, dealer inventory is now just over three months slightly below our target. FENDT is below this average while Massey Ferguson and Valtra are just above Europe's near target. Inventory levels are encouraging, particularly given our strong exposure to the region. In South America, dealer inventory ticked up to around four months, slightly above our three month target and quarter two levels given the decline in demand for low and medium horsepower tractors. The increase in inventory reflects mainly a more cautious industry outlook given the demand changes in quarter three which led us to adjust our forward sales expectations. In North America, we continue to make meaningful progress reducing dealer inventory from nine to eight months while still above our target. The reduction reflects the success of our disciplined production cuts with units being reduced almost 13% in the quarter. Our 3 high margin growth drivers, globalizing and expanding our FENDT product line, growing Precision AG and increasing our parts business remain central to our strategy to unlock the full potential of these growth levers and transform AGCO into a higher performing company throughout the cycles. There are five major strategic shifts we've just made in the past two years that position us for significant earnings growth. Let's start with a significant update regarding our resolution with tafe. We recently announced the sale of our ownership interest in tafe, generating approximately.

Precision planting the ag assets of Trimble. And six additional tech acquisitions over the last five years, plus doubling our engineer. Engineering budget. We've built a 900 million dollar. Platform. With a path to $2 billion in precision. Ag revenues as synergies and scale take hold. As we strengthened our high margin, high growth portfolio. We exited the lower growth, lowermargin business of green and prot. Protein, which lacked alignment with our core machine and technology products. As well as our distribution strategy. Project Reimagined is a companywide restructuring effort focused on automating. Standardizing, simplifying, centralizing, and in some case. Cases outsourcing work with over 700 active projects. We are driving efficiency, lower costs, and most important, Importantly, improving the outcomes for our dealers, farmers and employees. Enabled by AI. This initiative is expected to reduce. Our cost base by $175,000,000 to $200 million. Finally, farmer core is unique in our. Industry. As transforming our Gotomarket strategy. We're taking service and support right to the farmers online. And on the farm by investing in digital tools and enabling deal. Dealers to shift from brick and mortar. To mobile service models. This is about servicing the farmer, not just the product. We're making meaningful progress in north and South America with expansion. To other markets planned in the future. Together these five. Strategic shifts are shaping the Agco weaven vision. More focus. Focused, more agile, and better positioned to deliver. Sustainable, highmargin growth. The results include margin. Margins at this trough that are comparable to the company's margins. At the previous cycle's peak ago is delivering higher margins through. The business cycle driven by these structural changes to the company's portfolio. And value proposition. Going? Deeper into precision. Ag slide seven showcases two major in. Innovation milestones that reflect Agco as a leader in smart farming. Solutions. We launched phase I of farm engage. Our new mixed fleet digital platform. Designed to deploy work. Plans, track field work and collect task data. From all machines on the farm, regardless of brand. This retrofit first solution enables AgCO equipment. To seamlessly integrate with existing trimble technology. While also supporting interoperability with non Agco fleets. Looking ahead, Phase II will consolidate features into a uni. Unified platform experience, and phase three will complete the full farm. Operations cycle, delivering an end to end solution for planning. Execution and optimization. Together these phases. Position. Farm engaged as an absolute cornerstone. Of our smart farming strategy. As you know, our. Goal is to be autonomous across the crop cycle by 2000 and. 30. We are accelerating this journey and that a recent tech. Day in Germany, we unveiled the latest outrun autonomous solution for. Tillage and fertilization. Tillage is now. In beta testing and fertilization is in alpha. These build on the success of our outrun autonomous green card solution, which. Is already in production. These innovations offer autonomous capabilities. For fent and competitive machines in three of the five major. Stages of the crop cycle, making us one of the industry leaders. In this transformational technology. This. Progress reflects our commitment to delivering practical, scalable. Technologies for the mixed fleet that reduced labor dependency. Improve efficiency and help farmers operate more profitably. On that exciting note, I'll hand it over to Damon for a deeper dive into the. Financials. Thank you, Eric, and good morning. Slide eight summarizes our regional net sales performance. For the third quarter and yeartodate. Net sales for the quarter increased. Approximately 1% yearoveryear. Excluding the positive impact. Of currency translation. For comparability. We've also exclud. Excluded the $251,000,000 of sales associated with the. Divested grain and protein business in Q three of 2024. Breaking net sales down by region euro. Europe. Middle east posted a 20% increase compared to the same period. In 2024, excluding the impact of favorable currency effect. Effects. This reflects a recovery in the production levels and corres. Corresponding sales following extended plant downtime last year. Growth was strongest in the high horsepower and midrange tractor. Tractors, South America declined close to 10%, excluding favorable. Currency impact. Weaker industry demand drove most of the decrease. With lower sales across most product categories. North America was down 32%, excluding unfavorable currency effect. Effects. The decline was driven by continued market softness. And our focused underproduction to reduce dealer inventories. The. Largest decreases occurred in high horsepower tractors, sprayers, And combines. Asia Pacific. Africa declined. 5%, excluding unfavorable currency translation impacts. Lower demand across the asian markets were partially offset by strong. Stronger performance in Australia and Africa. Finally. Consolidated replacement parts were 498,000,000 in the third quarter, up 2% year. Over year on. A reported basis and down approximately 2% when excluding. The favorable currency translation. Turning to slide. Nine. Third quarter adjusted operating margin was. 7.5% 200 basis points higher than. The prior year. The industry backdrop remains challenging. With continued pressure from factory underabsorption and elevated discounting. The margin improvement was primarily driven by strong performance. In our Europe Middle east segment where higher sales and production vol. Volume supported improved operating leverage. By reg. Region, Europe Middle east income from operations increased around 100. And 63 million, with operating margins approaching 16%. The improvement reflects the significantly higher volumes and sales. Compared to Q three of 2024, which was impacted by the extended plan. Plant shutdowns. North american operating income declined. Approximately 56 million year over year, with margins remaining negative. Again this quarter. Lower sales and significantly reduced production hours. Were the key drivers, coupled with a significantly weaker industry. South America. Operating income declined 23 million. With margins down to around 6%, primarily due to lower. Volumes. Asia pacific africa posted. A slight increase in operating income of 1 million, driven by lower Manu. Manufacturing costs partially offset by lower sales volume. flight ten shows our yeartodate free cash flow Performance. As a reminder, free cash flow is defined as. Cash provided by or used in operating activities, less capital expend. Expenditures. Free cash flow conversion is calculated as free. Cash flow divided by adjusted net income. Through September. We generated $65 million of free cash flow and improve. Improvement of around 450,000,000 versus last year's net outflow of. 387,000,000 for the same period. This was driven by stronger working. Capital performance and roughly 120,000,000 in lower. Capital expenditures year over year. We continued to expect. Full year free cash flow to be within our targeted range of 75. To 100% of adjusted net income. Our capital all. Allocation priorities remain unchanged. Reinvest in the business. Potential Bolton acquisitions maintain investmentgrade credit. Ratings and return capital to shareholders. As Eric. Mentioned following the taffy resolution and the board approval of our new. $1 billion share repurchase program. We expect to begin repurch. Repurchasing 300 million of shares in the fourth quarter. We also recently declared our regular quarterly dividend of 29. Cents per share. We remain focused on deploying capital effect. Effectively to drive longterm shareholder value, and we're encourage. Encouraged by the increased flexibility to return capital through the preferred invest. Investor method of share repurchases. Slide eleven highlights our current 2025 market outlook across. Our three major regions, our outlooks remain relative. Relatively unchanged since the second quarter call, other than a modest. Adjustment to our north american large ag forecast. In. North America, we continue to expect significantly lower indust. Industry demand in 2025. While net farm income has improved support. Supported by government programs and record high cattle prices. Sentiment remain. Remains challenged by wheat, corn and soybean prices. Investment. Competence is declining, and interest rate cuts haven't yet provided meaningful. Relief. We're maintaining our outlook for the small tractor segment to. Be down approximately 5%. And now expect large eggs to be. Down around 30% versus our prior range of down 25 to. 30%. In western Europe, we continue to. Expect the industry demand to decline five to 10%. The market. Remains soft but relatively stable. Weak prices are below. Historical averages and geopolitical uncertainty continues to weigh on. Sentiments in South America. Record, soybean. Exports, partly driven by us tariff barriers, have supported. Trade flows. However, margins are under pressure from higher input. Costs and elevated interest rates in Brazil are dampening demand, especially. For large ag. Under these conditions, we still expect Brazil to. Be flat to up 5% for the year. Slide twelve outlines the key assumptions supporting our full. Year 2025 outlook. We continue to expect. Global industry demand to be around 85% of mid cycle levels. Our sales alloc remain unchanged despite a slightly. Softer pricing. Outlook now in the zero to 1% range, which is down. From approximately 1% in q two. Given the increase in. Competitive pricing in certain regions. We continue to anticip. Anticipate a favorable currency impact of roughly 2%. Our guidance reflects current tariffs across our global footprint along. With mitigation efforts through cost actions and pricing. That said. The potential for additional us tariffs or retaliatory measures. Fostered continued uncertainties. We're monitoring developments closely and. Will adjust our outlook if needed. Engineering expense is. Expected to remain effectively flat yearoveryear. We still. Expect our adjusted operating margin to be approximately 7.5%. reflecting structural improvements in cost initiatives positioning Us roughly 350 basis points above our last trough. In 2016. Lastly, we revised. Our effective tax rate to 33% to 35%. Modestly better than our prior estimate of approximately 35%. Turning to slide 13 for our current. 2025 outlook. We continue to expect full year net. Sales of approximately 9.8 billion, consistent with our prior outlook. This reflects the modest changes in demand trends across key markets. We refined our earnings per share forecast to approximately five. Dollars, reflecting strong execution across our global oper. Operations. This assumes no material changes to existing trade measures. Capital expenditures are now expected to be around 300. Million. While this represents a decrease from the prior estimate of 300, And 50 million. We remain focused on supporting strategic initiatives. And maintaining flexibility in response to shifting demand trends. We continue to target free cash flow conversion of 75% to 100% of. Adjusted net income, supported by disciplined working capital management. And improved inventory efficiency, as Eric noted. We're pleased. With our performance through the third quarter in what remains a challenging and evolving year. Our teams have executed well grown share. And continued to reduce dealer inventories while supporting farmers'needs. With this updated outlook, we believe our results further demo. Demonstrate the structural improvements in Agco's profitability, even in. A down cycle. We're delivering stronger margins and more consistent ear. Earnings, a reflection of our transformed business model. With that, I'll turn the call over to the operator to begin the Q and A. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch. Tone phone. If you are using a speakerphone, please pick. Up your handset before pressing the keys to withdraw your. Question, please press star, then two. Please limit yourself. To one question and one follow up. Our first question today is from Kristen Owen with Oppenheime. Oppenheimer and company, please go ahead. Hi. Good morning. Thank you so much for the question. Wondering if we can start here. With the strong Europe results. Maybe just ask a simple question. How Europe. Perform. Performed relative to your expectations. I'm just trying to parse through some. Of the one time items versus the underlying trends there. And what's supporting the outlook for a little bit more constructive growth in. 2026 and i'll start there Yeah, sure. Kristen so I think Europe, I would say. Performed. Modestly better than what we had expected. More on the top. Line. So volumes were a little bit stronger than what we had. Originally anticipated the production. What you saw with the. Margins heavily influenced by. Production schedule, I would. Say was relatively in line with what we had expected. So overall, we feel good. I think the key point for us as we look. At Europe right now. The dealer inventory levels are sitting. Below the optimal level for us, so we feel very good. As we go into the fourth quarter and into 26. Here that we're sitting in a relatively strong position. From Produ. Producing in line with retail or hopefully, if the markets were to pick up. And again, We haven't given a full outlook for 26 yet, but the. Dealer inventory levels are positioned well there for 26. And then my follow up understanding. It's very early days to digest, but any initial thoughts on. The China trade agreement that was announced yesterday. And how that might complement some of the government support that's been fl. Floated out there. Just early thoughts on what that could do for your north american outlook. Next year. Thank you. Yes, we see. This as clearly net positive. There's a combination. Of the soybean purchases that are more clear now for this year. And the next few years so farmers can. That's, that's really the core of what? Farmers look to is market stability and predictability. But. Then there's also the government support that's been strengthened, and so. It's a dual positive out. Outlook. Having said that, We think this is going to be? A little bit of a show me situation where the farmers are going to. Need to have the trades actually happen. The deal actually finalized. The beans actually being purchased, which will then drive real pricing. In the market. Our phones weren't. Ringing off the hook yesterday with all kinds of purchasing orders coming in. But it's net positive. That will just take some time to play out in the. Market. It's probably more of a 2026 effect. The next question comes from Jamie Cook with true. Truest securities. Please go ahead. Hi. Good morning. I guess just my first question. Just on the North America dealer inventory. It's nice. That it came down to eight months, I guess, versus eight to nine or nine. Months last quarter. This sounds like this is obviously going to. Go into the excess inventory is going to go into 2026. So just any color there on at what point in 2026 do you think? We could get right size. And if we continue this way. And given what you're. Saying about North America, is there greater risk in 2026? North america. Would be at a loss. Again for 2026. I guess that's my first question. And then I'll ask the next one after you answer this. Yeah. Jamie. So I think overall, North America, the team did a really. Good job in reducing the units on Hannah's, I think Eric said around. 13% down sequentially. Given. The change in our industry outlook for this year with large AG. Being down now around 30. And as Eric alluded in his. Opening comments here we do see North America down. Large egg down in north next year as well, that is. Putting pressure on us to get to that six month target. We won't. Get there by the end of the year, I think we'll make improvement from the eight. Months down. But we won't get to the six months. Now, again, that's based. On our current outlook. I think, as Eric just said on the PRI. Prior question here. A lot of new information has come out over. The last couple of days with the China trade agreement. With more. Conversations about. Subsidies for the farmers. And just to put it in perspective again, our industry. Our inventory levels are based on the twelve month forward. Look so again. If, hypothetically, if large ag in North America was flat next year instead of what we're. Assuming. Is down. That would have changed my current eight months. Would have reduced it by around a half a month, and so. It's fair. Fairly sensitive to what looks, what 26 will look like, so. Again, if we see that market turn here based on farmer sentiment, based on. Increased purchasing in 26, we're going to be in line with our target. Fairly quickly. So a little bit hard to answer right now because I think. There's a little bit of flux in the system based on some of the most recent news. Okay. Thank you. And then I guess, just my second question. Tariffs in the lower price, I think last quarter. The guidance assumed 45 cent in net tariff. Impact to eps. Any update? Sort of. With section 232. How. That impacts you. And just curious how we're managing. The higher cost. But then, obviously. You lowered your pricing assumption. So where are you seeing the discounting, and how do you think about pricing into 2026, given what some of your peers have communicated. Yes. No. I think the incremental sec. Section 232 items. Had a relatively modest. Impact to our overall tariff cost. Again, as we've sort. Of quoted a net tariff number for 2025. I would say we are marginally worse relative to the 45. Cents more due to the incremental loss volume that we're. Estimating here versus the industry. And so. I think that's sort of a little bit of the challenge for us here as we. Think about the pricing comment for this year. We have seen some increased competitive pricing. Ten. Tension more in South America and Europe. And that's what's forced us to change our outlook from what was up around one. To somewhere in the range of zero to 1%. We will still be net neutral, deposited on price. Include versus material costs, and that does include tariffs on a global. Basis. So we're still going to be able to cover it, but maybe. Not as much as we had hoped, given the current environment as. We look into 2026, we're going to see how the. Industry dynamics play out. As we've said from the beginning, our goal. Is to limit the cost of the tariffs to us and to the far. Farmers where we can't do that. We know that those costs will be centralized. Likely here in North America, and we're going to look to try to spread pricing. as broadly as possible and as i again early look into 26 again i think As a total company, we should be able to cover the. Material costs and the pricing. But we want to get through the year end before we. Give more official outlooks for 26. Thank you, Damon. Very helpful. The next question is from Kyle Mengez with Citigroup. Please go ahead. Thanks for taking the question, guys. Maybe just jumping off from the last question. It'd be helpful. To just hear you guys elaborate a bit more on the pricing competition you're seeing. Particularly, it sounds like, in Brazil and Europe, just maybe what's going on there. Yeah, I think Kyle. What we've seen is the south american market especially. Brazil. As we said, the last quarter has started to recover. It was the first one of our three major markets into the downturn. It started to recover mainly in the medium and low horsepower segments. Of the market. And influenced a lot by the specialty crop farmers. Coffee, citrus. And what we've seen is a little bit of a. Slowdown in those markets here. And so. The market is still growing. I would say we were zero to five last quarter. We were probably closer to the high end of that. And as we look at some of the compet. Competitive nature down there with some discounting, especially in. That segment. It's reduced our outlook. Now closer to the lower end of. That segment again. I think the markets are still doing well. But just given the push to try to drive volume there, we're seeing. That segment of the market be a little bit more competitive in. Nature. Got it. And then just on your earlier. Comments on global retail sales looking like they could. Be flattish. Year over year, next year. Assuming that's more so just talking. About unit sales. I'm curious if that includes. Precision at all and would be helpful just to hear you discuss a little bit. The trends you're seeing in demand for your precision solutions into 2020. Six. And how you feel like you're positioned. In that retrofit market going into next year. Yeah, so. Maybe I'll touch on. The industry. How much metal at Eric? Elaborate on the PTX business. So our outlook. For next year is really based on retail unit sales. It's not really including parts or our PTX business. Think of that more. As whole good sales. Yeah, and then ptx, we're. Hitting all our forecasts this year. It's going as we would plan it to be. At this stage of the cycle, we're at the trough, so the bars are lower than. Where we ultimately want them to be, but we're signing up dealers. We've got over 90% of our Agco machines now going out of the factories. With. Trimble technology. Essentially, if. You look at the two channels that we inherited, the precision planting and. The ptx trimble channels. We've got over. 90% of the market covered in everywhere except for Brazil, and that's in the low. 80s. With that dealer network, and we're working on melting those together. The effort. To end up with combined dealers that have the full portfolio as well. Underway. We've got 50 of those done. Targeted to have 78 of them by the end. Of the year. That'll cover about 70% of the US market, which is the fastest growing precision. Egg business. So just trying to give you a few data points on both channel as well as. Technology on our product and then new technology. We had our field tech days and PTX launched. Eleven new innovations this year, well ahead of what we had. Anticip. Anticipated when we were putting the business together. So the innovation engine. Is probably running ahead of schedule. Financials are on track. Channel development is on track. We've got. A new leader in charge of PTX. He's hitting the ground running really well. Has visited many of our global operations in terms of sites and deal. Dealers. I'm very pleased with how that's going. Just as a. Reminder, Retrofit doesn't go down as much as the rest of the business. It only. Declined about a third as much as the overall. Decline of the whole goods, and so. We're seeing Al. Although it's down, it's not down nearly as much. And as it recovers, we expect that that will recover. As well. Caller thanks. Guys. The next question is from Tammy. Zakaria with Jpmorgan. Please go ahead. Hi. Good morning. Thank you so much. I wanted to. Get a little more clarification on the pricing outlo. Outlook being changed. Can you help us with? Which regions? Or region is driving. That reduction in outlook, and I just wanted to make sure. Is fourth quarter pricing still positive, or are we talking about negative PRI. Pricing. Yeah. So, Tammy, fourth quarter. It will still be positive. If you look at our year to date, I think. we're up around 50 basis points. Give or take. And so pricing will be up around 1%. In the fourth quarter total. Company wise again, if I think. About the change in the pricing again, based on. One of the prior questions. The change really was driven more. In South America and Europe is sort of where we saw. The reductions relative to our Q two outlook for you guys. Understood. Thank you. And my next. Question is, I think I heard you say North America. Large egg. You now expect to be down next year. Can you. Help us frame what the down means. As of right now, are we talking about. Flat to down or down? To some degree, but less than this year's 30 is any way to frame. That. Yeah, prior to the news. Of the last two days, we would have said down, like, say, single digits. Nowhere near as much as this year. But then. Since then, we've had a couple pretty significant positive indicators in terms. Of farm support for farmers from the government. and Pricing stability of China buying soybeans. So where that actually end up is unknown, but it won't be anywhere near. What we saw this year. We believe we're at the bottom. Of a global industry. We believe pricing is probably at about its worst. We think. Pricing power will be stronger next year. I think that 25. Is probably. In many cases, the worst of the cycle. Understood. Thank you. The next question is from Steven Volkman with Jefferies. Please go ahead. Great. Good morning. Thank you, Dam. Damon, can you just give us a little bit of a walk? Into the. Fourth quarter. There's a pretty big margin. Expansion, kind of. Implied in your guidance. And I'm just curious, what are the buckets? That kind of. Deliver that. Yeah, I think Steve. For us. The margins in the fourth quarter should. Finish up at around 9%, or a little bit over 9%, to deliver. The seven and a half percent. Full. Year. And as we look at some of the improvements, I think Europe again. Four quarters, generally a fairly strong quarter for Europe. And so from a volume standpoint, so we should see the margin. Margins tick up there. Asia Pacific is one. Of the early was in the down market early, and we see that improving. So I think. We see a little bit of the margin coming out of there and then south. America would be the other one. North America continues to be the challenge. If I think about the margins in North America, Relative. To the third quarter, given the increased level of underproduction. Again, we. Said on the scripted remarks that we were down around 50 and Q four. Will be down. We'll be cutting productions over 50% as we. Continue to try to focus on that dealer inventory. So I think sequentially, Those margins will be even lower here in. The fourth quarter for North America. Okay. Thanks. Helpful. And then maybe just to. Focus on the restructuring program. So the 175 to. 200 million. Is there a benefit of that in the fourth quarter? And then what would the benefit of that be in 26. Yeah. Again, year over year. We're picking up steam as we move through the restructuring act. Actions. So there will be some benefit in the fourth quarter relative. To last year. That's embedded in the outlook already. As. I look at next year, you're going to get the carryover from the original. 100 to 125,000,000 and you'll get some of the early. Parts of the incremental 75 so next. Year. As we look at the restructuring benefits. Today, I'd. Say it's probably in the range of 40 to 60 million of increment. Incremental improvement relative to 2025. Super. Thank you. The next question is. From mcdobra with rw baird, please go ahead. Hey. Good morning, everyone. Want to go. Back to the tariff discussion, if we can. What I'm confused about, frankly, is this interplay between. Section 232 and just a normal reciprocal Ta. Tariffs. And I guess the way I would ask the question when we're sort of thinking. About your guidance for 2025. There was a sort of cadence in the way these tariffs. Kind of came into play. Not much impact in the first half, maybe more. Impact in the second. You also have Fifo. Accounting. So I'm wondering. Is it fair to think. That the impact from these tariffs is actually greater in 2026 than. What's embedded in the 2025 guidance? And if so, is there a way to. Maybe quantify it for us. Yeah, sure. Mig. So yes, in answer to your question, if we look at the there. 's a couple of variables to your point. We still have some cost. That we have costs that have flown through our penile related to the. Tariff payments we're making. Some of it is still tied up in inventory. And then we will have the full year run rate of those. Tariffs, assuming there are no changes. So again, when we think about that, we've also announced that we put price actions in. Effect in many of our businesses. PTX parts whole. Goods for model year 26. And so we have only seen a port. Portion of that, and that's why we're sort of giving you that net effect. This year. But if I just try to quantify. In absolute terms, what the tariff costs are, again, not mitigating. With price or other actions for next year. Again, assuming no changes. To what's in effect today. I would tell you that. The total tariff cost are less than 1% of my total company sales. So this year we're guiding to 9.8 billion. I'd tell you the total tariff cost on an annualized basis would be less than one. Percent of that. Now, that would be concentrated here in north. America, so the percent would be more. But as we talked about in the past, Our philosophy is to try to price in the region where we. Can. But to the extent we're not able to pass all of that, given competitive dynamics, In that region, we look for opportunities to be strateg. Strategic and increase prices in other parts of the world to offset that total cost. Here for the total company. Okay, that's really helpful. Thank you for that. And then maybe. A quick follow up on South America. I don't know if this the right way to think about it, but when I'm. Sort of looking. At margin here. Your revenue has gradually recovered. Sequent. Sequentially through the year. we've seen a sequential step down In margin from the second to the third quarter despite reven. Revenue being higher, and I'm kind of wondering if this is a function of pricing. As you talked about earlier, or if there's something else going on that. We need to be aware of as we think about the fourth quarter. Thanks. Yeah. So I think Meg. There's been. A couple of things. The mix, if you think about year over year. And more. The mix is we talk about the high. Horsepower segment, despite all of the geopolitical stuff that. we're hearing about brazil being a beneficiary we're not seeing The large ag part of that market pick up yet? And so what? We have been seeing is again that medium low horsepower specialty. Crops. So what you're seeing year over year there. Is really more. Of a mixed challenge in the quarter. We had a little bit of a warranty. Spike year over year, nothing significant, but just on a quarter year over year. Bas. Basis, warranty was a little bit higher. When I think about. The fourth quarter again, you're going to see that mix headwind. Come in. In South America, as again, we're not seeing the large horsepower. Pickup. And if you look at the fourth quarter for South America specifically, Last year, we called out a special tax benefit for. R and D. It was about 1% to one and a half percent of a margin lift. That's not repeating this year. And so those are the two driver. Drivers, as I think about the fourth quarter, is really the continued mix decline. Year over year. And then that one tax benefits that I had in the fourth quarter. Of 2024. All right. Much appreci. Appreciate it. The next question is from Chad. Dillard with Bernstein, please. Go ahead. Hey. Good morning. Guys. Question for you guys on North America. So. Can you walk through the path to margin recovery is. There further restructuring that you can do. And then also, I guess, how much of that headwind is just coming from tariffs Yeah. So, Chad. Part of the overall restructuring programs that we're talking. About. A portion of that is in North Americ. America, so we will see some marginal benefits of that. As we. Move into next year. When I look at the margins right now, Or the negative margins. It's heavily influenced by the level of. Underproduction again. I think, as Eric mentioned, when you look at. Where we were producing in 2023. The number of. Hours versus what we're producing right now in the back half. Of 25. We're down. Around 70 plus. Percent. In hours in North America. So when you just think about. The cost of those factories running at that lower level of utilization. That is a significant drag on the margin. Margins. On top of that, as I said, the tariff costs. Are centralized here. The team is doing a nice job in trying to. Offset that? I'd say on a dollar basis. We're not offsetting it on. A margin basis, so obviously that's going to be margin dilutive. So the key for us is to get the volume. Right. We look at this industry, and I think last year, when you exclude Gra, Grain and protein. We were 2.3 billion or so, give or. Take. We need to get that volume back up and whether. That's the industry recovering. Whether that's the continued focus on. Gaining share. All of those things are going to be critical, I'd say. Parts is doing quite well, but in North America, parts is a little bit weaker. Year over year. So again, that's a high margin part of. The business, so we need. The volume has to start flowing back in. North America and it's not necessarily a reflection of what we're doing. It's more. Reflection of the industry, because when we look at fence, we're actually gaining. Share here in North America. You're just gaining share on a much smaller. Pie, and you're not seeing that drop to the bottom line. Just. Given the overall industry to climb. Got it. That's super help. Helpful. And then just secondly, you were talking about. Your pricing strategy to mitigate tariffs and talking about. Spreading it, I guess, more globally. I'd love to get a little bit more color on. That. I guess what I'm trying to understand is. How successful are. You seeing pricing stick. If you're looking to expand more. Globally than narrowly focusing on pricing in North America. Maybe I'll take that one. Our biggest market is Europe, and we continue to grow share there even though. We put pricing into that market, South America is probably opposite. It's like Damon said it's. The most price competitive right now. And so it's been the one that's the most difficult for us to have. Pricing power at the moment. But big picture. South America is going to come back as the industry comes back. We've had the most success in Europe. Put the. Price in and gain share at the same time. So our disconnect. Between where we incur the tariffs and where we offset. It has been working. Remember, there's a three pronged strategy there. Number one is. Work with our supply chain to minimize the cost impact. And moving products around. Within our supply base or. Within our manufacturing operations is item number one. Item number two is project. Reimagine. We're going to take about $200 million out of our cost. Structure. On a little over a billion dollar base, so that's a self help area. And then only third is the pricing action and. We've been really clear all the way along is we're going to put price around the globe. Wherever we can, where the market will bear, and that focuses on North Americ. America. Thank you. Next question is from joel jackson with bmo capital markets, please. Go ahead. Good morning. What's on? Your outlook that you expect next year. Global sales flats Europe up. The rest of the markets down a bit. Can you speak to knowing what your inventory level. Levels will be at the end of this year. What? That might mean for under. Underproduction. In the various regions we might expect next year. Yeah, Joel. Obviously. I think if we look around the world, Europe, we continue to be in. A really good position. You didn't see much under production in Europe this year. And again, given the dealer inventories right now, are sitting below. Our optimal level, I would say. Sort of consider that. Relatively flat year over year, again producing closer to. Retail or in line with retail? Excuse me. South America. Again. The industry is picking up year over year. If you remember, we had. A lot of under production here in the first half of 2025. And so, as I think about South America, you'd probably see some incremental. Positive from absorption on the full year, it'll be first half weighted and then we'll. Start to laugh. The comps that we're seeing here in the third and fourth quarter where we're producing closer to retail. North America, again, is a little bit of the wild card again. If you look at what we've said with North Americ. America large ag potentially being down our dealer inventories. At eight months right now, hoping to get that closer to our target. That would likely result in some underproduction here in the early. Part of 2026. But as Eric said, given the rece. Recent news with the trade deal. With potential incremental subs. Subsidies in my comment that if that changes the industry outlook. For large ag that may help. Us. accelerate or not have to underproduce but again north america is still A little bit of a TBD next year. And then finally, can you maybe talk about. What sort of subsea pax? And states Bailey package in the states, magnitude might move the needle. For your end customers. 5 billion, 10 billion. $15 billion. Programs, whether that's $50 an acre, $100 an acre. Have you thought about sort of what's needed. To move the needle, to get farmers to look at capital purchases and not just. Do leveraging or working capital. I think it needs. To be over 10 billion. Ten to 20. Anything in there will get farmers attention. Granted. That money is not seen as the same as market driven profit. Profitability. They're more likely with subsidy money to pay down debt. And other things because they're not sure if it's going to be sustainable in the next year and year. After. So if the trade deal really sticks and there's a three. Year commitment to purchase. 25 million metric ton. Tons type purchasing or more. That's going to drive confiden. Confidence way more in farmers than will the subsidy. The next question is from Angel. Castillo with Morgan Stanley. Please go ahead. Thanks. Good morning, everyone, and just wanted to go back to maybe one of the earlier discussions on. North America margins and tariffs. I just wanted to check, I guess. Am I doing the math? Right. Based on what you talked about with the one percentage of sales impact next. Year that that kind of implies something approaching or kind of. Roughly a dollar. Of tariff headwind. So if you just comment on that and. Then just relate it to that. I guess based on what you're estimating today for kind of. The North America Outlook, fully accepting that there's a lot of moving. Pieces still, which quarter would you kind of expect to see? The kind of. Peak pressure in. So, angel, can you peak pressure? In what regard? In terms of how you kind of spread that tariff headwind, which. I'm assuming there's a little bit of a ramp up. Can you, as you kind of work through inventories. And the flow through of that tariff impact on your kind of PNL. So, just curious, which quarter would kind of see the peak of it before it starts? To kind of comp. Your numbers. Yeah. Well, I think first question again is if our sales right now are nine point. 8 billion. I said less than 1%, so. You're probably looking. At sort of less than a dollar. Call it closer to 80. Cents, give or take, depending on how things finalize against some of these tariff. Tariffs, as you know, are still changing, and those will influence. Some of the small horsepower tractors that we buy from other that are import. Imported from other countries, so I don't want to be too precise, but. Directionally. Less than that. And again, that doesn't take. Into consideration the pricing actions that I mentioned as well, so. Again. When I gave Mig that number, that was the absolute tariff. Cost. That's not my net effect to PNL next year. Because I already have pricing actions in effect in parts. In PTX for model year 26 equipment, and so that net number. Will be less than that. Again, we haven't given a specific outlook we want to see. How? The fourth quarter unfolds, but it will be a lot less than that absolute. Number that I'm quoting you for the tariff costs themselves. As I think about the cadence, we're starting to already see that. Float through our PNL in North America, depending on the product. Again. As you know, we buy a lot of these medium and low hawks power tractor. Tractors from other companies, depending on the level of inventory that we had. In stock and that our dealers had the stock that's flowing through over a. Period of time, coupled with the costs that were incurring for some of the raw. Materials that we're purchasing for our assembly operations here in the US. So again, I think it's going to phase itself in as we get into. The second quarter, I would think we'd work through most of the inventory that we've. Had, and we'd start to see more of the full effect. I'd say direct. Directionally around q two. That's very helpful. Thank you. And then maybe earlier, I think you had indicated that flat. Volumes next year would actually reduce your inventory levels by about half a month. And I think your current assumptions was down single digits. I guess first. Can you put a finer point on kind of what that assumption was for North America? Is that go to mid single digits or high single digits type of decline? And then if for some reason, I guess volumes in North America large ag wind up being. Closer to down kind of midteens, which I think some investors just kind of channel checks. Suggest. That might be a realistic risk, I guess. What's the sensitivity of. Mass or impact on your inventory levels if it were. To be closer to the midteens. And what does that mean for under production next year? Yeah. We haven't given a specific. Number related to what we were thinking for 26 again. As we look at the data, as we look at the analytical models running, we're starting. To see a down. I think, as Eric said, sort of in that mid single. Digit range is what we were directionally looking at. I'd rather not. Speculate right now with all of the recent news that's come out this week. Again. I think, as Eric said, those are both net positive data. Points for farmers in North America, and we're hopeful that that has more. Of a positive catalyst as we go into 26, but obviously to. The extent it was down. Using your mid teens numbers. We would be forced to keep the under production probably longer. To continue to reduce the dealer inventories. We want to make sure that. We're getting that down to that six months as quickly as. Possible. And again, given the numbers you hear us quoting, with production down. Over 50% again in the fourth quarter. We're being as aggressive as we. Can. In trying to minimize. The putting incremental inventory into the dealer channel here. Very helpful. Thank you. this concludes our question and answer session i would like to turn The conference back over to Eric Hansodia for any closing remarks. Yeah. Thank you for joining us today and all these thoughtful questions. Agco continues to make meaningful progress on our transformation journey. We. Delivered a strong third quarter performance with strong margins, disciplined inventory. Management accelerated cost reduction and healthy, free cash flow. Generation year to date. I'm really proud of the team for achieving this. Amidst. Macro volatility by focusing on what we can control. In. A dynamic environment that always and always keeping our eyes on putting the farmer at the. Center. In fact, the feedback we're getting from our farmers is real strong. Our net promoter scores at our all time highest level in the company's history. They like the net impact of our products and what we're doing with our dealers to serve them better. In the quarter. Europe is our biggest market. Continued to. Provide stability. We know farmers around the world are under pressure. Our priorities, supporting them with efficient machines and technology that keep. Them productive and profitable. We continue to execute our strategic shifts that sharpen our focus and unlock longterm potential, including the TAFE exit, the PTX creation and project reimagine our innovation flywheel is spinning faster than ever with new autonom. Autonomous solutions in the launch of farm engage, reinforcing us as one of. The most progressive leaders in smart farming, and I think you'll see that. On display big time at Agritechnica, the world's largest. Ag show. Coming up here in a week or so. that will be a great way To engage with all the exciting things that Agco has got going on. Our 2025 financial outlook reflects our confidence in the strategy and the strength. Of our global team. Even in this challenging environment, we are investing. In the future, gaining share, executing with agility, and always. Putting the farmer first. Thank you for your participation today. We really appreci. Appreciate it. The conference has now concluded. Thank you for. Attending today's presentation. You may now disconnect.