AGCO Corporation (NYSE:AG) today reported record net earnings for the first quarter ended 31 March 1998. The Company reported net sales of $701.5 million and net earnings of $32.7 million, $.52 per share for the first quarter. Net earnings increased 27% over 1997 and earnings per share increased 18%.

Earnings on Comparable Basis

AGCO’s first quarter 1997 results included nonrecurring expenses of $2.6 million, $.03 per share, and an extraordinary after-tax charge for the write-off of unamortized debt costs related to the refinancing of its revolving credit facility of $2.1 million, $.03 per share.

For comparative purposes, excluding the nonrecurring charge and the write-off of unamortized debt costs recorded in 1997 net earnings were $29.5 million, $.50 per share, for the first quarter of 1997, versus $32.7 million and $.52 per share for the first quarter of 1998.

Robert Ratliff, AGCO’s Chairman and Chief Executive Officer stated,

"AGCO continues to produce positive earnings growth. Our emphasis on margin improvement has been especially beneficial, despite the negative influence of currency movement and the decline in European and Asian markets."

Operating Results

Sales in the first quarter of 1997 included approximately $19 million in sales from the Fendt Caravan and the Deutz Argentina engine businesses. Fendt Caravan was sold in December 1997. Also in December 1997, AGCO sold 50% of its Deutz-Argentina engine business to Deutz AG in the formation of a joint venture.

Sales were negatively impacted by approximately $32 million in the first quarter of 1998 as a result of the translation effect of the strengthening dollar against most European currencies. Excluding the currency impact and sales from disposed businesses, AGCO’s sales increased 7% over the first quarter of 1997.

Excluding nonrecurring charges, AGCO’s operating margin for the first quarter improved to 9.7% in 1998 compared to 8.4% in 1997.

"AGCO’s introduction of new products in the second half of 1997 has greatly contributed to improved margins compared to last year," Mr Ratliff stated.

"Additionally, the acquisition of Dronningborg in December of 1997 has given us the opportunity to begin to generate synergies in combine production and sourcing."

Included in the first quarter operating expenses were $3.2 million, $.03 per share, of amortization expense relating to the Company’s Long-Term Incentive Plan compared to $2.6 million, $.03 per share in the prior year.

Unit sales of AGCO tractors increased approximately 7% during the first quarter of 1998, slightly less than the 10% industry increase. Increased sales of Massey Ferguson midrange and high horsepower tractors contributed to AGCO’s year-over-year increase.

"The North American market continues to be strong and reflects the farmers’ optimism and strong cash position," said Mr. Ratliff.

"Although the first quarter is generally the slowest quarter for equipment purchases, we are encouraged by the favorable acceptance of our new products in North America."

Industry retail unit sales of tractors in Western Europe declined approximately 5% in 1998 compared to 1997 levels. Retail unit sales of AGCO tractors increased 2%.

"Industry results in Western Europe continue to be impacted by a severe decline in the UK market compared to the first quarter of last year," Mr. Ratliff stated.

"The remaining European markets, excluding the industry sales in the UK, declined approximately 1%."

Industry retail sales of tractors in Brazil increased 34% over last year, and AGCO’s sales lagged the industry. Industry sales of tractors in Argentina decreased 11% compared to 1997, and AGCO’s sales decreased in line with the industry. Industry combine sales, which are seasonally strong in the first quarter, were up approximately 65% in Brazil and 5% in Argentina. AGCO’s combine sales exceeded industry sales in both countries.

"Improved farmer financial conditions, as well as a strong harvest, contributed to the continued strong rebound in the Brazilian markets," said Mr Ratliff.

"Our tractor market share remains strong at approximately 38%, and we continue to hold the line on pricing in a very competitive environment. Margin improvements in South America have contributed greatly to AGCO’s overall results."

Rest of the World Markets

Outside North America, Western Europe, and South America, AGCO’s net sales decreased approximately $22 million or 24% compared to the first quarter of 1997.

Mr Ratliff said, "The Asian markets were down significantly over 1997 due to economic difficulties in that region, which was in line with our expectations."

Dividends Declared

AGCO also announced that its Board of Directors approved a quarterly dividend on the Company’s common stock of $.01 per share. The dividend is payable 1 June 1998, to holders of record 15 May 1998.