Dear fellow shareholders, employees, customers, and partners,
The world population is estimated to grow close to 10 billion people by 2050, nearly 25 percent more people in the next generation than we have today. Sustainably feeding that growing population is an awesome responsibility that requires our industry’s commitment to innovation and the rapid evolution and adoption of smart farming solutions to empower the world’s farmers.
At AGCO, we are united by our shared commitment to solving this pressing global challenge. Our Purpose as an organization is to deliver “Farmer-focused solutions to sustainably feed our world.” Working together in partnership with our dealers, we deliver the high-quality, smart solutions farmers need to sustain their operations and the environment while increasing yields to feed our growing population.
As COVID-19 became a global pandemic, it was clear that 2020 would be a year unlike anything most of us had ever encountered. Our immediate and ongoing concern was to protect the health and safety of our employees and to keep our factories up and running to ensure farmers had the products and services they needed to secure the global food supply.
United by our unwavering commitment to serving the world’s farmers, our global AGCO team set a vision of success for 2020 that included going above and beyond to ensure each other’s safety, keep farmers and dealers operating and minimize negative impacts to our results. A vision we achieved with resounding success.
Our global, front-line manufacturing teams were early adopters of stringent safety protocols, creating a global playbook that has protected our employees well throughout the pandemic.
The supply chain organization teamed with our supply partners around the world to secure components to keep factories operational, and restart quickly if shutdowns occurred due to component shortages or employee health concerns. Their tireless efforts resulted in the quick restart of European operations, enabling a safe and seamless recovery for a critical region.
Our commercial and field service teams immediately embraced virtual, digital solutions to engage with farmers and dealers, showcase our award-winning, farmer-focused innovations and grow market share.
Thanks to our team’s collective efforts, AGCO delivered impressive 2020 results despite the ongoing challenges of the pandemic. AGCO reported 2020 net sales of approximately $9.1 billion, an increase of approximately 1.2% compared to 2019. Adjusted operating margins expanded over 160 basis points to 7.0% due in part to our ongoing cost-control initiatives and improving sales mix. Reported net income per share was $5.65 and adjusted net income per share was $5.61, an increase of approximately 26% from 2019. Our focused execution also allowed us to reduce company and dealer inventories, contributing to free cash flow generation of approximately $627 million, an increase of approximately 48% compared to 2019. These strong results allowed us to maintain our investments in premium technology, enhanced digital capabilities and sustainable, smart farming solutions.
In addition to successfully navigating pandemic-related challenges, throughout 2020, the AGCO leadership team and the Board of Directors created a vision and strategy for the future based on our shared passion for farmers and the important role agriculture plays in securing the global food supply.
Our strategy is custom-built to place farmers at the center of everything we do. Deeply understanding our customers and aligning our business to meet and exceed their expectations will secure future growth and deliver stakeholder value. We will continue to leverage our award-winning, differentiated brand portfolio to deliver the high quality, smart farming solutions farmers need to feed our growing population. We will offer our customers best-in-class digital and in-person experiences while engaging with them throughout the lifecycle, from purchase consideration to replacement. Honoring these commitments will help us achieve our Vision to be farmers’ most trusted partner for industry-leading, smart farming solutions.
Strengthening our commitment to sustainability, we’ve embedded four environmental and social pillars into our business that create value for our stakeholders. They are: advancing soil health and soil-carbon sequestration, decarbonizing our operations and products, elevating employee health, safety and wellbeing, and prioritizing animal welfare in food production.
Celebrating a Legacy
From our bold start in 1990 to our current position as the only global, full-line agricultural solutions provider in the industry, our 30-year history is marked by ambitious growth, strategic acquisitions and tireless drive to become an industry leader in our chosen markets.
Martin Richenhagen, our recently retired Chairman, President and CEO, was the driving force behind our performance for sixteen of those years. Under his leadership, AGCO evolved into an integrated global manufacturer of high-tech, sustainable, agricultural solutions. Throughout Martin’s tenure, AGCO expanded its product portfolio, entered new markets, consolidated product platforms, modernized facilities and engaged in our communities. His powerful legacy will impact AGCO for years to come!
Ongoing Commitment to Good Governance
As the needs of our farmers and other stakeholders evolve, so must our strategy and the composition of our Board of Directors. Consistent with our growing focus on digitizing the farm, we recently welcomed two new directors to our Board. Bob De Lange, Group President, Services, Distribution and Digital, at Caterpillar Inc., brings extensive digitalization and distribution experience and Matthew Tsien, Executive Vice President, Chief Technology Officer at General Motors and President of General Motors Ventures, brings important technology and product development expertise to the Board.
In addition to this refreshment program, we executed concrete actions in-line with our commitment to best-in-class corporate governance practices, including (1) the appointment of a new Lead Independent Director, Mike Arnold, the former President and CEO of Ryerson, who brings proven board experience and an operational and leadership track record with global expertise in industrial businesses, and whose role and responsibilities have been enhanced to demonstrate the Board’s commitment to strong independent oversight, (2) the rotation of Board leadership roles, and (3) the adoption of term limits for Board leadership positions. Our ongoing Board refreshment program and evolution of our governance practices reflect the valuable input received through our broad-based shareholder engagement efforts and underscore our Board’s focus on enhancing value for all shareholders.
Deeply understanding our customers and aligning our business to meet and exceed their expectations will secure future growth and deliver stakeholder value.
While 2020 wasn’t the year any of us had planned, I am incredibly proud of the results our AGCO team and dealer partners achieved on all fronts. Our employees’ above and beyond actions helped farmers secure the global food supply while achieving impressive results for our shareholders. I am honored and humbled to lead this wonderful company, and I look forward to bringing our farmer-first strategy to life in the years ahead.
Together, we will advance the future of AGCO and agriculture. Thank you for your continued trust and partnership.
Eric P. Hansotia
and Chief Executive Officer