www.ubs.com/investmentresearch This report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 14. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Global Research 14 June 2020 Future of Farming Transcript: AGCO - Precision Ag and Future of Farming Call Series Precision Planting opportunity is expansive, and the focus is now on plant-level We hosted a call with Seth Crawford, AGCO's VP of Fuse Connected Services and Digital Customer Experience. AGCO's goal is to deliver value to farmers by helping to increase yields, and reduce waste. AGCO believes that their precision & digital solutions can result in 20% profitability gains for farms ($80b globally), driven by increased productivity in planting (15-20%) and nozzle control (5-10%), and 10-15% add'l yield on compaction. A 1,600 acre farm could see a $26K benefit from automated tractor control alone, per AGCO. AGCO also highlighted that once customers have the base technology installed, the customers can unlock more features, which drive higher margins for both the farmer and for AGCO. AGCO (& the industry) have moved from higher level precision (e.g. GPS) to focusing on plant-level precision, which entails developing automation systems & decision engines (i.e. ML/AI), & onboarding the requisite computing power. AGCO's digital focus is more on fleet mgmt, less on farm mgmt On the digital focus, AGCO emphasized the benefits of connected machines at the service level. The new systems allow users to diagnose & self-service their machinery for smaller issues, thereby freeing techs from lower-value tasks. AGCO also noted that the connectivity enables them to notify operators of required maintenance prior to problems arising, allowing them to target their aftermarket sales efforts. To that end, AGCO highlighted that the parts business was up 7% ex-currency (and in the teens in NA; COVID possibly helped remote/digital communcation) in Q1, while total sales (inc. parts) were flat, due largely to increased online sales, which AGCO believes will be sticky. Similarly, the Precision Planting retrofit business (which works across brands) was up ~30% in Q1, with strong dd margins. Rivals are building out farm mgmt platforms designed to optimize total ops (i.e. DE with JD Ops Center); AGCO partners with Climate Corp (North America) & Solinftec (Brazil). Tech adoption has been gaining momentum; startup pipeline is robust & a key AGCO aims to eliminate unplanned downtime via its digital offerings, & believes COVID has reinforced the importance of reliability, which should help drive replacement demand in a challenged year. AGCO noted that nearly all large tractors are being sold with the base tech kit. Re: growth opps, AGCO supplements R&D w/an incubator at U of IL, & looks constantly at the startup pipeline for potential M&A/partnerships. Equities Americas Heavy Machinery Steven Fisher, CFA Analyst steven.fisher@ubs.com +1-212-713 8634 Future of Farming 14 June 2020 2 AGCO - Precision Ag and Future of Farming Call Series Host: Steven: Fisher, UBS U.S. Machinery and Engineering & Construction Analyst Speaker: Mr. Seth Crawford, Vice President of Fuse Connected Services and Digital Customer Experience Mr. Greg Peterson, Vice President Investor Relations We present below the transcript from our recent call with Mr. Seth Crawford and Mr. Greg Peterson. Minor grammatical changes that do not impact the meaning of content have been applied. The opinions expressed by Seth Crawford or Greg Peterson, personally or on behaf of AGCO, herein do not necessarily reflect the views and opinions of UBS. UBS accepts no responsibility for the accuracy, reliability, or completeness of the information, and will not be liable, either directly or indirectly, for any loss or damage arising out of the use of this information or any part thereof. June 4st, 2020 10:00 AM ET Steve: Good afternoon, and good morning. I’m Steve Fisher, UBS Machinery and E&C Analyst. Thanks for dialing in. This is our third call in our Precision Ag and Future of Ag-Technology Series. Through this calls series we intend to provide investors a view on agricultural technology trends, developments in precision ag, along with viewpoints on current business conditions. In this call series, we’re going to feature both newer companies and the well-established incumbents as well. Today we are really lucky to have one of the leading public companies on the machinery side, and that’s AGCO. We have Mr. Seth Crawford, Vice President of Fuse Connected Services and Digital Customer Experience, and we have Greg Peterson, Vice President Investor Relations. Just a quick background on Seth. He’s been with AGCO for roughly a ...
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