Shares in Agco, the manufacturer of Massey Ferguson and Fendt machinery, fell by as much 12% this week after the group reported significant declines in full-year sales for 2015 and reiterated its bearish outlook for the coming year.

Group sales for 2015 declined by more than 23% to just under $7.5bn, reflecting just how difficult the current trading environment is for machinery manufacturers. Excluding currency headwinds of 13%, sales in constant currency were back by more than 10%.

Agco’s operating profits for the year were just over $383m, a whopping 45% decline year-on-year with margins tightening 200 basis points to a little over 5%.

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Agco reported net earnings of $3.24 per share for the year – a decline of more than 30%. Of more concern to investors will be the further 30% forecast decline for earnings in 2016 ($2.40 per share), indicating just how negatively Agco sees the market performing in the coming year.

Martin Richenhagen, Agco chief executive, described the market conditions in 2015 as highly challenged and was just as pessimistic in his outlook for the year ahead.

“We expect difficult global industry conditions to persist through 2016, with farmers delaying purchases and industry inventory levels being managed down,” said Richenhagen.

Markets

In the US, Agco said that tractor sales were down 13% while heavy combine type machinery sales were back 28%. In Europe, tractor sales were firmer only declining 4%, while combine sales were back 10%. The group said that the declines were most pronounced in the UK, Finland and Germany.

In South America, Agco said that combine sales were back close to 40% year-on-year. In particular, the market in Brazil was extremely weak with the economy entering recession over the last 12 months, funding issues from the Brazilian government’s financing programme and a general weakness in the sugar sector.