Agco, the company behind Fendt, Massey Ferguson, Valtra and Challenger, has recorded an operating profit of $196.7m (€179.5m) for the first six months of 2015, a decrease of more than 53% compared with the same period last year.

Operating margins also shrank over the period from 8.3% in 2014 to 5.2% this year as weak global commodity prices, reduced farm incomes and currency headwinds continue to affect the business.

Net profits almost halved from $265m in the first half of 2014 to just under $136m for the same period this year.

Sales for the six-month period were back nearly 26% to just under $3.8bn, with 12.9% of this decline attributed to currency. Combine sales were the worst affected over the six months, falling by an average of 28%, while tractor sales fell by an average of 12.3%.

By region

In North America, the group’s second-largest market, sales fell by 22.4% to $1.04bn as a result of weaker demand for sprayers, high-horsepower tractors and grain storage. Agco said lower sales and production volumes coupled with a weaker sales mix wiped more than $75m from first-half operating profits generated in North America.

South American sales declined by a third to just over $529m, with 19% of this decline attributed to unfavourable currency translation.

Machinery sales in Brazil declined due to the softness in the sugar industry coupled with a weak Brazilian economy. Sales growth in Argentina and other smaller South American markets partially offset the sales decline in Brazil.

Agco’s largest market by turnover is Europe, Africa and the Middle East, which recorded a 25.8% decline in sales to $2.05bn.

Almost 17% of this decline is attributed to currency. The company said industry sales declines were most pronounced in the UK, Scandinavia, France, Germany and Russia, with approximately $94m wiped from operating profits for the first half of the year.

Agco added that tighter margins for European dairy producers coupled with lower commodity prices kept market demand soft.

Outlook

Agco is forecasting that the weak demand for agricultural machinery along with unfavourable currency movements will continue throughout the remainder of 2015, negatively affecting both sales and earnings for its full financial year.

The group has projected net sales between $7.7bn and $7.9bn for the full year and has issued an earnings per share guidance of $3.10.