Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2019 second quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. Please limit your questions to one question and one follow-up. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to Mr. Peterson, head of investor relations. You may begin your conference.
Thanks, Natalia. Good morning. Welcome to those of you joining us for AGCO's second quarter 2019 earnings conference call. We will refer to a slide presentation this morning that we posted on our website at www.agcocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the appendix of that presentation. We'll also make some forward-looking statements this morning, including demand, product development, and capital expenditure plans, and the timing of those plans, acquisition expansion and modernization plans, and our expectation with respect to the cost and benefits of those plans and the timing of those benefits. We'll also discuss production levels, share repurchases, dividend rates, and our future revenue price levels, earnings, cash flow, tax rates, and other financial metrics. We wish to caution you that these statements are predictions and that actual events may differ materially.
We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year ending December 31st, 2018. This document discusses important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. We disclaim any obligation to update any forward-looking statements except as required by law. We'll also have a replay of this call on our website. On the call with me this morning are Martin Richenhagen, our Chairman, President, and Chief Executive Officer, Andy Beck, our Senior Vice President and Chief Financial Officer, and Eric Hansotia, our Senior Vice President and Chief Operating Officer. With that, Martin, please go ahead.
Thank you. Good morning. Special welcome to Eric, our almost brand-new COO, not so new anymore.
Thank you.
My remarks begin on slide three, where you will find a summary of our second quarter and year-to-date results. We posted another quarter of strong margin performance, and despite market headwinds in North and South America, we expanded our consolidated adjusted operating margins by over 150 basis points and grew adjusted earnings per share nearly 38% in the second quarter. With technology-rich products being well-received in the market, our pricing and cost control initiatives are contributing to higher operating margins. In addition, we increased our earnings outlook for the full year on the basis of our first half performance and our margin projections for 2019. AGCO's long-term performance remains a key focus. We are investing in projects that will drive long-term benefits from raising our efficiency of our factories, improving our service levels, and strengthening our product offerings.
During the first half of 2019, we continued to return cash to shareholders by completing in stock repurchases. Slide four details industry unit retail sales by region for the first half of 2019. Concerns over delayed crop development and lower harvest forecasts negatively impact North American industry retail sales in the first six months of 2019 compared to the same period in 2018. We expect North American industry retail tractor sales to be relatively flat in 2019 compared to last year. Modestly higher sales of small tractors and hay and forage equipment are expected to offset lower retail sales in the row crop segment. Continued dry growing conditions across much of Europe has stressed the development of the winter wheat crop, while milk prices remain supportive of the dairy sector. Industry retail tractor sales in Western Europe increased in the first six months of 2019.
For the full year, industry demand in Western Europe is expected to be flat. Industry retail sales in South America decreased during the first six months of 2019. The benefits of improved grain production in Brazil and Argentina were partially offset by interruptions in the government-subsidized finance program in Brazil and weak macroeconomic conditions in Argentina. For the full year of 2019, industry demand in South America is expected to be flat. While negative in the short term for farm income and farm equipment demand, forecasts for lower global crop production and lower ending inventory of grain have moved commodity prices higher, which will be positive for global farm income in the future. AGCO's 2019 schedule for factory production hours is shown on slide five. Total company production was up approximately 2% for the second quarter.
Production was higher in Europe, lower in North and South America, and for the full year of 2019, we are targeting a production increase of approximately 1%. Finally, our June order board for tractors is up in North America while being down in Europe and South America. I will now turn the call over to CFO, Andy Beck, who will provide you more important information about our first quarter results.
Thank you, Martin, and good morning. I'll start on slide six, which looks at AGCO's regional net sales performance for the second quarter and first half of 2019. AGCO's sales were flat compared to the second quarter of 2018, excluding the negative impact of currency translation, which lowered sales by approximately 5%. The Europe Middle East segment net sales were also flat, excluding the negative impact of currency translation compared to the second quarter of 2018. Sales growth in France and Germany was offset by declines in Scandinavia and the U.K. AGCO's second quarter 2019 net sales in South America decreased approximately 10% compared to the second quarter of 2018, excluding negative currency translation impacts. Funding interruptions in the government-subsidized loan program, as well as weaker demand in Argentina contributed to the decline.
Sales in North America increased approximately 4%, excluding the unfavorable impact of currency translation compared to the levels experienced in the second quarter of 2018. Increased sales of high horsepower tractors were partially offset by declines in the sales of protein production equipment. Net sales in our Asia Pacific Africa segment decreased about 1% in the second quarter of 2019 compared to 2018, excluding the negative impact of currency translation. Lower sales in Australia were mostly offset by higher sales in Africa. Part sales were approximately $384 million for the second quarter of 2019, were up about 4% compared to the same period in 2018, excluding the negative impact of currency. Slide seven examines AGCO's sales and margin performance. AGCO's adjusted operating margins expanded approximately 150 basis points in the second quarter of 2019 compared to the same period last year.
Margins benefited from pricing, increased production, cost management, and the timing of our engineering expenses compared to the prior year. Europe Middle East margins improved over 80 basis points compared to the second quarter of 2018, resulting from the benefit of pricing, higher production, the timing of varying expenses, as well as ongoing cost control efforts. North America operating margins expanded 200 basis points in the second quarter compared to the second quarter of 2018. Increased sales, improved net pricing, and a positive sales mix contributed to the higher margins. Third quarter margins in North America will be negatively impacted by the cost associated with launching new products, lower production due to our reduced market forecast, as well as a weaker product mix.
In South America, the second quarter operating results improved compared to the same period in 2018, as we continue to make progress in the transition of our product offering to Tier 3 technology in that market. Our South America business is expected to be profitable in the second half of 2019. In our Asia Pacific Africa segment, operating margins expanded over 160 basis points on relatively flat sales due to primarily expense control efforts. Slide eight details AGCO's grain, storage, and protein production equipment sales by region and by product. Sales in this product group increased about 4%, excluding negative currency impacts in the first half of 2019 compared to 2018. Globally, grain and seed equipment grew over 12% on a constant currency basis, with the growth achieved in the Europe Middle East, Asia Pacific, Africa, and South American regions.
Protein production sales decreased approximately 70% on a constant currency basis, with the largest declines in the Asia Pacific Africa and North America regions. The global trends toward growing population and increased protein consumption should make our GSI business an attractive source of profitable growth for AGCO in future years. Slide nine looks at AGCO's investments in both capital expenditures and research and development. We're continuing to make strategic investments to refresh and expand our product lines, upgrade our system capabilities, and improve productivity in our factories. We intend to increase the level of engineering expense in 2019 on a constant currency basis to execute our product development plans and meet new emissions requirements in both Brazil and Europe. Our spending plan is needed to maintain our competitiveness and to support the long-term growth of our business.
Our 2019 capital expenditure plan reflects investments to support our product plans and is projected to be higher in 2019 than 2018. Slide 10 addresses AGCO's free cash flow, which represents cash used in operating activities less capital expenditures. Our seasonal requirements for working capital are greater in the first half of the year thereby resulted in negative free cash flow in both the first half of 2018 and 2019. For the full year of 2019, we are targeting another year of strong free cash flow. At the end of June 2019, our North America dealer month supply on a trailing 12-month basis was improved for tractors, hay equipment, and combines. Losses on sales receivables associated with our receivable financing facilities, which are included in other expense net, were approximately $11 million during the second quarter 2019, compared to $9.7 million in the same period of 2018.
As we focus on return for shareholders, we expect cash distribution to continue as an important component of our long-term capital allocation plan. Over the past six years, we've executed share repurchases of nearly $1.3 billion, which had the effect of reducing our share count by approximately 25%. During the first six months of 2019, we completed $70 million of share repurchases and expect cash generation to fund additional share repurchases through the balance of the year. Our updated 2019 outlook for three major regional markets is captured on slide 12 and reflects lower forecasts for both North and South America. In North America, 2019 industry unit tractor sales are now expected to be flat compared to 2018 levels. Our prior forecast calls from the North America market to be up 0%-5%.
Late planting and slow crop development, as well as ongoing trade concerns, are weighing on sales of large equipment. Low horsepower equipment sales, which tend to be tied to more general economics, have been more resilient and are now expected to be up modestly in 2019. Warm, dry conditions across much of Western Europe are expected to pressure yields and contribute to softer demand in the back half of 2019. The dairy and livestock fundamentals continue to be supportive and overall demand in Western Europe is expected to remain healthy. Based on these assumptions, we expect full year 2019 industry sales to be flat in Western Europe compared to 2018. Harvest in the first half of 2019 in both Brazil and Argentina are improved from 2018 levels.
Interruptions in the government-supported finance program in Brazil and ongoing macroeconomic issues in Argentina limited sales in those markets during the first half of 2019. We now expect South American industry retail sales to be flat in 2019 versus 2018 versus our prior forecast of up 0%-5%. Slide 13 highlights the assumptions underlying our 2019 outlook. The priority for 2019 continues to be managing our costs and continuing investments in our products and in business improvement opportunities. Our market forecast assumes relatively stable industry demand across all regions. Our plan includes market share improvement with price increases of 2%-2.5% on a consolidated basis. At current exchange rates, we expect currency translation to negatively impact sales by about 3.5%. In 2019, engineering expense is expected to be up approximately $10 million on a constant currency basis compared to 2018.
Operating margins are expected to improve by approximately 100 basis points due to the benefit of our pricing, productivity, and purchasing initiatives with margin expansion projected across all regions. Below the operating income line, we are targeting an effective tax rate of 31%-32% and interest and other expense to be down about $10 million in 2019 after excluding the debt extinguishment cost incurred in 2018. Slide 14 lists our view of selected 2019 financial goals. We are projecting 2019 sales to be in the $9.4 billion range. We expect gross and operating margins to be improved from 2018. Based on these assumptions, we're targeting 2019 earnings per share of approximately $5.10. We expect capital expenditures to be up approximately $25 million compared to 2018 levels and free cash flow to be in the $275 million-$300 million range.
For the third quarter, our results will reflect the sales and margin impacts of lowering our market forecast for both North and South America, as well as an effective tax rate that is expected to be approximately 40%. As a result, third quarter earnings per share are projected to be in the $0.70-$0.80 range. That concludes our prepared remarks. Operator, we are ready for questions.
Ladies and gentlemen, at this time, if you would like to ask a question, please press star then the number 1 on your telephone keypad. Again, that is star 1 to ask a question. Please limit your question to one question and one follow-up. If you would like to withdraw your question, press the pound key. Your first question is from the line of Jerry Revich with Goldman Sachs.
No Jerry. Jerry, are you there?
Jerry Revich, your line is open.
Yes. Hi, can you hear me?
Yes, Jerry, we can hear you now.
Okay. Sorry about that. I'm wondering if you could talk about the margin trajectory that we should be thinking about in South America exiting this year as you folks complete the product transition, and talk to us about where the supply chain ramp stands exiting the quarter, please.
Sure, Jerry. In terms of margins in South America, you can see that we did improve over last year in the first half of the year. In the third and fourth quarter, we're projecting margins to be relatively flat compared to what we experienced last year. As we said in our remarks, we've made some adjustments to our production levels. As you recall, in 2018, we had elevated production to build some inventory to carry us through some of the changes we're making because of emission changes. Our production levels are down, and that's contributing to the flatter margins. Going forward, by the end of the year, we'll be pretty much done with a lot of these new product introductions that have been so challenging for us.
With the exception of the IDEAL Combine, which comes online next year, we'll be really more stable in terms of our product portfolio and our production. With that in mind, I think we'll continue to show steady progress in improving our cost structure in South America and seeing some margin improvement year-over-year.
Andy, just to put a finer point on that, should we be thinking about the margin run rate in the 5% range that you folks have achieved historically, or are we talking about better margins than that as you complete the transition?
We talk about better margins. This is basically a focus Eric Hansotia works on. Eric, do you want to talk a little bit about it?
Sure. Brazil is included in the overall effort, and it really boils down to process, product, smart machines and Fendt globalization, and South America is part of all four of those. Process standardization and automation and digitization globally is a big area of focus, and we still have opportunity this year and beyond. Product cost reduction is an area as we went through so much rapid change over the last few years with emission changes and so on. We still have some areas where we can take our product costs down. Smart machine development is what our customers are most excited about. The new Fendt machines, the IDEAL Combine, the Momentum planter that we launched in South America, Fuse Precision Planting, all of those are great examples of the whole portfolio of smart solutions that we continue to invest in. That's why our investment in R&D is up.
Lastly is Fendt globalization. We launched Fendt in South America at Agrishow with the new tractor, the new combine, and the new planter, and it was a big hit at the show. South America is a representation, but it's really a global effort on all those areas.
The project Eric works on is called Project 10. This basically is because our internal strategic target is 10%.
Martin, based on that comment, even in South America, you can get to 10% where you have more of an assembly business than other regions, you can get to 10% on your framework?
You heard everything from Andy about South America and Eric, so the 10% is for the consolidated AGCO results. There's no reason why South America shouldn't be there sooner or later. That, by the way, was your third question.
I appreciate the discussion. Thank you.
Thanks, Jerry.
Your next question is on the line is Seth Weber with RBC Capital Markets.
Hey, good morning. I wanted to ask in Brazil again, I guess with the FINAME program now back in line, have you noticed trends kind of returning in July? I guess just on your revenue performance in South America was actually a little better than the market. Do you feel like you're recapturing some share in the region? Thanks.
The answer is yes and yes. The details come from Andy.
Yes. I would say on the two questions, the FINAME program kicked back in probably mid-July, where funding started again. We're starting to see activity. As funds are now starting to flow, the market's returning to a normal activity level. A little slow start beginning of July, but now things have ramped up here in the back end of the month. We'll see how the market goes for the full quarter. In terms of sales growth, the one thing that I would point out beyond what Martin said was where we're seeing improvement our sales is in non-tractor products. We focus a lot, and we talk about South America, about our tractor sales because our market shares are so strong. We're really growing in some of the products that Eric mentioned.
We saw substantial growth in sprayers and planters during the second quarter. We expect that to continue for the balance of the year.
Okay. That's helpful. Thanks. Just my follow-up on North America, the strength in margin. How much of that would you attribute to Precision Planting? I guess you kind of noted that mix is going to drop back off here in the third quarter. Can you just give any color on what's going on with the Precision Planting business in North America?
Sure, Seth, you're absolutely right. Precision Planting is very seasonal, although the first quarter tends to be the heaviest. We had a much bigger contribution from Precision Planting in the first quarter. Second quarter, we talked about sprayers. That's a very good market for us in North America, so that was a big contributor.
Bigger, higher horsepower tractors was also up year-over-year, so that was a contributor. Those are the two biggest contributors. Thanks for your questions, and we'll go on to the next question.
Your next question is on the line of Stephen Volkmann with Jefferies.
Hi, good morning. Both Andy and Martin, you both mentioned pricing as a positive impact on your margins, and I guess that must mean price cost is positive here. Can you just talk a little bit more about what you're seeing in price cost and how that progresses for the rest of the year?
Sure, Steph. In terms of pricing, as we noted, our price target for the year is up 2%-2.5%. That's with strong pricing in North and South America and a little lower pricing in Europe, and kind of reflects the inflationary conditions in those markets. From a net pricing position where you offset with what's happening on our material costs, we're looking at about 100 basis point improvement. We've been seeing that in the first half of the year and expect that to continue in the back half.
Great. That's helpful. Thanks. Then can you just refresh my memory on what's left for repurchase authorization? Would you expect to follow that up with another one?
Yeah. We have about $70 million left, and we'll be working with our board here in the second half of the year to get a new authorization.
Yeah, we plan to have another one at around $300 million.
Great. Thank you, Martin. Bye-bye.
Your next question is from the line of Ann Duignan with JPMorgan.
Ann Duignan.
Good morning, guys. It's actually Tom Simon. It's on for Anne. You've lowered your North America market outlook and production hours for 2019. Just curious if the details of the Market Facilitation Program announced last week by the USDA are factored into your outlook, do you expect those direct payments to translate into new equipment orders? If so, when?
It is factored into our forecast. What we're seeing in the market for North America is still a fair bit of uncertainty in our customer base. As we all know, they had a very challenging spring season, causing lots of late planting. The summer hasn't been as warm and productive as last summer was to do some catch-up like last summer did. A lot of farmers are expecting lower yields. There's also a higher degree of unplanted acres. Farmer uncertainty is fairly high right now, and as we talk to our customer base, they're saying that their buying decision will be put off to later in the year this year than is typical. They're gonna wait until they have their harvest in the bin, and they know what kind of pricing they can expect.
Okay. That's helpful. Thank you. If I just ask a question on GSI, given the impact of ASF on China's hog herd, are you seeing any new opportunities for GSI as the world attempts to fill that protein deficit?
I can take that one. I think there's a few areas. In the short term, it's actually been a negative to our results in that much of our poultry production is down. We had planned orders, with our pipeline of relationships with customers in many of the regions for a normal business. When ASF came, many of those producers, because of needing to cull their herds, had to put those orders on hold and those expansion plans on hold. In the short term, it's been a pullback. In the midterm, we see protein replacement opportunity where protein will shift to broiler production and other forms of protein, which we are also providers of and leaders in. That's where our focus is in the short term.
In the midterm, swine production will come back, and it will be biased more toward more professional protein production facilities that have better bio controls and those types of things. We think in the mid, let's call it midterm, this will be a net positive for swine production facilities and the growth they're in. In North America, in grain storage, we also see opportunities where late planting means a risk of harvesting crops with higher moisture levels. Now that we have Precision Planting, we have some of the best planting intelligence in the market. We're joining that up with our grain business to say where are those farmers most at risk for having high moisture conditions, and how do we help them with dryer solutions? Finally would be the bins that were damaged with flooding. Where can we go help farmers with replacement storage facilities?
What I would like to add is that in the Western society, in Western countries, the requirement for animal welfare is going up.
We have already very interesting solutions in that area, and we invest more into developing animal-friendly, state-of-the-art solutions also in the future. I think it's a trend.
That's great. Thank you very much.
Your next question is from the line of Jamie Cook with Credit Suisse. Jamie Cook, your line is open.
Hi, can you hear me?
Yes, now. You were late.
I know. I'm sorry. I'm managing between two calls. I guess, Martin, I didn't want to miss your call. Martin, just understanding it's probably too early to think about 2020, but there's a lot of different views on how 2020 could be shaping up with where commodity prices are now, and still we're waiting to hear more so on China trade war. Could you give any initial thoughts where you stand relative to perhaps six months ago? I guess just my other question is, understanding you cut production a little bit, how are you thinking about channel inventory heading into 2020? Thank you.
Thank you very much. You know that we don't talk about it, but you never miss a chance to ask. I give you a kind of rough view on 2020. I personally believe that for AGCO, 2020 will be another good year, and we want to show some more improvement, certainly also in the area of margins. You should expect us doing a good job as we do this year. When it comes to the other factor to talk about, I do not see them having really a big impact on our business. I'm positive.
Jamie, on the channel question.
We manage the channel very well. Sorry, I missed that.
As you pointed out, we did reduce some production in the North America region, and that was all to work on our channel and make sure that we don't end up with higher dealer inventories than a year ago. These adjustments we've made will keep us on target for where we want to be at the end of the year.
With the COO, we have more horsepower now also, so you should expect a major improvement.
Okay, thank you. I'll get back in queue.
Thank you, Jamie. Have a wonderful day. Back to the other call.
Again, ladies and gentlemen, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Please limit your question to one question and one follow-up. Your next question is from the line of Ross Gilardi with Bank of America Merrill Lynch.
Thanks. Good morning, guys.
Good morning.
Hey, Ross.
I just wondered if you could comment on the CEMA index and its relevance for your business as you see it. You characterized the European market as healthy. That particular index has been trending lower. I'm just wanting to get your take on how good you think it is for following your business.
I follow this index for more than 20 years now. It's very complicated, and it's basically made in a way that it's always right. When it's positive, it's also showing some negative trend and the other way around. Overall, I think Europe is doing fine, and I see the opportunity of a comeback in important markets next year.
Based on what in particular, Martin?
Based on talking to my dealers, my people, and farmers, which is much better than just an index.
Okay, fair enough. I just wanted to get your take also just on the relevance of the German tractor registration data. There seems to be a real disconnect between your top line and that data. Obviously, you produce in a lot of different countries, but Germany is very, very important. What has it been most recently that caused that disconnect? For many quarters, you guys were outgrowing the overall market. It seems like this quarter, your organic is flattish, which is more what I would have expected given the overall environment. If you could comment on that too, that'd be very helpful.
Yes, we had some extraordinary issues to get all tractors shipped because of basically quality problems and performance problems of some important suppliers. You should see numbers more normal next quarter.
Okay. Got it. Thank you. That's my two.
Your next question is on the line of Andy Casey with Wells Fargo Securities.
Good morning, thank you. Could you help with a clarification first on the SG&A and engineering expense line items in Q2? Those were down year-over-year. I'm wondering if that was all due to currency.
Yeah, that's right, Andy. Without currency, the expenses have been relatively flat.
Okay, thank you. On the revenue outlook, if I'm doing the math right, it looks like the implied second half revenue growth embedded in the assumption seems like it's set to re-accelerate to 2.5% from Q2's 0.6 organic. Could you help me understand the main growth assumptions within that? Meaning, is the second half expectation more or less all price?
Yeah, I would say that most of that growth is in pricing. As we said, our price will be up 2%-2.5% for the balance of the year.
Andy, as we talked about too, in Brazil, with the financing coming online, the year-over-year growth in Brazil is going to be pretty significant in the back half of the year. There's pent-up demand in Brazil, so that's also going to drive a good part of it.
Okay. Thank you. The Q3 comments suggest earnings growth for the second half is going to be pretty concentrated in the fourth quarter. I understand the comments about Q3. What are you expecting in the fourth quarter to drive that re-acceleration?
It's a little bit the usual cycle. The fourth quarter is always the strongest one. Do we have any more details, Greg or Andy?
No, I think what we see in the fourth quarter is, particularly in North America, we talked about how North America will be relatively weak in the third quarter with a weak mix and higher expenses. The fourth quarter kind of reverses that trend. We'll see better mix and better margins than what we saw in the fourth quarter of 2018. We see margin improvement across the other regions as well. It's mainly driven by margin improvement in the fourth quarter.
Okay. Thank you very much.
Your final question is from the line of Chad Dillard with Deutsche Bank.
Hi, good morning, everyone.
Good morning, Chad.
Is Deutsche Bank still in existence?
We are. We're still standing.
Yeah.
I just wanted to get an update on the potential for share gain in Europe. Can you just talk about how you're planning to increase penetration of the Valtra brand? Is it progressing this year versus last year?
Valtra continues to perform well in the market, but actually all our brands are doing well in the market. That's both a tractor story as well as the non-tractor business. We bought Lely a couple of years ago, and that filled in a few gaps that we had in our product line. We now have the largest green harvesting product line in the business.
Including loader wagons, round balers, and things which are very important for Europe.
Exactly. The IDEAL Combine continues to perform very well in the wide variety of crops and conditions that we have throughout Europe. Finally, Precision Planting is establishing itself nicely in Western Europe. That whole combination is creating a partnership with our customers in all brands and strengthening AGCO's position.
Great. Just actually switching over to the IDEAL Combine. I just want to get an update on the rollout, how it's going, particularly in Europe, since that's the first region, followed by North America. I guess, what are you expecting for this year and how are you thinking about the next 1-2 years here?
Yeah, our projections and experience is unchanged from all the previous comments. Volume is unchanged, and the machine continues to perform very well in all crops and conditions. We run it very often against competition, and our customers are really happy with the results that they're seeing from the machine in each region.
We don't talk about volumes for next year yet, but they will be up substantially.
Great. Thank you.
We do have an additional question from the line of Larry De Maria with William Blair.
Thanks. Good morning, I apologize in advance because I jumped on late, guys. If you discussed this already, I apologize. Two things. First, you guys have been fairly vocal about the Fendt, and it looks like you've been in with Ziegler, et cetera, in North America, and you've been growing that brand in different markets as well. Can you maybe talk about the financial impact for this year and then maybe longer term on the Fendt side? Secondly, Martin, you've talked about 8% margins in 2019, 10% in 2020. Given that the guidance is still considerably below that, can you just discuss this, rectify those public comments versus the guidance? Thank you.
My margin numbers are internal targets, and as you can imagine, they are of course stretched to make life a little difficult for my team and myself. Therefore, the official numbers you always hear from Greg and Andy, and you know the numbers for 2019. The 2020 numbers have not yet been communicated. The first question, to be honest, I did not understand.
I'm just curious more about your Fendt plans. You've discussed, obviously, Fendt is a big brand for you. In a way, you're going to outgrow the markets. You've gotten with Ziegler Distribution in North America. You've done some distribution deals, I think, in Brazil. If you could talk about the broader strategy of Fendt and what the financial impact could be in terms of sales, margins, et cetera, as this brand gets rolled out more meaningfully around the world over the next couple of years.
Sure. I'll take that one, Larry. Fendt is a brand that has gotten great reputation in Europe and a strong brand globally, actually. We didn't really move it strongly into the other regions in the past years as a tractor brand because of its design not fitting so directly as a row crop application. With our new rollout of the 1000 Series and now the 900 Series, those are designed to be a globally applicable tractor now. Still great for Europe conditions, but now versatile enough to fit perfectly for North American, South American conditions as well. In addition to the tractor portfolio, we've brought out the IDEAL Combine and in South America, the Momentum planter, and helping our dealers change their game to match the Fendt experience overall. That's the strategy, and it's really just filling out the Fendt experience around the world.
From a financial standpoint, it's still relatively modest in the early years as we want to make sure that we do this very well as we get out of the gates.
Thanks. Does that really close a gap for you guys versus competitors in the professional farmer segment, having the IDEAL Combine, the Fendt tractor, and planters and things that you mentioned? Is that a full-on solution or is there more work to be done to provide a solution to the largest format farmers?
Well, it does. We leapfrog. We basically are in a position now to offer better technologies as we do already for many years in Europe, and this is the plan also for the Americas.
Okay. Thank you.
There are no further questions. I will turn the call over to Mr. Peterson for any closing remarks.
Thank you, Natalia. We'd like to thank all the participants and would encourage you, if you have follow-up questions, to get back in touch with us later today. Thanks. Have a great day.
The AGCO team wishes you a wonderful summer.
This concludes today's release conference call. Thank you for your participation. You may now disconnect.