Good afternoon, everyone. This is Tami Zakaria. I'm the Head of Machinery, Engineering, and Construction Equity Research here at JPMorgan. We are here today with Damon Audia, Chief Financial Officer of AGCO, and also the Head of Investor Relations, Greg Peterson. For those who are not familiar, AGCO is the leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. It provides farmer-focused solutions to sustainably feed the world. It sells a full range of agricultural equipment, including tractors, combines, sprayers, hay tools, and others. So with that, welcome, Damon, and welcome, Greg. So I wanted to start off recapping 2023. You had a record year of sales and profits,
Expectations are relatively more moderate this year versus last year, and the USDA is forecasting farmer equipment down 26% in 2024, after being down almost 17% last year. So how does that shape your expectation for retail demand in North America, let's say, over the next 12-24 months?
Yeah. So I think, Tami, it's important to recognize, as we look at farmer income over the last couple of years, they're coming off of some record levels. Go back a couple of years, it was a record all-time high for farmers. And so not a surprise as we see the numbers coming down last year, and we see the numbers coming down this year. And so if you look at the forecast for 2024, that's still in line with the 20-year average. So not a horrible year relative to long term, just down from the last couple of years of the peak. When we look at commodity prices right now, for corn right now trading somewhere in that $4.14-$4.30 range. So every...
Different by farmer, but directionally, it means they will likely be modestly positive, so the little bit of positive farm net income this year. When we look at that, and we look at the age of the used equipment here, or the new equipment, excuse me, the fleet in North America, what we said on our fourth quarter call is we expect the age is about the long-term average. And again, to have an average, you have to have a couple of years above and a couple of years below. So we still see opportunities for farmers to increase or improve the age of their fleet, and part of that is because of what we went through the last couple of years, where the supply chain was challenged. We, and the industry as a whole, could not supply the farmers everything they wanted because we couldn't produce enough.
And so what would have been probably bigger years in 2021 and 2022, directionally, probably got shaved off or pushed here into the outer years. And so as we look at that, we see those as positive opportunities. Again, it won't be as robust as what we saw the last couple of years, but we still see expect to see good farmer demand. Our expectations for this year is North America down around 10%. And again, that's going to be a mix of high horsepower being down a little bit more than that and low horsepower being down a little bit less than that, but overall, still a solid year for the farmers here in North America.
Perfect. So that's a good segue to my next question. When we look at your guide for the full year, I think you're expecting sales down about 6%?
Mm-hmm.
Which is, again, lower than what you're expecting for the overall industry. And I think you said your production hours would be down 10%. So help us bridge the gap between those amongst those numbers.
Yeah. So if you look at our industry, overall, if I think more for, to break it down, about half of our revenue comes from Europe, and what we said is we expect Europe to be down in that 5%-10% range, North America and South America, down around 10%. So when you weight that, we're probably industry-wide about 7%-8% down year-over-year. When you look at our production, we said around 10%. When you sort of break it down by plant, by product type, you know, that's probably another 7%-8%. Remember, we, we buy a lot of equipment on the low horsepower. We don't just produce it all ourselves. So you're seeing that number come down around 7% or 8%. The, the offset to that is pricing.
You know, we said pricing will be more normalized, where today we're talking about a 1.5% price increase, and then you get into mix and share. We have several new products coming out into market. We have the Fendt 700 Gen7, we have a high horsepower Massey, high horsepower Valtra tractors. We have the Fendt 200, which will be coming mainly to the West Coast but also in Europe. And so we see good mix improvement, and then we see share. And we'll talk more, I'm sure, in detail, but the Fendt market share rollout, that's been part of our plan. We said whether the industry's up or the industry's down, we still have opportunity to grow the white space for Fendt. And the existing Fendt dealers, they've been constrained with selling their products because of supply chain.
So we see good share capture opportunities for the Fendt dealers, North America, South America, and even in Europe. And those are the things that are going to help dampen the revenue decline relative to the overall industry. And then the other two points I would point as to why it's 6% versus the industry is Precision Ag. Again, we'll talk more about Precision Ag, but we expect to see that business growing mid-single digits. And again, a lot of that is retrofit, mixed fleet offerings. So these are farmers who are looking to replace and upgrade their equipment in a smaller investment than buying new equipment. So that's growing mid-single digits. And then the third part of our growth vectors is the parts business.
Again, we've had great growth in our parts business, another high margin business, and we expect that to be growing mid-single digits this year as well. When you put all three of those together, between the Fendt market share growth, the precision ag growth, and parts growth, you're sort of dampening some of that cyclicality that we're seeing in the overall industry.
... Got it. So let's follow up on the pricing comment. What gives you confidence that you wouldn't have to see negative pricing in North America like you've seen in South America? What gives you confidence that the market is good enough, or the inventory in the channel is lean enough for you to not go in that direction in North America as well?
Mm-hmm. Yeah. So when we look at the North American market overall, I guess let's step back and look at our pricing. When we gave the outlook for about 1.5% of pricing, that was a global comment. And what we tried to explain in there is that we assumed that there would be some negative year-over-year pricing in South America, given the very strong performance that we saw, mainly in the first three quarters. So that was a negative embedded in that 1.5%. We do see positive pricing in excess of 1.5% in North America and in Europe. A lot of that is carryover pricing, so some of the model year 2024 stuff that we put out in the marketplace, we already have pricing set.
So we see good carryover, and we think we'll, you know, a good ability to retain that. When we've looked at pricing back over the last 10 years, and we go back through the prior downturn, we've not seen negative pricing in North America. I think the lowest point we saw was around 50 basis points of pricing back in 2016. So there's a strong history that shows that we and our industry historically don't really fall into that negative pricing phenomenon. So again, never predict the future, but we don't see the history showing that. And I think the third data point is really the deal, the inventory in the used equipment markets. We're hearing a lot about growth in the level of used inventory.
I would say that's more on the combine side of the house, where AGCO has a much lower market share than maybe our two global competitors do. But even though you're seeing a little bit of elevation in the tractors, and sprayers and planters, it's not abnormally high versus historical standards. But more importantly, the used pricing, so what the farmers are getting on their trade-in is staying relatively high versus historical standards. And so that makes it easier for that farmer to upgrade his or her equipment, knowing that they're still getting a relatively good value in their trade-in.
Got it. So let's talk about South America. Can you just recap what happened in South America over the last 12 months, and what drove the weakness? And what are some signs of stabilization or recovery that you're hoping to see for that market?
Yeah, sure. I mean, South America is always one of the most volatile markets. For as long as I've worked in multinationals, it's always been the most volatile. And if we go back just over 12 months ago, new president shows up in Brazil with Lula taking over. Lots of questions or uncertainty as to what he's going to do related to the ag business. That region was performing exceptionally well between the increase in the arable land in the Mato Grosso or the Cerrado region. You know, they were adding to their line there. As you look at the geopolitical tensions between the U.S. and other markets, Brazil was becoming more of the exporter for the world, and so you were seeing significant growth. Commodity prices were good, and they were enhanced because of the dollar-real exchange rate.
Farmers were making great profit. They were growing their business. They were adding to their fleets because they do 2-3 plantings per year, so they were adding incremental equipment to their business. And so as we looked at the first half of 2023, we saw phenomenal margins in South America. We were seeing 20+% margins in our business. And I think we were trying to be clear to our investors that we knew that that wasn't sustainable because we were not giving really any discounts, even to the normal dealer discounts. We didn't have to, because demand was outpacing supply.
You go through the first half of the year as the new regime starts to adjust the financing, and again, in South America, you know that a lot of the farmers there rely upon subsidized financing to borrow, 'cause interest rates in Brazil are so high. They put the FINAME financing out there. There was some complications in the farmers actually being able to get the money to buy the tractors. So between the end of the second quarter and the third quarter, as they were working on getting their FINAME financing lined up, we saw the dealer inventory levels move to the normal level, and because they weren't selling out. You get into the fourth quarter, they, because they do multiple plantings per year, dealer inventory levels were high or full, and then there was some questions on the yields.
Because of the timing of the soybean harvest, there was questions about yields, mainly in the Cerrado region or that Mato Grosso region, which made farmer sentiment go negative. And with that negative sentiment, a lot of the farmers stopped buying, and we're sitting here as an OEM, selling into the dealer with an inventory level that's already full. And so the industry got fairly competitive, really offering a lot of retail incentives to drive retail traffic to the farmers. I would say we followed suit to a certain degree. Unfortunately, given the negative sentiment, you didn't see as much sell out to the farmers as what we had expected or I think as the industry has expected, and therefore, we couldn't move as many of our tractors into the dealer network.
That really compressed the margins, because as I'm applying a retail incentive to a group of tractors at a dealer level, that's flowing through my P&L. So as we see that, we knew it was a big challenge in the fourth quarter. We had a one-time and a normal dealer termination fee that affected us by about 300 basis points. But we saw the industry really step back in the first quarter. What we see going forward here in the first quarter was probably more of the same in the first quarter. We know that we have to work through the dealer inventories. The farmer sentiment, hopefully, will continue to improve, as we've seen some rain in the regions and things have gotten a little bit better.
So we're hopeful that in the first quarter, we'll still see the margins likely be relatively flat, sort of that mid-single-digit range in the first quarter. And then as we move into the second quarter, dealer inventory levels start to normalize more. And then when we move into the back half of the year, that's when the subsidized financing, the FINAME, starts, usually in July. So the farmers will get that subsidized financing levels again. Hopefully, that will be a catalyst to drive demand. On our side, though, then there's the production, which also drove the negative, the lower margins. So in the fourth quarter, we cut our production in South America by 33%. So you can imagine the negative that that has on us from an absorption standpoint.
We're cutting production here in the first quarter as well, as we try to rightsize that dealer inventory. We'll continue to work through that, but based on our outlook for 2024, we hopefully work through that in the first half of the year. And then as we get back into the back half of 2024, retail demand and production are, are more equal, so you're not getting the negative absorption like we saw in the fourth quarter of last year and what we'll see in the first quarter of this year.
How confirmed or guaranteed is the replenishment of FINAME or the subsidized loan program you're referring to?
Yeah. So I think, annually, the government does put a financing program out there. The two variables that we don't have clarity on is how much money. Again, this is a limited amount. They put it out there until it's used up. Occasionally, they will replenish it, so we don't have clarity on how much they're gonna put. And the second big variable is the interest rates, and depending on what level of grower you are, there's different interest rates that you qualify for. And so those are still those are the two big data points that we'll have to watch, probably here as we get into the summertime.
You know, their fiscal year starts July 1, so maybe a month or two before, maybe even a day before, is when they sort of publish the information that then allows farmers to react to that.
Got it. And the outlook of going back to mid-teens sort of margin in South America in the back half, is that predicated on pricing stabilizing to, let's say, a flattish level?
Well, if you look at pricing again on a year-over-year basis, when we think about pricing, we think of net. So it's not only the price of the MSRP of the tractor, but it's any discounts that we're offering at a retail level or at a dealer level. So when we look at the net pricing, we expect 2024 to be negative for the full year because we were so strong this past year, and we know that we're gonna be giving more normalized incentives to the dealer, and we put a fair amount of retail incentives to start the year. So as we look at that, we know pricing for South America will be negative. As we get into the back half of the year, we'll start to normalize those year-over-year comps.
If I look at the fourth quarter, I wouldn't expect to see a negative in the fourth quarter relative to the fourth quarter of last year. But for the full year, you're gonna see a negative pricing.
Got it. That's helpful. So let's switch to Fendt. I think you've been very successful at growing Fendt in both North and South America over the last five years. As both of these end markets are slowing, how is your strategy shifting to help the brand grow, even in a down cycle, given we are talking about premium-priced products?
Mm-hmm. Yeah. So Fendt is the premium price producer. It's, it's the best of the best. You know, when you think about Fendt, it started as a tractor brand, and part of our global plan was to create a full line. So we brought the sprayer, we brought the planter, we brought the combine to offer the Fendt dealers the full portfolio that they can now go to the farm and win with. Part of that was part of the growth strategy. The second part was to bring it to North America and to South America, and by redesigning the rear end of the tractors to accommodate more of the row crop farmers here, you know, we've had very good success in bringing that product to North America and South America.
So we'll start with why the farmers want it, and then how we're gonna continue to gain, even in the down market here. The Fendt experience, as we talk about it, is a unique opportunity for the farmers, where you are getting one of the best tractors in the marketplace. It's the most fuel-efficient tractor. It's usually, generally, the most technologically advanced tractor in the market, and it has, you know, the best level of cabin comfort for the farmer. So you look at that just in the product itself, you know, it generates value to the farmer because he or she is saving on fuel. The CVT transmission, if you're pulling an implement, is the smoothest in the industry, and it allows for a better planting or as you're towing your implements.
The tractor itself delivers in return to the farmer in fuel savings and other economic benefits for him or her. The second thing is, what we have is the Gold Star warranty. So it's a relatively new brand to North America and South America. We provide an industry-leading three-year warranty here in North America. Think of it like a bumper-to-bumper warranty, where if something happens to your tractor or your combine, this dealer is going to bring a replacement one on the farm within you know, within 72 hours. All of your maintenance is covered for three years. So as a farmer who's looking at a downturn right now, saying, "Well, if I have to conserve cash and I may not buy new equipment," you have that third year of warranty that no one else offers you.
So your cash obligations are sort of risk-free from a parts and service for the first, for the three-year business versus the industry here in the U.S., which is more two years. So we have that, and then you layer on the dealer experience. Again, as we've rolled out Fendt here in North America, today, we have about 80% coverage. We have about 250 points of distribution. Each one of those dealerships, not even a dealer, but a store, has gone through a certification process to make sure that he or she can deliver the Fendt experience, and whether that's the number of loaner vehicles, the number of technicians they have, the parts and service, all of those things to help deliver that Fendt experience. And so we've seen very good traction in gaining share there.
As we think about going into the industry downturn, there's a couple things. One is those 250 points of distribution, most of them have not achieved the share that they know they were capable of achieving because we, as a company, haven't been able to provide that to them. We've been capacity constrained. We've been seeing good success in North America, Europe, and South America, so we've been limited. So we know that those dealers can continue to gain more share. As the industry comes down, we have more flexibility, and then we also have the white space. Again, we're at about 85-80%, excuse me, of white space coverage right now in North America. Our goal is to get to around 95%, so we see incremental share opportunities there.
and we expect to do that through, downside of the market as well. So that would be point one. Point two is Farmer Core. So we just announced, and think of that as like a customer-connected distribution, and that's sort of how our, our dealers and our farmers are staying more connected, leveraging the technology and the machines, trying to be more proactive in addressing the service needs that those farmers are gonna have by leveraging the information and the connected machines, and helping our dealers be doing it more in a cost-effective way for them and making it easy for the farmer. So that means more mobile trucks.
That means rather than these farmers having to bring these large tractors into the dealership, losing a day, trailering it in, you know, hiring someone to put the flashes out, they go to the truck, they go out to the farm, and we've demonstrated to our dealers that we can do about 85% of the service on the farm. So think of it more Amazon-like. We're coming to you, we're doing the work for you when it's convenient for you, versus the old mall style, where you had to come into the mall. So we're seeing good success there, and we know that we're rolling that out, not just from our own company-owned store that we have, but we're showing that to our dealers of what the value is for them.
So we've seen very good success, and I, I guess I'll give you the last data point that validates the success. If I go back to 2020, Fendt's North and South American revenue was around $350 million. 2022, we were just over... We were about $750 million. Last year, we were $1.4 billion. So if you think of the, obviously, that's coming from share, that's coming from growers looking at the Fendt experience. I was on the road last week with farmers in the Midwest. Every one of them were creating mixed fleets, with Fendt coming into the other competitor products, and their feedback to me was, "Keep doing what you're doing. We love the product, and we want more of it." So we see good momentum, even in a down market.
We expect to continue to grow share.
Got it. I wanna ask two more questions before I open it up to the audience. So I wanted to switch to Precision Ag. Your strategy has been retrofit. I think one of your competitors is-
Mm-hmm.
has been recently stepping up efforts. They recently came out with a retrofit kit at a very affordable price. So how do you differentiate-
Mm
... yourself against competition within Precision Ag?
Yeah. So I think, our competitors are starting to talk more about the retrofit offerings for many of their customers and their farmers. I think there's two ways to look at it. When AGCO talks about retrofit, we're unique in that we talk about we're a mixed fleet, or we're OEM-agnostic. And so when you look at our precision planting brand, you know, we service all makes and all models. Where our competitors, usually, when they're talking about retrofit, they're talking about their brands, and they're talking about some of their recent products. And so when you look at the addressable market of what we cater to from a precision planting application, the addressable market is all of those other brands and our brands, and it usually goes back a lot longer.
And so we have a much larger addressable market and when we think about the precision applications and the retrofit opportunity. So that would be point one. Point two is: How do you go to market with these retrofit applications? Today, AGCO is the only OEM that offers a unique or a discrete go-to-market channel. So we have our new equipment channel that would sell Fendt or Massey or Valtra in other parts of the world, and then we have a precision planting channel. And those are very different salespeople. They're agronomists, they're seed salesmen, they're crop consultants, so they have a different mindset. They're more on the farm. They're more working to drive productivity, and so they're more comfortable in selling these modules, these lower price points. Generally speaking, our competition is selling the retrofit through their OEM channel.
So now you have the salesperson who he or she is making a choice: Do I sell Tami a brand-new planter or do I, you know, for X hundreds of thousands of dollars, or do I convince him or her to buy some modules that may be worth $25,000 or $50,000? And so you have this person who's driven for the big sales, with, you know, like an elephant hunter, or am I looking for these small, these small incremental sales? And again, we're unique in that we have this direct go-to-market channel with precision, where those type of salespeople, that's how their, their business is built on these smaller, incremental retrofit opportunities versus trying to funnel it through an OEM's channel, where you're used to selling the big brand-new equipment.
Got it. I think you have a pending joint venture with Trimble.
Mm-hmm.
Can you just remind us why Trimble, why now? And what obvious synergies or dis-synergies you anticipate from the deal?
Yeah. So I think if you think about these mixed fleet mindset, so the companies that are servicing all makes and models, the two most well-known brands in the industry that do that were Trimble and Precision Planting. And so we brought those two together, underneath AGCO here, as we hopefully will close this joint venture in the first half of this year. But what Trimble brings, again, is a very common culture of servicing the farmers regardless of the makes or models, that that farmer has been using. And again, Trimble has over 10,000 makes and models that they're servicing. And so again, they bring that OEM agnostic mindset. So we see good opportunities. We talked about the joint venture coming together. We talked about $100 million of synergies. The majority of that is coming through channel synergies.
So we have our Precision Planting channel that will look for opportunities to sell Trimble-related products and vice versa. They have their own distribution channel advantage that will look to sell Precision Planting. So creating this retrofit, mixed fleet offering to the farmers will be a critical offering for them. If we think about the technology itself, it was sort of the missing piece for us as we think about our future platforms. Again, as machines are becoming more technologically advanced, they're starting to become a need for more continuous connectivity. We do a lot, you know, sort of edge processing today, a lot of the stuff being analyzed on the machine, but not necessarily connecting with the cloud.
But as you think about the importance of precision in the field, as we think about the implements becoming smarter and having to connect with the machine for that high level of precision and ultimately for autonomy, you need to know where those machines are. And we've been working with multiple providers as we were working on our autonomy, but by moving it all to Trimble, it allows us to basically build our architecture off of that one platform. So as we're thinking about the future state of autonomy, we can sort of build and map that around the Trimble offering and those positioning signals that'll be coming via that software or that service, rather than having to sort of script it depending on different services. So we see a lot of opportunities.
It's the biggest ag tech deal in history, the biggest acquisition we've ever done, so we see a lot of opportunities there. From a dis-synergy standpoint, when you look at the product portfolio, there's not a lot of overlap. Again, we both offer technologies around the crop cycle, very different types of offering, whether it was water management, carbon trading, farm management from their side, you have precision spraying, precision, planting for us. So very complementary technologies. Even in the targeted spraying, again, we had targeted spraying offerings that will go into markets this year. They have one called Bilberry. Ours was targeted more for row crops, theirs was grain.
So complementary today, we'll look and see if there's something we can learn with ours or what they can learn from us, but there's not a lot of product overlap, and it gives farmers a whole suite of offerings that they're now able to leverage. And ultimately, the goal is as we integrate this into AGCO, sort of creating more of an open architecture form. So again, we would term it more of the Android model, whereas these as you continue to see farmers look at more and more of a mixed fleet offering, and whether that's the equipment they're using or the implements that they're using, you're seeing farmers drive for productivity, but getting all of that data to be common and used in one format, that's what the Trimble offering has.
And so for us, we sort of see this as an Android platform, that if you're using a Fendt tractor with a different planter, or you're using a competitor's combine with a Fendt product, it's all sort of being consolidated under the Trimble platform, giving you that usability of having it all in one, in one area.
Perfect. So I think we have some questions.
... Negative, negative is the tightness in supply as we went through COVID, so driving up prices, and now we're into a sort of normalization period. If I look at North America, I don't know how much prices went up in the last couple of years, but it, I think it's a very significant number. And the comfort comes from the fact that prices haven't come down before in North America, but we've never had prices go up so much in North America. So can you just... And we're also in a situation where all of you, all major manufacturers are making far higher margins than you made before. Can you just provide a bit more substance as to why prices aren't gonna go down?
Yeah. So I think there's a couple points I'd look at. If I look at the overall pricing in South America, I would tell you the pricing in South America was significantly higher than anywhere else in the world. We were seeing pricing in excess of 20%, which was significantly outpacing our input cost. If you look at North America, I would say it's probably closer to the company average for the last couple of years. We were 12% two years ago, around 10% last year. We were able to outpace our material cost inflation as a total company, but the pricing that we received in North America was less than what you would have saw in South America.
So you're not seeing, you know, the, a significant increase in the margins in North America being driven by a price versus material cost arbitrage. You're seeing it more from the Fendt market share growth, you're seeing it from the precision market share growth and sort of driving those higher margin businesses. So, you know, I think we look at those variables. The other point I would look at right now is the used equipment inventory and the dealer levels. They're not abnormally high. They're above what we would consider the low, the optimal level, but they're not at a significant elevated level, that you may see, at least today, that we feel there would be a need to do something dramatic.
The whole industry, you would say, has not benefited from price-cost mix?
... I would say we as a company-
In the North America, in North America.
No, I would say in North America, we as a company have benefited from price versus cost, not to the same degree, though, that we benefit in South America.
Okay, thanks. Any other questions in the audience? I think I wanna ask a question. You're taking on some debt for the proposed JV with Trimble. What's the plan in terms of debt paydown? Or do you think, you know, 2-3 turns leverage is okay and you don't need to prioritize debt paydown and focus on something else? How should we think about leverage?
Yeah, I would say we value the investment-grade credit ratings that we have, and we don't wanna. We're not gonna do anything that compromises those investment-grade credit ratings. I would also say that if you look at our balance sheet, we have a very under-levered balance sheet relative to our current rating. So as I said on some of the prior calls, we will issue some long-term debt to finance this transaction. The amounts, the tenors have not been decided yet, but we will put some long-term debt on the balance sheet to create a better capital structure. But that being said, we also know that we're generating a significant amount of free cash flow. We're not a large repurchaser of our stock.
We only buy back stock to offset incentive comp, so we don't buy back stock given our shareholder concentration. So that being said, we know that we wanna set some short-term debt up, some debt that's gonna be pre-payable. And then, given that our Grain and Protein business is under strategic review, if we were to decide to sell those assets, you know, we'd wanna be able to use those proceeds to potentially pay back a portion of the short-term debt.
So once we go to the market, I think what you'll see is a reaffirmation of what I've said in the past, which is some long-term debt, but a fair amount of it that's short-term, that gives us the flexibility to repay that using our free cash flow over the next couple of years, or if there's any proceeds from the Grain and Protein strategic review.
Got it. Any other questions from the audience? I wanted to ask you about your through-cycle margin target.
Mm-hmm.
You have a standing target of 12%, but I think recently we've heard you talk about the possibility of probably mid-teens% at some point.
Mm-hmm.
Can you elaborate on that? What makes you say that? When you think we can hear more details around that?
Yeah. So I think, if you looked at where we finished the year, 12% was our operating margin or adjusted operating margin target. We would tell you that was at about 105% of mid-cycle. And if you looked at the value creation line that I presented on our fourth quarter call, and you were to look at the slope of that line, that conveys about 11.5% mid-cycle operating margin today. So we're still not at the 12%. Our expectations are that over the next couple of years, through the Fendt market share growth, the Precision Ag growth, and the parts growth, those things will help us outpace the market by 4%-5%. Those are all margin-enhancing businesses for us, so we continue to see that as a way to close the gap.
I think what you're referring to, though, is what we did say is with the Trimble acquisition coming in, given the high margins, again, the pro formas that we showed when we announced this transaction, the Trimble EBITDA margins were in the low 30%, so that would be a margin-accretive business for us. And when you layer in their pro forma revenues that were last year were right around $500 million, you know, that will enhance our consolidated margins by 40 basis points or so, give or take. And so when you look at where I sit today at 12% or 11.5% mid-cycle, that's a natural lift before these other things. And then to the extent, if we were to sell the Grain and Protein business, that's a margin detractor.
That's sort of a mid-upper single-digit margin business, and so there's about $1.1 billion of revenue there that's single digits. So if we were to sell that, you know, that would also create a margin lift for us that sort of forces us to revisit our mid-cycle targets. And, knowing that Trimble is likely gonna close here in the first half, and given where we finished last year and where we're projecting this year, we'll probably be out in an investor day later on this year, sort of talking about what's next for us.
Perfect. I think we're right on time. Unless anybody has any last question, I think we can wrap it up.