Despite the increasing massive market decline, 2009 was the second best year in the history of the company. “It was only possible to achieve an acceptable result through great discipline in managing the budget within the entire company" said Peter-Josef Paffen, Spokesman for the Fendt Management at the annual international press conference on 1 September 2010 in Wadenbrunn.

Agriculture and Outlook

“The mood and the readiness to invest of our agricultural customers rise and fall with the trends in producer prices for the main products: milk, meat and grain. These products have undergone extreme price fluctuations worldwide in the past two years. The boom year 2008 was followed by a rapid drop in prices – triggered by the global financial and economic crisis – which lasted well into 2010. Currently, the prices are climbing to a relatively reasonable level again. We are expecting that the mood and the readiness to invest will climb again amongst professional farmers. However, farmers will draw conclusions from their experience with the extreme price fluctuations and will be more careful and not as quick to invest in replacement machines or expand their fleets,” said Paffen, explaining the current situation.

Independent of these short-term fluctuations, the long-term prospects for farming and the agricultural equipment industry continue to remain positive. The demand for high-quality food and climate-friendly regenerative bio-energy continues to grow. The need for modern and efficient agricultural equipment grows along with this trend.

“It is therefore logical and consistent, but looking at the current market trend, not a matter of course, that our President Martin Richenhagen gave the go-ahead for the continuation of the large-scale investment for the expansion of capacity at both the Marktoberdorf and Asbach-Bäumenheim locations. A good, but at the same time challenging, task for us. Planning has been completed. Currently the tendering procedure is under way for awarding contracts for the different construction stages. This year already, the excavators will roll onto the construction site again. The new final assemblies in Marktoberdorf and Asbach-Bäumenheim should be completed in two years,” said Paffen.

“The intermediate halt of the project was painful for us at first. Looking back today, however, the break was very useful for the overall project. Because our new Managing Director for Production, Hubertus Köhne, and his team used the time to completely rework the overall hall and function concept for the final assembly with his team – also taking the larger market fluctuations that are to be expected in the future into consideration. Instead of an assembly line, an assembly system with laser-controlled transport vehicles will be implemented. This permits more flexibility in production in the future and we can adapt ourselves to market conditions better and faster,” explained Paffen.

Tractors sales 2009

In 2009, Fendt sold a total of 13,647 tractors. That was 11.5 percent or 1,781 units less than in the previous boom year 2008. Fendt could not escape the general market decline in Europe, but performed significantly better than the overall industry, which had to bear a minus of approx. 20 percent.

“Since almost all markets remained at a very low level at the turn of the year 2009/2010 and no signs of a market upturn were in sight, we decided to start into 2010 carefully and cautiously. With the reduction of overtime, holidays and the use of the government-backed reduced working hours program in January and February, production in the first quarter started with a bit of a delay. In the months April to July, production was almost at a normal level. For the last four months, September to December, we are planning a higher output again. Currently the annual target figure is at 12,500 tractors.”

Fendt harvesting – corporate strategy consistently implemented

For Fendt harvesting, 2010 will be a distinctive year. Fendt has been implementing the AGCO strategy consistently in this area. The objective is to claim a good market position for larger harvesting machines for Fendt and AGCO in all major markets. “We are moving ahead on the market step by step. This can be seen in the increasing market shares in Europe,” pointed out Paffen.

The Fendt harvesting line

The new Fendt Hybrid high-output combine 9470X with 496 hp is now ready to go into series production and will be fully available for the harvesting season 2010/2011. Starting now, our line of walker and rotary combines, ranging from 200 hp to 500 hp, is complete and covers all regions and power classes. “We are also moving forward in giant steps in distribution. For example, our Polish importer Korbanek will concentrate fully on the AGCO offerings. And the BayWa will also offer Fendt harvesting machines in their entire sales region. We are especially looking forward to the world premiere of our new Fendt forage harvester. With it, we have achieved our objective of offering customers and sales partners the key machines they need all from one source. We would recommend ourselves as the best partners in the agricultural equipment sector.”

Intelligent solutions for Industry, Road and Environment (IRE)

Technology, performance and profitability are convincing more and more construction businesses that the use of large Vario tractors in civil engineering projects brings outstanding results. With the presence at the BAUMA in Munich and a targeted initiative for the Fendt sales division IRE, Fendt has set new accents here. “We see considerable growth potential in this sector all over Europe,” said Paffen.

Net sales with Fendt machines

The year 2009 was the first full year with the new AGCO corporate structure and the European headquarters AIG in Neuhausen, Switzerland. That is why from now on Fendt will specify the consolidated net sales with Fendt machines. This number lies slightly below the previous net sales figure because spare parts, continuously variable transmissions for other AGCO brands and the sales from Challenger Germany are no longer included in this figure. In 2009, net sales declined by approx. 12 percent to 1.063 billion euros. “Due to the continuing weakness on major markets in Europe well into July 2010, we are expecting a further decline in net sales of five to ten percent.”

Research and Development

The continually increasing development budgets in the last few years show that AGCO, despite the current weak market in Europe, continues to invest heavily in the development of new products at Fendt. For 2010, 50 million euros are planned, which will flow into the forage harvester project as well as new tractor projects. A substantial share of the budget is required for the technical implementation of the requirements of future emissions regulations, also in the upcoming years.

Investments

The large-scale investments in the German AGCO locations also make it clear that the AGCO Corporation is preparing its premium brand Fendt for future growth. In the past three years, an average of 60 million euros was invested in renovation and capacity expansion. This investment volume will be similar in 2011 and 2012, until the production facilities are completed. After the Fendt ahead2 project is completed, we will have the most modern, most efficient and most flexible tractor manufacturing facilities in the industry. With the supplementary wage contract, all AGCO/Fendt employees actively support this large-scale investment of some 172 million euros,” said Paffen.

Employees

There was little change in the number of employees. At the end of December 2009, 3,381 permanent employees worked for Fendt. That was 60 more than in the prior year and over 25 more than at the end of June 2010. Adaptation to the low production figures was achieved through contract workers and the reduction of overtime.

Overall analysis 2009

“Despite the increasing massive market decline, 2009 was the second best year in the history of the company. It was only possible to achieve an acceptable result through great discipline in managing the budget within the entire company,” said Paffen, summarising the previous business year.

Tractor market in Germany over 50 hp

In 2009, unit sales for tractors declined by about 7.6 percent to 25,227 registered units. “We consider the market to be above 50 hp. This is where the real tractor market starts. Our line-up begins with the 207 Vario with 70 hp. When analysing the market trend, we have to draw attention to the extremely high December registrations of a competitor, which artificially drove up the overall market figures,” said Paffen. For 2010, Fendt expects a continued decline in the number of registrations, by 10 to 15 percent to below 22,000 units.

Germany – market share increased

“In times of market contraction, the battle for unit sales and market shares becomes tougher by nature. Andreas Loewel, Managing Director of AGCO Deutschland GmbH and responsible for the German market, and his team were able to increase the Fendt market share by 0.4 percent to 20.1 percent in 2009. That makes us the market leader in Germany for tractors over 50 hp,” said Paffen.

“The higher the engine output, the higher our market share. In the over 200 hp segment, for example, we achieved a market share of 34.3 percent. Also always highly interesting is the analysis of which individual models in which power class were the most sold tractors. As in 2008, the 200-hp 820 Vario was the most sold model in Germany in 2009, with 925 units. In second place was the 312 Vario with 583 units sold. It is remarkable that a 200 hp tractor is the most sold tractor in Germany by a large margin.”

In the first half of 2010, the market in Germany experienced a relatively strong contraction, declining by 23.7 percent. We are expecting improvement to ‘only’ a minus of 10 to 15 percent by the end of the year. Our objective is to maintain our unit sales from the previous year and increase market share.”

Fendt on export markets

The export share is currently approx. 60 percent with a continued increasing trend. In 2009, Fendt delivered some 95 percent or 12,901 Fendt tractors to customers in the region West and Central Europe through importers and Fendt dealers. Fendt sold 746 tractors outside of this region, for example, in North America, Australia, Asia and Eastern Europe. After several years in an upward trend, the overall market in West and Central Europe experienced a relatively strong market decline in 2009 to nearly 174,000 units. That was 16 percent less than in the previous year. According to current industry estimates, the market will contract by approx. another 16 percent to below 150,000 units by the end of 2010. Fend market share rose by 7.2 percent in 2009 and is expected to grow by more than 8 percent in 2010. That brings us closer to our long-term objective of claiming a 10-percent market share in West and Central Europe for Fendt,” said Paffen.

Market development in Western and Central Europe

France is the largest tractor market in Europe. In 2009, there was a 10 percent market decline, in the first half of 2010 the number of registrations dropped by more than 30 percent. “We expect that this trend has bottomed out in France and there will be more activity again in the second half of the year. Because wheat prices are climbing and that is of great significance for large agricultural countries such as France,” explained Paffen.

The Italian market is declining by some 18 percent. Fendt gained market share here, above all through sales of the new 200 Vario.

In Spain, the market is currently declining by some 15 percent. Fendt is gaining market share.

Fendt is especially happy with Austria. The market is declining by nearly 8 percent and Fendt has increased registrations by 20 percent. Here the excellent acceptance of the new 200 Vario model range has had a very positive effect.

The trend is even slightly better in Switzerland. The market is declining by nearly three percent and Fendt has increased registrations by 25 percent. The upturn in Switzerland is also due to the new 200 Vario model range.

Fendt is the market leader in Luxembourg by a large margin.

Holland and Belgium had a relatively weak start into 2010. “We are expecting more momentum in the market in the second half of the year.”

In Scandinavia there was a slight to strong decline in the market and in Norway there was an upward market trend. Fendt will maintain its market position and continue to expand it.

The region Central Europe is the first region with a noticeable market upturn after the financial and economical crisis.

“There is not much happening in the CIS countries yet. Companies are apparently still having trouble getting reasonable financing for Western agricultural machinery. But there were some interesting sales in the Ukraine. We are continuing to work intensively on setting-up and expanding the Fendt sales organisation in the CIS countries,” explained Paffen.

In summary, Paffen asserted that the agricultural equipment markets in Europe are still at a relatively low level at this time. If the prices for agricultural products remain stable at a reasonable level in the long-term, Fendt sees opportunities for improved mood and readiness for investment for farmers and contractors.

About Fendt

Fendt is the leading high-tech brand within the AGCO Corporation for customers with the highest demands. Tractors and harvesting machines from Fendt are at work in enterprise-oriented farms and other interesting areas of application on fields around the world. Fendt is considered to be the global innovation leader for agricultural machines. Fendt customers therefore profit earlier than others from the newest technology for boosting performance, efficiency and profitability of their farming businesses. AGCO Fendt employs a workforce of 3,300 in the areas of research and development, sales and marketing as well as production, service and administration at the locations in Marktoberdorf and Asbach-Bäumenheim in Bavaria, Germany.

About AGCO

AGCO, Your Agriculture Company, (NYSE: AGCO) (www.agcocorp.com) was founded in 1990 and offers a full product line of tractors, combines, hay tools, sprayers, forage, tillage equipment, implements, and related replacement parts. AGCO agricultural products are sold under the core brands of Challenger^®, Fendt^®, Massey Ferguson^® and Valtra^®, and are distributed globally through more than 2,700 independent dealers and distributors, in more than 140 countries worldwide. AGCO provides retail financing through AGCO Finance. AGCO is headquartered in Duluth, Georgia, USA. In 2009, AGCO had net sales of $6.6 billion.