AGCO Corporation (AGCO) Earnings Call Transcript & Summary

Good morning, good afternoon and good evening to those of you joining us on our webcast. My name is Greg Peterson, Head of Investor Relations for AGCO. It's my pleasure to welcome all of you to AGCO's 2022 Sustainable Technology Event. You can see from the schedule or the slides behind me, our agenda for today. And on the webcast, you'll be able to see the slides and the speakers on your webcast player. We'll post a replay of this event on the website of our Investor Relations page later today. Let me go ahead and handle the safe harbor statement. Our presentations this morning will include some forward-looking statements, including information about our strategic plans and initiatives as well as our financial impacts. We'll discuss demand, product development and capital expenditure plans and timing of those plans, and expectations with respect to the costs and benefits of those plans and timing of those benefits. We'll discuss future revenue, price levels, margins, earnings, cash flow and other financial metrics. We wish to caution you that these statements are predictions and that actual results 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 ended December 31, 2021. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. These factors include, but are not limited to, adverse developments in the agricultural industry, including those resulting from COVID-19, and supply chain disruption, the war in the Ukraine, weather, exchange rate volatility, commodity prices, changes in product demand. We wish to disclaim any obligation to update any of these forward-looking statements, except as required by law. With that, it gives me great pleasure to introduce our President, Chairman and Chief Executive Officer, Eric Hansotia.

Welcome, everybody. Based on what the markets have been doing over these past several weeks, I imagine you're coming in here depressed, down, nothing is going in the right direction. Well, the good news is we're about to tell you some really exciting stuff that's going on at AGCO and a really bright future. I'm going to set the stage for all the presenters by talking about our 3 growth engines. I want to make sure it's pretty simple and clear for everybody. The first growth engine is all about Fendt full-line going global. So historically, you just saw the background there that Fendt is a very, very strong, impressive, successful tractor European business historically. One vector of growth is to expand that to be a full-line provider of equipment throughout the crop cycle, planters, sprayers, tractors, combines and other equipment. That's a doubling of the business that we can see going forward from moving from a tractor business to a full line. And then the second doubling is moving from full-line Europe to a global marketplace. The markets outside of Europe have an amazing opportunity to be able to consume the Fendt potential and have the farmers that expect the very best and not only their product, but the overall Fendt experience be able to bring Fendt on to their farm. So we've got a double, double opportunity there. The second one is about precision agriculture. And at AGCO, there's a couple of big names that you've heard about. And the first 1 is precision planting. The most impressive ag-tech company in the world. They've been in our family for almost 5 years now and have had a tremendous success story, growing rapidly in terms of adding automation and intelligence to the planting system, and now they're growing beyond the planting system into the other parts of the crop cycle. We launched sprayer technology this fall -- or the spring. As they grow into these other parts of the crop cycle, they're staying true to where they came from. And that is the best retrofit technology company in the market. Retrofit just means a farmer has a piece of equipment that may be several years old, and they would like to upgrade that machine with new technology, take it from a dumb machine to a smart machine with new capabilities. Precision Planting not only brings the technology but the channel to be able to do that. We've made several acquisitions in this past year to add more horsepower, more acceleration as we have Precision Planting growing throughout the crop cycle and growing globally. And we think that, that's going to continue to accelerate this growth curve that we've been on. The other half of that is Fuse. That's more of our internal organic development that goes on AGCO machinery, telemetry, guidance another Precision Ag technology. That's also on an accelerated growth curve, as farmers are thirsty to make their machines more capable, more intelligent, being able to communicate onboard and offboard and things like that. So we're working -- having those 2 businesses work well together, we expect this to at least double over the next, say, 3 to 4 years. And then the third growth engine is our service and parts business. Now we already believe that we are in a preeminent position relative to being able to have the part there when the customer and the farmer needs it. We call that parts fill. We're growing on top of that solid foundation and trust that we've built with farmers to now capture more of the business. We're helping dealers become better at service and parts. They call that dealer absorption, being able to have them really focusing on being able to provide -- be a full provider to the farmer. And leveraging the technology from Fuse of connected machines to be able to remotely identify when that machine may need a service interval -- intervention or a component is about ready to fail, things like that. Today's activity is going to be primarily -- today and tomorrow is primarily focused on the Fendt business and our Precision Ag business. Lots of exciting technology, and we're going to connect that to the farmer problems it's solving. And let's talk about farmer problems. There's probably not been a more intense period than right now to drive Precision Ag adoption. Simply stated, the world doesn't have enough grain. There's a certain demand for food and fuel, and there's a supply, and there's a gap between the demand and supply right now, unfortunately. And that gap existed even before the conflict in Ukraine and Russia. It's just gotten worse. So farmers are under a lot of pressure to somehow produce more, get their yields up, be more effective, produce more. That's 1 reason why they're looking for precision technology is to get more out of land that they have. But at the same time, they're also under incredible pressure to use less inputs. Prices are quite high because fertilizer has been pulled out of the market from Russia and Ukraine, but also the other inputs are under some inflation. Availability is a problem. And you've got regulatory pressure that continues to put pressure on our farmers like the Green New Deal in Europe to use less chemical inputs and other inputs, as they're getting this higher yield. So they're being asked to produce more, and they're getting rewarded from that for higher prices and they're getting pressured to do so with less inputs. The only way to solve that equation is precision agriculture. And that's why we're here today. And we're going to show you a lot of the solutions that we're delivering to the marketplace. And we chose this location right here in Marktoberdorf, as [ Christophe ] talked about. Not only going to talk about farmer problems and great technology to solve those problems, but we're going to start off our discussion right here in the most technologically advanced ag machinery plant in the world. We'll give you a good tour of that here later on today. So with that, hopefully, I've set the stage, talk a little bit about the backdrop of what we're going to talk about. And I'd like to introduce Louisa to come up here and talk about not only the productivity element and precision element of this but how we're also focusing on doing it in a very, very sustainable way to match up with our purpose. Welcome, Louisa.

Thank you, Eric. Good day, everybody. I'd like to take a few moments to highlight today how regulatory developments in the EU, specifically the EU Green Deal, and its connected strategies will impact the future of farming in Europe. So the Green Deal aims to be -- really sets the stage for Europe to be the first climate-neutral continent by 2050. And they set out interim targets to reduce emissions by 55% by 2030. This sets out the EU's path to a low-carbon future, and it touches on almost every industry and sector. The targets have become legally binding through the EU climate law. And just to give you a sense of how broad this is: every piece of EU legislation is being reviewed to ensure that it aligns with the targets of the EU Green Deal and doesn't work against them. For ag, there are 2 key strategies under the Green New Deal, which will impact to our customers. Firstly, the Farm to Fork Strategy, which many of you have heard of. And this really covers the entire agricultural cycle from farm to fork. So it includes the food production. It includes the distribution, reducing food waste, and it goes all the way through to nutritious diets and reducing the challenge of obesity. So it's incredibly broad. Aside from that, there is the EU biodiversity strategy, which aims to halt and reverse ecosystem degradation by 2030. They include several targets which impact farmers directly, including reducing pesticide use by 50% and fertilizer use by 20% and also increasing the amount of land under organic production. Now the EU Green Deal is not without its critics. The challenges that we face right now are very real. Firstly, energy supply and security in Europe and globally and also short-term food security challenges, as a result of COVID-19 and Russia's Invasion of Ukraine. So the EU is making short-term concessions, for example, relaxing the rules on crop rotations and allowing farmers to plant in fallow land, while still receiving common agricultural subsidy payments into next year. However, overall, the EU rhetorical position is clear. They are doubling down on the targets under the EU Green Deal. Last month, they launched the repower EU strategy, which focuses on building energy independence from Russia by 2027. Last week, a new proposal was introduced, it's called the nature restoration law, which we'll look to put into law of the targets around pesticide reduction and make those legally binding on states. So all of this is really about our focus on long-term food security and protecting the very ecosystems on which agriculture is reliant and also preparing us for the future impacts of climate change. So I wanted to touch briefly on the common agricultural policy, as this is really key for farmers across Europe. It is the EU's main subsidy program for farmers and the new CAP is due to come into force in 2023. This includes support transition to sustainable farming practices across the EU. 25% of the EU CAP budget will be going towards the new eco schemes, and these cover a very specific list of agricultural practices. The European Commission recently published a list of potential practices under the eco schemes and these cover things like cover crops, precision farming, conservation, agriculture and mechanical weed control. A critical note, I think, to point out here is that in almost all of the documents that refer to the common agricultural policy and the EU Green Deal strategies, precision agriculture and digital solutions are seen as 2 of the main drivers to achieve these ambitious goals. So here, you see a brief highlight of the percentage of subsidies to farm income across the EU, which averages around about 30% when we look broadly across Europe. So the CAP remains incredibly important to farmers. And of course, this does vary by country and significantly by farm enterprise. So for example, on 1 extreme, mixed and livestock farmers under the CAP received more than or equivalent to their average farm business income. And on the other extreme, horticulture rarely claim CAP subsidies, as smaller farms are often ineligible under the current program. We're also seeing a reallocation of funding under the new CAP and the proposed rules. Firstly, we're seeing 10% of national budgets redirected from larger towards smaller farmers, 3% towards younger farmers and 25% towards the eco schemes. So the farmers that are already applying ecologically advanced processes will be eligible and rewarded under the eco schemes. And perhaps smaller farmers that were unable to access some of the Precision Ag technologies because of some of the cost barriers will find it easier to access them. Farmers, of course, right now are currently experiencing strong commodity prices. They are arguably less reliant on the CAP right now than they have been in the past. But of course, this is partially offset by the increased costs in fuel and fertilizer and other inputs. So where are we now? The common agricultural policy comes into force in 2023, and we're really in a little bit of a limbo situation with a lack of clarity as to exactly how this will be applied at the country level. Member states have submitted their national strategic plans on how they intend to distribute the CAP and how they will align that with the Green New Deal and the framework set out by the European Commission. So far, from those submitted, many of them have been pushed back to member states with the comment really from the European Commission that they need to reexamine plans and make them more environmentally ambitious. So I think in summary, it's fair to say that looking ahead, we can assume that the strategies of the farm to fork and biodiversity under the EU Green Deal will drive greater adoption of sustainable farming practices driven by on one hand, the strengthening of legislation and on the other hand, by the incentives provided by the common agricultural policy. We can anticipate to see the EU take some short-term actions to address immediate food security challenges. However, the European Commission has reinstated its commitment to long-term food security and climate resilience. Lastly, the full suite of Precision Ag technologies, including guidance technologies, sensing technologies and responsive technologies are vital now more than ever in driving forward sustainable food systems and achieving the climate targets. So with that, I'd like to introduce Seth Crawford, who's our Senior Vice President and General Manager for Precision Ag & Digital to talk to you about our farmer first strategy and provide an overview of what you can expect to see over the next 2 days.

Thanks, Louisa. It's great to be with you again, and it's a lot of fun to talk about the story that we have because we rolled out this strategy in 2021, and we talked about how we're going to focus on the growth areas and how we're going to make progress going forward. So today, what I want to talk about is where we stand and how we're moving forward in delivering on our Precision Ag commitments, delivering on engaging with farmers deeper into the life cycle and how we're managing our digital transformation, as it relates to farmers and our distribution channel around the world. Where I want to start is talking again about our strategic focus areas. You saw these when we launched our strategies, and you're going to hear a lot about these throughout the day. But what's probably most exciting are the foundational pieces that we've really reinforced over the last year and a year plus now, as we made progress with our overall strategy in implementing it. First of all, the purpose-driven culture. With over 23,000 employees, you can ask them what the most motivating part of our new strategy is. And I think you would hear the strong majority say, "It's the fact that we're now farmer-focused. We're not dealer-focused, we're not product-focused, we're not internally focused, we're farmer-focused." And that has been a true motivator for all of our employees around the world. The other piece that is key for us is we're listening to those farmers. And the farmers are telling us, we want to do business in a different way. In our lives, no matter where we look, there's digital enablement of everything we do, yet the agricultural equipment industry has been slow to pick that up. So that digital enablement is really helping drive that to be farmer-focused and to serve our farmers' needs. Again, another step that we took was our simplified operating model. Last year, we finished the operating model update in the month of October. So we haven't quite been in the full new operating model for more than a year now. But what we did was we took out layers and we focused heavily on making sure our front lines were strong, making sure that's where we prioritize the full force of our organization. Again, reducing those layers, making sure the front lines are strong, making sure we're faster to make decisions, helps us achieve our strategic objectives. And then finally, the margin improvement. Identifying those businesses that are key to our growth, key to our margin growth and key to making sure it's more sustainable over the cycle, that is what we're focused on. And that's where I have the pleasure of talking about the businesses that are the high growth, the high margin and the less cyclical parts of the business as we go forward. Eric gave you the overview on this slide. So Torsten Dehner is going to come up and give you an overview of the Fendt story. I'm going to cover the Precision Ag side of this and our Parts and Service business. One thing that isn't going to change is how we focus on improving the net farm income of our farmers. We're focused on a 20% improvement in their net farm income. We have a portfolio of products that we regularly refresh to ask the question over the next 5-year horizon, are we going to be able to improve the bottom line for farmers by 20%? And that's not an easy task, especially when you're constantly challenging yourself to renew that. It's not like you get there once and you stop. We want to do this over time, and we want to keep that moving forward. The other piece is we want to make sure we deliver it with a focus on reliably delivering it for the farmers and make it easy for them to achieve these gains with their operation. And then as we focus on delivering that improvement, 1 of the things I want to highlight with all of you today is that it's not just the ag equipment industry. It's the entire expense load that the farmer has. It's well beyond that 12% that they might spend on equipment, and you're going to hear that. And you know that from past discussions around Precision Planting, how we help the farmer put the seed in the right spot at the right depth, with the right spacing, so we can achieve emergence where every plant emerges on the same exact day, so we optimize the chance for a great crop and a great harvest. That's where it starts. That's the seed part of it. When you look at the other pieces of this pie, the fertilization part is huge. That expense, 27% of a farmer's expense is huge. We're going to talk about some of the technologies we're bringing to address that problem. So when you talk about the total addressable market, in the Precision Ag space, in addition to the equipment space, it's a huge opportunity. I know some of your colleagues have been out there claiming that it might be $250 billion in total addressable market. We're not here to tell you exactly what it is. What we can tell you, it's much larger than we talked about just equipment. It's really looking at the farm improving their prospects and making sure we go after that hard, and we think we're well positioned to do it. And we're well positioned to do it because of our key differentiators. I'm going to talk a lot today about retrofit first. We're the only OEM that focuses on retrofit first. And the reasons are simple. While it's hard for OEMs to do this, we believe it helps us be more innovative. We can get to market faster with the technology. We can go out, we can find customers with a multitude of brands, but look at their agronomic issues that they're trying to solve, look at the economic challenges that are in front of them and help them solve that and bring the technology out in small batches. Maybe the first year, it's our own test. Next year, maybe there are 10 customers that we'll engage with. If things go well, maybe we'll increase to 50. And after a few years, we have a mature product. At that stage, we take the next step, and we go into serial production in our factories, and we make it available to other OEMs as well. It's been a great strategy for us. But the way we do it is driving for innovation and having an independent retrofit focused channel to deliver those solutions. So it's not just an OEM channel, we have a retrofit focused channel that specializes in delivering those innovations to customers, and that's what they do. And that's what makes it special, innovation and the channel, delivering it to the market. Next is the farmer-focused digitally enabled. Farmers want us to evolve digitally. They want to do business in a different way. I'm going to talk a little bit later about what that means. But the McKinsey study found that 45% of farmers want to engage online, they want to buy products online, but they say that it's just not enabled today, and they want our industry to evolve, and we're leading the way. We have specialized ag-focused brands. Today, we're at the home of Fendt. And you won't find more about passion and pride in an operation than you find here with Fendt. It's focused on those production ag customers that want high specification machines wherever they are in the world. We also have our Massey Ferguson brand with simple and straightforward products for those customers that want more of the mid specification products. We're able to get those [ machines developed ] out clearly to farmers. And then we have our retrofit brands, which clearly help farmers achieve their agronomic objectives with retrofit technology. So we want to be clear with our brands, not money the waters and move forward to achieve success. And then the full line smart farming portfolio. For those that will be able to join our field day, you're going to see this in action. You're going to see our planter that's growing in sales every year, the momentum planter. You're going to see our ideal combine. You're going to see our self-propelled sprayers. And of course, you're going to see the technologically advanced tractors that we have that we're well known for. But it's not just us bragging about our technology, the industry is recognizing us as a technology leader. Eight AE50 Awards, a silver medal at Agritechnica, Agrishow gold medals. We can go on and on. MAGIE ShowStopper for the R9 sprayer, even being recognized by supply chain and purchasing organizations for our innovations to be the best in the business. So it just highlights some of the awards we've received, how we're recognized by our peers by customers, by fellow engineers by -- and peers in our industry on leading the way. The other thing I want to highlight today is it was a little over a year ago when we stood together in Pontiac, Illinois, and we talked about our growth plan for Precision Ag. And we talked about how we believed we were very close to being #2 in the industry when it came to just the Precision Ag side of the business. We're at about $400 million in ag-related sales at that time. We said we were going to double it by 2025. Well, I'm here to share today that we're excited about the growth we've achieved through our Fuse portfolio by expanding that portfolio expanding geographically and expanding the capabilities of our dealers. We have strong engagement. And with Precision Planting, we again, we talked about expanding across the crop cycle. We talked about continuing our innovations and further growing our global presence. And by doing that, today, we're raising the bar. By 2025, we're going to be at $900 million. You've asked us in the past to set a goal and deliver. And not only are we delivering, we're raising the bar. We're happy with where we are with our organic developments, but we think the race is definitely on in the Precision Ag space. So we've supplemented our organic developments by enhancing our overall tech stack. And first, to explain our tech stack, we start with our base architecture. For our retrofit products, that's our 2020 architecture. For our Massey, Valtra and Fendt products, that's a common electronics architecture. For each of these, we build on top of that architecture to enable the steps above. And this is key for us because that way, we can leverage this technology above to bring features to farmers, whether it be our own equipment that was built a few years ago or competitive products that are out there. And so when we look at this, we have the foundational architecture in place. We have our guidance products in place, our connectivity in advanced sensing. We've been connecting our machines for a few years now. You're going to see a lot of our advanced sensors tomorrow when we're in the field day. But obviously, we've had those in place to be able to achieve the growth that we've had. Data management and logistics and then the automation of various features and the AI that's needed to be able to do that, leading all the way up to autonomy. Because in the end, autonomy isn't just making a tractor drive by itself. If it was, we would all have our products out there readily available today across the industry. But the reality is you have to fully automate each task and make sure it's done right for that farmer to trust that operation and for them to leave the tractor and whatever implement behind in the field to complete that job. And so it's the automation of the features that you will see tomorrow in the field, whether we're talking about combines or planting or spraying, you'll see the approach we're taking to make sure we're automating each of those steps so that we're in the game with autonomy and we will be there. Now with that, we had a number of acquisitions that we've picked up. And some of these were made -- all of these were made after the last time we had an Investor Day event. The first 1 we made was Headsight. This helped us move further in the crop cycle or across the crop cycle into the harvesting area of the business. We also acquired Creative Sites Media. Creative Sites Media is a software and application development firm in Bloomington, Illinois, that was already doing a significant amount of work with Precision Planting. So we brought it into the Precision Planting operation to help increase our capacity and capabilities. We bought Appareo Systems. Appareo was our connectivity provider. We had a joint venture with them and they're 1 of the leaders in acoustic sensors, whether it be on air seaters or on fertilizer spreaders and we wanted to take the next step with Appareo, located in Fargo, North Dakota, brought a great set of capabilities along with it. And then more recently, we picked up JCA Technologies out of Winnipeg, Canada. When you talk to anyone in the industry about automating equipment, JCA has been there. They've been working with a variety of companies for several years on helping them achieve autonomy. We like working with them so much, we bought the company. And we believe they offer us tremendous potential as we accelerate our efforts. We're also looking at how we apply technology in our grain and protein business. So 151 Research and Faromatics will help us in that area. And finally, we started our corporate venture capital effort to invest in startups. Those that are really beyond their seed stage, but still in the early rounds where we want to get a little bit closer, but we're not interested in the full investment at the time. And so with Greeneye Technologies, with Apex.AI, those are companies that we believe have a place for us to -- where we can learn, we can develop things together and develop that relationship, even though in both cases, our investment is less than 5%. If we would be here 10 years ago, you would have looked at our Precision Ag focus and said, "They don't control their destiny." Today, one thing that's clear is at AGCO, we now control our destiny for where we're going with Precision Ag. We're no longer counting on those external partners like we have in the past. The future is ours. So a little deeper in the businesses. The Fuse business, the Precision Ag industry overall depending on what research report you read, is growing somewhere between 10% and 15%. Over the last 5 years, we've exceeded that every single year, and we're continuing to see more growth. And we're seeing engagement from our dealer channel that's really impressive. We have a precision farming specialist focus and they're adding more and more every year. In fact, we've doubled the number of specialists that we have in our dealerships, and they're begging for more training and more development and we're working to deliver that each and every day. The other piece is when we last met, we're talking about how we were really focused on North America and Europe, and we were just expanding into South America. That expansion is really taking hold, now we're connecting tractors in South America, now we're providing our foundational elements in South America as well. So very exciting progress for us overall. Now I'll talk a little bit about how farmers buy equipment because this is absolutely critical to understand because it will help you understand why we take a dual-channel approach and why we're so focused on retrofit. When you look at the number of customers that buy new equipment each year, it's usually about 7% or less that will buy a new piece of equipment. But 100% of the farmers will want to enhance their operation. And there's no doubt that 100% of those farmers are going to be under the umbrella of those regulations coming from the Green Deal or other initiatives somewhere else in the world. They're going to need to make investments to keep up. But not all of them are going to want to sync $500,000 or $1 million or euros, however, you want to look at it, into updating their fleet. Some of them may have $20,000 or $30,000. And when they do, they're going to want products to buy. So we have an OEM channel, our Fendt, our Massey Ferguson, our Valtra dealers around the world, they're great at selling equipment and taking care of farmers' needs as it relates to that equipment. When you meet a Precision Planting dealer, they're great at listening to the problems of the farmer and teaching them about agronomic solutions and agronomic solutions that can be solved with technology that we have that can go on anyone's product. And it's not just planters anymore. So when you look at the chart up at the top, the OEM dealers naturally treat those customers that are buying new every year the best. They have a very close relationship. That's what we want. We want our full share of that. But down at the bottom, the retrofit dealers, we want them to engage with all customers. And especially those that aren't the new equipment buyers, we believe that helps us grow. We talk about the crop cycle and how we're progressing overall. The key here is you know Precision Planting was focused on the planting cycle. We bought Headsight. Now we're in the harvesting cycle. With Appareo, we've got connectivity, we have air seeders, we have fertilizer monitoring equipment. And then with JCA, it enables the automation that will go around the crop cycle. And then finally, at our winter conference program, we announced expansions to the portfolio. We talked about how we're going to be in the application business on sprayers, on sensing with vision systems to be able to spot spray, as we go through the field. We also talked about how you can apply fertilizer in a whole different manner to be able to be more efficient. And to give you an example of that, I've got a quick example here. On the left, this is how a lot of the fertilizers spread over the years with the, what they call, a spin spreader, which is driving through the field and this thing is loaded with granular fertilizer, and it's just blasting it across that field. And in fact, tomorrow, you're going to see a tractor-mounted spin sprayer. And in Europe, 70% of the fertilizer is applied with a spin spreader yet today. So the precision isn't all that great overall. We do have products and we offer them of making it a variable rate application, so you can adjust the rate based on your fertility needs across the field. But the reality is when you grow a crop, that crop can't always reach out and grab those nutrients. The other problem is if you get a heavy rain, as soon as you put on the fertilizer, too much of it will wash away, creating some of the environmental concerns. Then you look at the product on the right that we introduced at our winter conference through our retrofit business called FurrowJet with vApplyHD, this enables you to get the seed where it's supposed to go and put the fertilizer right where it's supposed to go in a liquid form creating much less waste that will enable us to go after that fertilizer reduction that we talk about in Louisa's sustainability presentation. It will be able to help us get that fertilizer in the right spot to enhance the yield and make the most of it. So lots of exciting innovations for us. And those innovations aren't just demanded by our farmer customers in the retrofit market, the reality is there's a huge pull across the industry. The situation we're in is we have farmers that are telling their OEM, if you don't put that product on my planter, sprayer, et cetera, I'm going to look for another brand. And so the demand for our technology with other OEMs continues to grow, and it continues to put us in a very nice position to drive growth and to drive healthy margins, as we go forward. So I'll end this section on the precision planting overview. The way we're growing is continuing to drive innovation. You can see that in the chart to the bottom left. The net sales are growing, and you see the innovations we've brought to market. And we're going to continue to innovate. We see the R&D investment in the precision business at a much higher rate than the traditional equipment business. And to compete in Precision Ag, we have to, and we will. And the results of that are significant growth. The retrofit business globally continues to grow, and we are the leader in this space. You'll see that not just in North America growth, but also in rest of world growth. We're seeing very nice growth in Brazil and in Europe. And then finally, this growth is giving us good reason to invest even more. And what you see in the bottom right is the planned operation center, where we just announced officially last week, this underway. We're already starting some of the work on the new site, but this is going to more than double our current capacity for our Precision Planting business. It will still be in the Morton, Illinois, area. But we'll be able to go from 5 facilities that we have today with -- where we have warehousing and kitting and assembly operations down to 1. So it also helps us alleviate many operational issues because we've been renting more and more space so to bring this all together. The other bright side here is we're going from 240,000 square feet to 500,000 square feet with the ability on the same site to double that to 1 million. So we think the future is so bright that we need this type of investment to keep us moving into the future. So now I want to talk about how we're engaging with farmers deeper in the life cycle. Because with the Precision Ag business, we want to talk about the high-growth, high-margin business and how it's been consistently growing over time because it's important for our growth plans to be able to have that solid base. And it's only appropriate that we also talk about our aftersales business. What you'll see on the left-hand side of this slide is, first of all, the parts sales versus whole goods sales. This is something I think you all know, but occasionally, it helps us remind ourselves of how this works. Over the last 10 years, we've grown every year in our parts business. The whole goods business is more cyclical. And just so you know, where you see that line coming across horizontally, that's the -- that would be 0 growth. So if there's any lines that dip below that bar, it means the industry shrank that year declined. Whereas if we stay above it, that's a growth year. So you'll see the red bars whole goods sales and the gray bar is part sales. The other piece, when you look at the scale on the right, look at the black line, those were our parts sales to whole goods, so we continue to see more whole goods sales. And as a percent of whole goods sales, we now are regularly delivering over 20% and that percent is growing. That gives us stability. That's an annuity for the years to come on delivering in that aftermarket business delivering high-margin business, and we've been experiencing a 7% CAGR in our parts business, and we expect this to go forward. One of the key ways we've been able to achieve that is we are the supplier of choice for our farmers and for our dealers. And the way we get there is because of how we fill their orders. When you're a reliable supplier, farmers will count on you. Parts availability in every survey I've seen over the last 20 years always ranks as either factor #1 or factor #2 in reasons farmers switch brands. We have to get this right. And what you'll see on the screen here are the fill rates. And you may want to say, "Hey, wait a minute, you're talking about just 1% or 2%." Well, I'm celebrating this month, 25 years in this industry. And what I will tell you is when that number is over 97%, you have happy customers. When that number dips below about 96%, your phone rings off the hook with screaming customers. There's something magical in that range, and we are 100% on delivering parts to our customers and being a reliable supplier. The other thing you'll see on the slides is that we're now the best in the industry, which is distinctly different from where we were 10 years ago, and we expect to stay there. This provides that growth, this provides -- that provides the growth in parts, but it also provides us that stability with whole goods customers because the best way to grow our market share is stop losing your current customers. So how are we doing this? First of all, we're engaging with farmers to go deeper into the life. We're selling service contracts. We're selling more extended warranty, and we're seeing very good growth there. We're investing in our [indiscernible] brand, Sparex. We have plans to double that business as well as growing in the Reman business. We're working with our dealers to achieve 100% absorption in the aftermarket. And just to explain what this means, what we want is that -- any of our dealerships around the world, we want the contribution margin from their parts and service business combined to be able to cover their fixed overhead. That helps them weather the cycles because we all know those big cycles of the equipment business. But if we can maintain that business in parts and service, we're going to have a healthier channel, our dealers will invest in more service technicians. That will drive more profitability, more part sales and loyal customers. That's absolutely critical for us. The other thing that this will all do is raise our Net Promoter Score. We're committed as part of our strategy to raise our Net Promoter Score by 25%, and we're making progress already by highlighting our farmer-first focus to our employees and to the industry. We see great focus from all of our employees and really taking care of customers' needs. The other piece here is not only are we connecting machines, that's what we were talking about 2 years ago, we're connecting all of our large machines now. Now we have over 80% of those connected machines covered by proactive alerts. So now we're able to deliver value to the farmers who are buying our machines, so making the most of that connectivity. And that's just part of our digital work. we're also seeing a tremendous growth in our e-commerce platform. We launched this before COVID, we made additional progress during COVID, and now just in 2022, we'll have a 4x growth in our e-commerce, which leads me to cover where we're going with digital very quickly. We're going to have 80% of our orders coming in on a harmonized platform around the world. In past discussions, we've talked about our investments in the digital customer experience. Initially, we worked targeted -- targeting just key markets in Europe. For 2022 and with our new strategy, we're taking those investments. And now we have one digital effort that goes global. And so we're able to move to having the orders come in on 1 harmonized platform. We're going to have a station later to get a little bit deeper in this. The other piece is we have 1 harmonized platform for our parts orders. So that's a huge step, as we go forward. And it's a key step in helping farmers do business the way they want to do business. So now tomorrow, we're going to head out to the field. And let's keep our fingers crossed that the weather cooperates. But we are really excited about what we have because the way we frame this up is we talked about the 20% improvement in net farm income, but we want to have a model farm. And so Alex is our farmer example, and Alex has got 500 hectares of land. And when you look at the makeup of the farm, you're going to see a variety of crops. But what we're going to do at every single station is talk about the improvements that we can make in the Alex's operation that will help him achieve the green deal, and also achieve the net farm income improvements that we're committed to. And with that, you know that farms are investing each year in bringing a good crop. From a cost standpoint, on this model farm, the costs increased from EUR 700,000 a year ago to EUR 1.2 million this year. And on a farm of this size to achieve the 20% improvement, we need to help Alex achieve nearly $100,000 in improvement. And so that's a huge step forward as we look at positively impacting these operations. And so throughout the field demonstrations, you'll see station by station what we're doing and how that adds up to making an impact overall, and we'll sum it up. So here are the stations you're going to see. First, a planner station. You're going to see how we're putting precision planting technology on our momentum planner, and you're going to hear about the technology that enables it to automate more and more features because again, to get to the overall autonomous operation, we have to automate each of these features. So it's critical to watch for those enhancements. Then we're also going to talk about how we retrofit planters and how we do it in Europe because you're going to see that with products like [indiscernible] in Europe that were very actively selling products to them through our precision planting channel and meeting the needs of customers, as well as some of the smaller planter OEMs in Europe like John Deere in CNH. We sell through our precision channel and we go directly to the customers. We help teach them about the agronomic advantages, and we show them the products we have available. And we'll talk about that, and we'll have an example of a machine out there that you can put your hands on and truly see how we transform it or what we mean by retrofit. Then we're going to talk about autonomous systems, a lot of questions in the autonomous systems area. We're going to show you our tractor driving autonomously. You're going to be able to experience it and see where we are. And then you'll be able to see how that connected with the implements will take us to a whole new level. And I think that's quite exciting. Targeted spraying, another very hot area. We always get questions on targeted spraying. With targeted spraying, I think the first thing that I want to point out today is there are different segments in the market. There are commercial sprayers that cover thousands of acres of land each year. And then there's -- your farmer that's covering their own crop. Maybe it's like Alex that we talked about where they have 500 hectares. If you're in North America, maybe they're covering 1,000 to 2,000 acres. They have their own sprayer. They want to retrofit that sprayer and have some of these capabilities. And so we have our precision planting retrofit approach looking at those masses of customers that have the smaller acres that have less to invest where we can have a scalable system, and we announced that at our winter conference earlier this year. And then we have our investment with Greeneye Technologies, and we also have a partnership with BASF and Bosch, where we're bringing different concepts, and you're going to see some of that tomorrow to see how we're going after the market. In those cases, it's going to be a factory installed concept that's going to be for much more of the commercial operator because we think both segments are going to need the technology to hit the 50% reduction that they're going to have to have overall with the Green Deal requirements that are laid out there. So I think that will be an interesting station to see how we go about that and how we're moving into that part of the crop cycle with our retrofit solutions. Another area where we're moving into the -- another part of the crop cycle is on the fertilizer. I talked about how 70% of fertilizer is broadcast. Here, we're going to show you a spin spreader. We're going to be able to show you how we are able to communicate the information, the prescription down to the machine, leveraging FendtONE. We're going to be able to talk about how we can implement variable rate on those fields to help the farmer achieve their goals. And we're going to help you see with one of our smart solutions how we're enabling the farmer to get as good of distribution, even distribution as they possibly can. And you could just think of how big this opportunity is if 70% of farmers in Europe are putting the fertilizer on this way. This opportunity is huge, and we have to get it with a simple solution to adjust that fertilizer spreader and map that field as we're going across. So we can see how the crop is progressing. It's really exciting, whether it's the fanciest new products or some products that have been around for a while, we want to make sure that we're helping the farmer achieve their goals. The IDEAL Combine. We continue to make progress with our sales of the IDEAL Combine in Brazil, in Europe and in North America. We want to give you the chance to get in that machine and see it for yourself. Again, see how we're automating the tasks to be able to advance that machine overall as we move forward, I think you're going to be nicely surprised with the progress we're making, and it will also be fun to have you in the seat harvesting barley. And then the other piece that's important to talk about are where are we going with alternatives. And we know that in the electric vehicle space, there's radical changes in autos. We're going to give you the chance to operate our e100, our electric -- battery electric tractor. And so you can see how it operates, and you can put it through the paces and judge for yourself the progress we're making. We think this is exciting. We think there's a lot of growth in this area, and we want you to see firsthand with hands-on experience about where we're heading. So in the end, we're going to add it all up for you. We're going to talk about the benefits by category. So when we talk about the e100 tractor, we believe there are some environments where you aren't going to have a choice. But there are some environments where you have a choice and you're going to want this, if you're in closed buildings with livestock, if you're in a greenhouse environment, some other areas, you're going to want an electric tractor. There will be municipalities where this might be a requirement. And when you see the sound difference between the diesel engine and the battery electric vehicle, you'll definitely see where it could come in handy in some different operations. In autonomy, it's not just taking the operator out of the cab, there's value there, though doubt about it. When I showed the pie earlier, you saw that labor piece, and that's a key issue for farmers around the world. But it's also the timely application. I think everyone here gets the fact that most of the crops are planted within about a 3-week window and they're harvested within about a 3-week window depending on where you are in the world. And the timely placement of that seed in the ground is absolutely critical. So if a farmer can use autonomous vehicles we believe they will. And we think it wasn't too long ago, we thought this would stretch out into the 2030s. The reality is it's not stretching out that long. This is coming sooner. And that's why we're working so hard on automating each of the tasks along the way and bringing our autonomous tractor as well, we want to -- have you see where we are. Targeted spraying. We think there are savings with targeted spraying. We also think there are regulatory requirements that are going to drive this. And we talk about the reduction in herbicides and pesticides. You get to see our different approaches to the market. Smart fertilizer, you'll see not only the reduction in input costs, but also the improvement that comes with the yield with this technology. IDEAL Combine. One of the biggest numbers on this page because the IDEAL Combine, you'll see how productive this machine is when it's running through the field. And we have our technology fully enabled, you'll see how close this one is to truly delivering that full 9% that we've been recognized by others that are doing testing. They see the potential that we have for gains. Now it's a matter of gaining that engagement with farmers and having them bring it in and test it on their own farms. And then the Momentum planter, where we've had tremendous growth over the last few years, growing that 8% in net farm income, enabling that for our farmers. So many opportunities here that we'll talk about. So to finish it up again and sum it up right here, this business is far more than hard iron. It's why we're investing in Precision Ag and why we're investing and engaging with farmers over the entire life cycle and enabling them to do business the way they want to do business. That total addressable market is huge, and I hope you see that AGCO is poised to lead the way and get our share of this business as we deliver smart farming solutions to farmers sustainably leading -- feeding the world. Thank you very much. With that, if I can -- with that, I'm going to bring Torsten Dehner up, and I might need the team to advance it for us, but thank you.

Thank you, great job. Yes. Also a warm welcome from my side to everybody in front of the screen or here at Marktoberdorf. The first page have already -- has already been introduced by Eric and Seth, so I don't want to say a lot of words, just that these initiatives go hand-in-hand together. The Fendt growth is also built upon great aftersales support and great technology out of the technology stack. And this all together work hand-in-hand to grow our high-margin business at AGCO. So the next page has also roughly been introduced by [ Christophe ], but I would like to highlight key milestones that explain to you why Fendt has such a strong position in Europe. So in 1930, we heard the first diesel was sold. 65 years later, Fendt launched the world's first high horsepower tractor with in-house built Vario transmission. This so-called CVT is still one of the top selling value propositions for AGCO of Fendt tractors across the world. In 1997, Fendt became part of the AGCO family. In 2012, we celebrated the opening of what you will see later the so-called most modern tractor factory and network in the world. Another very important milestone on this chart is in 2014, when we launched the new groundbreaking 1000 series, which was a very important milestone for Fendt going global, and I will explain more about that from a technology or from a technical perspective, later. In the last years, we have successfully expanded our full line portfolio with very important products like the IDEAL Combine, the Momentum planter or sprayers. And you will experience, as Seth has just introduced, you will experience them and touch them tomorrow. A few months ago, we have been awarded like in the years before with the #1 position of the German Agricultural Society Award, the brand image parameter. So the DLG is the German Agricultural Society. And since years, many years, we have had the #1 position of the brand image. But we also won a new category, which is the leading employer in the Ag industry. Also that Fendt took the first position. And that's not all because since many years, we are awarded with the #1 position in Europe of the Dealer Satisfaction Index. This also shows how strong we collaborate with one of our strongest assets, which is our dealer distribution network. These are just a few examples which demonstrate the high market recognition and the premium brand position of Fendt in Europe. So considering this very strong position in Europe, you may ask yourself, why haven't you exported that and leverage that for growth in the rest of the world. This picture shows part or very important part of the answer. The U.S. and also South America have different farming practices than Europe. So prior to the launch of 1000 series, what I mentioned before, the very important milestone, the Fendt high horsepower tractor -- wheel tractors were not fully compatible with the farming practices of row crop spacing the famous 30 inches. So it took [ on note ] but we developed the Fendt 1000 from scratch to be compatible with the crop spacing requirement and the tread space of the 1000 series is now since the introduction already some years ago is fully matching the requirements of, let's say, U.S. and South American farming practices. In the meantime, we have also introduced the 900 series with the same tread spacing capability and fitting American and South American farming requirements, and we have very, very strong feedback. With this new product offering, we have grown our combined challenger and Fendt tractor business in North America by 2x versus 2017. And there is more to come. These are just 2 products. And you can imagine that there is the next product generations, we have also designed to match these requirements. And I can tell you, in the near future, you will see here and read more about this. Let's now move to the 2 dimensions of our global Fendt full line growth. We are tapping the potential of geographical expansion mainly to North and South America, while continuing to innovate and expand our smart full-line offering. Historically, Fendt has been more focused on tractors as we have heard than the full line. We are changing that over the last few years and have not only added full-line products such as IDEAL Combine, our flagship, Momentum planters and so on, but also smart solutions such as FendtONE and the Technology Stack, Seth talked about. We will further expand in this direction over the next years, and many of these product innovations will be explained in more details during this event today and tomorrow. This approach creates significant growth opportunities in all regions, including the very strong home market of Fendt in Europe. The second dimension is expanding the growth geographically. I will talk more about our distribution network development in these markets after the next slide. Let me leave this page with a key message for you. It's our ambition to double the combined global Fendt and challenger business -- full-line business, using 2020 base and assuming a flat mid-cycle industry in the next 5 to 7 years. Let's listen now to some customers in North and South America and what excites them about their Fendt machines and the Fendt experience. [Presentation]

Okay. Oh no. Sorry, I have to go back. So this page shows the Fendt customer journey and illustrate some of the examples how we are deploying targeted actions to increase Fendt's brand awareness and familiarity or deliver premium aftersales experiences. If we start the customer journey at the top, we see that knowing and liking are the first stages to engage with our customers, especially also in new markets like North and South America, our growth markets. So we have built detailed marketing campaigns to improve Fendt's brand awareness and familiarity in our strategic growth markets. This includes social media campaigns and our collaboration with Luke Bryan, who actually owns several farms outside of Nashville and is a proud owner of the Fendt 700 series. I don't know if the non-Americans in here know Luke Bryan. So he's also a judge on American Idol and broad, what I understand, really also country music more to a more pop style environment. And I have to admit that was really one of the best things we have ever done to get into this strong calibration with Luke Bryan 700, and we will later see a video that you can also find on YouTube. So with the help of Luke and other very successful marketing campaigns, we could increase the aided and non-aided awareness of the Fendt brand amongst the targeted customer group substantially. Furthermore, we could almost double the familiarity of the Fendt brand, that means also in the considering is a significant improvement. So opening doors over our very successful demo programs as well as our growth bowled events have been key in this regard. Another initiative, which played out very well in this field, is our operate to own program with hundreds of competitive on-farm demos completed. Our success rate of retailing after an on-farm demo is really outstanding and very, very promising for our future growth. After the buying stage, we move into the performing or so-called aftersales phase. Our targeted Fendt experiences in this stage include exceptional product quality, warranty and reliability, premium customer support with after sales or spare parts and customer support, technical service as well as digital omnichannel experiences such as Seth mentioned it, the parts e-commerce. Our Fendt leaders in North and South America have both spent a significant time of their careers in aftersales responsibilities. So they know very well how important this experience is for our customers and the growth and the reputation of a brand. That means, for example, that we in North America, not only focusing on increasing the coverage of our Fendt distribution network but also focus especially on dealer development and our global Fendt distribution standards to ensure a unique customer experience across the entire customer journey. In regards of our distribution footprint in South America, we started with one single outlet in 2019. End of last year, our Fendt distribution partners in Brazil had opened 10 additional locations. And there is construction work going on as we speak, as you see in the picture at the upper left, which is a real picture of -- let's say, a construction to double the number of outlets and the respective market coverage in the very near future means like in the next 12 months. These are all basically new exclusive Fendt locations. Strategically, as we start like greenfield, we put these locations with the dealers really positioned in the territories with the highest demand for Fendt technology and also the biggest like farming areas. And in South America, the distances between farm and dealers are not like in Europe. So one location covers a real interesting area. And these numbers do not include the plants we have already agreed with our South American Fendt distribution network for the next 2 to 5 years in regards of investment in additional locations and coverage. Let's now get a quick impression of our social media campaigns with our ambassador Luke Bryan and watch a short video clip that you can also find on YouTube.

When I started hearing about Fendt tractors, I mean, they certainly got my interest. And then I heard about just how well they're built, the technological advancements they've made the transmissions. It's like the Bentley of tractors. When I think of Fendt, I think of quality, innovation. I think of technology. They're just luxury tractors. And when I get off the road, I want to get on a tractor that I can dial in some stuff and make sure I do everything straight. And because I'm really good at messing up stuff. And I don't -- it's going to be really hard for me to mess up stuff in this Fendt. Thanks for waking up with me on Rise Before Sunrise.

Thank you, Luke. So the next page, no one back, sorry. The next page illustrates how our Technology Stack and Seth has introduced that to you and further innovations in the area of 0 emissions and Green Deal are feeding our mid- to long-term global Fendt growth. Most of these innovations will be covered today or tomorrow in more detail. That's why I would only like to highlight one example of this slide that will be covered later on but not tomorrow on the field. This is the H2 Agrar project which you find at the bottom right. It's a very interesting consortium project funded by the government or by the federal state of Lower Saxony in Germany. One of these -- the targets of this project is to study the feasibility of using locally produced green hydrogen for agricultural industry. So this is also about the infrastructure of an entire town from green hydrogen production with the local wind energy park down to farming practices and agricultural machinery, i.e., Fendt tractors being or consuming or being powered by, let's say, the locally produced and stored hydrogen. So Fendt is contributing fuel cell-powered prototype tractors, and you will see -- [indiscernible] of that later which will get their green hydrogen from a local wind energy park, as I mentioned, and will then operate under real farming conditions at 2 farms in this town. This brings me to the end of my presentation. Let me quickly wrap up. Fendt is building upon a very successful history in Europe and has earned the reputation of a premier brand and technology leader in the industry. By deploying our Farmer First strategy, enhancing our portfolio of high-quality smart full-line solutions and expanding our global distribution network, we have been unlocking very exciting growth dimensions, and there is more to come. It's Fendt and it's time. Thank you very much for your attention.

Thank you, Torsten. And I'm going to invite the rest of the AGCO management team up on stage, and we want to thank you for your attention. We'll go ahead now and transition into the Q&A part of the program. So we'll let the folks come up here and then we'll get this kicked up.

Okay. Who's -- Kristen, do you want to start us off? Actually, Kristen, just wait for the microphone.

Wanted to ask about just the combination of focusing on these higher-margin growth targets? And how that interprets into your incremental margins on additional market share? And how we should think about that in the context of your 10% long term margin target?

So as you pointed out, we've had a 10% margin target that we've had for a number of years. This year, we look to -- at getting very close to that 10% with our -- as the market has helped us a little bit, and we've really improved our margins over the last few years, partly some of the growth that we've talked about with Precision Ag, parts growth, growing Fendt globally, all of those have contributed. And so we're -- we can go well beyond the 10% as we continue to see these growth targets be met. We talked about not only having our margins go up because we get a better mix with these products. But we also talked about as if we get down to more into a mid-cycle or lower end of the cycle, these sales like Precision Ag and parts are going to become a bigger percentage of our business, and that also helps with the sustainability of our margins over a cycle. So we'll continue to update where we are with our margins, but you will expect to see us and tend to be much higher than 10% as we move forward and grow these high-margin businesses.

Can we just go to the topic of autonomy. You talked about how you think maybe this comes before 2030 now. So how soon could we see autonomy materially deployed in the field? And I guess, how do you feel you are positioned competitively to compete with the likes of Deere who have lunched their autonomous tractor earlier this year?

I'll take that one. So -- yes, we are seeing, obviously, the others in the industry introduce automation and autonomous vehicles. As far as when it will come for us, I would say you will see limited units in the field for us on a retrofit basis in 2024. But with that, we believe the key to adoption is not just having a tractor. It's actually making sure that job is done right. So that farmer can monitor the job and manage that job from anywhere. That's going to be the absolute critical part of this. And so that's really where you're going to see our demonstrations when you're in the field. It's seeing how the planter's automated and how, in fact, we're going to retrofit that on a variety of products, and we see tremendous growth in that area just because of the sheer number of implements that are out there. And the machines of a bit more of vintage age that really have the opportunity where those farmers are going to want to automate as well.

And hopefully, it came through strongly today in the presentation that Seth and the others put together, but our strategy is primarily on automating features first. We can get paid for every one of those step by step, those add value today. Technically, we can have a tractor drive autonomously already. That's been available for many years. But until you can solve all the problems of what the operator does in the cab, we felt like there's value add to put that into the market and just do a singular narrow task when all the rest of the tests had to be done with an operator in it. So that's why you see our focus is a little bit different. Automating tasks as rapidly as we can, all the year on the crop cycle. And then later on, we'll decide when the time is right to pull the operator out.

I have a question about Fendt. You seem to be having some success in North America with Fendt. If its good enough for Luke, it's good enough for me. But obviously, you have another brand, a large brand in North America. So how do we think about those? I think one of you said market share had doubled as you combine those. But we're hearing from the channel that may be somewhat at the expense of the challenger. So how do we think about sort of balancing that going forward?

Yes. So there's a couple of comments in there. First of all, with a multi-brand company, we target different customers. Fendt goes after the most demanding customers demanding a premium product premium outcome, best service in the marketplace, that type of thing. And we've had a challenge in the marketplace in North America. Over time, if you look at the combination of Challenger and Fendt, the business has doubled. Much of that growth is in the Fendt brand. And so that's where you kind of see the focus really for the premium producer. The other brand that we have in the marketplace is Massey Ferguson going after the straightforward in dependable marketplace. That's an entirely different customer segment with different products and a different value proposition. But Fendt and Challenger has doubled already. And as Torsten talked about, we've got another doubling in front of us.

And in that doubling Challenger also grows?

Yes. But it was like the 2017 to today, combined tractor, Fendt and Challenger doubled. And also my statement for the next 5 to 7 years was also combined Fendt and Challenger full-line business.

Great. And since nobody has taken the mic yet, I'll do another one. Unrelated though, you talked about the sort of focus on aftermarket. And I think you said that one of the goals is to be able to retrofit all equipment, not just AGCO equipment. So I'm curious how much of the retrofit that you're doing is on non-AGCO equipment, if you know?

Seth, why don't you take the lead on that?

Yes. I would -- I don't know the exact percentage, but I would say from the retrofit business, it'd be 80% plus on other brands. And that's a safe estimate. It's likely much higher.

Anyone else, here we go [ Larry ].

I have 2 questions. First, what are your dealers down in South America? Obviously, in Brazil, saying about your Fendt expansion, do you risk losing any massive dealers, for example? And then secondly, talk about Fendt, you talked about the global growth, et cetera, a number of things growing. Can you put them all together? What's the total number of sales we're talking about now? And what's the doubling to? Lot of number just kind of right sizes.

Sure.

Maybe I count the first part of your question. Yes. So as we are also targeting from our product design, but also the customer experience 2 different customer segments for Fendt and Messy Ferguson, for example, also in Brazil. There is -- that's not conflict. It's really covering a broader market with targeted branded experiences and products. And yes, that's why I also said is exclusive Fendt dealerships in areas where maybe even Messy Ferguson could not play very strongly because this is where the professional large Ag farming in Brazil happens.

Do you want to quantify your Fendt doubling?

Just to give you a couple of facts here. The Fendt business today is about 1/3 of our revenue. And if you -- as we said before, the growth has came primarily from expanding the product line just out of tractors and also from our geographic expansion. So we've grown from I think over the last couple of years by about 50% in terms of what we call Fendt. And so that percentage of the business is going up. So we're up to about 1/3 of our total sales is Fendt now.

And then the Precision Ag business, as Seth quantified that was aimed to go from $400 million to $800 million. And we've overachieved in year 1. So we're dropping that to the bottom line and increasing the target, and Seth talked about that. Our new target is now $900 million.

Just a quick follow-up on the question around your addressable market for the retrofit strategy. Can you just clarify for us how you view the existing installed base? And what percentage of the existing installed base for your own tractors is available for retrofit? I think you said something like the base architecture is 2020. So should we think about that aftermarket strategy for your own equipment being anything after 2020? Or does it go further beyond than that? .

Yes. Yes, let's clarify that one.

I think I might have confused some folks. 2020 is actually the name of the architecture. That's not the year, that's nothing to do with that. That's historically with Precision planning, what they call their base architecture. So through that out, I probably should have given a little more context. With that, the way we design products on the retrofit side is it can sit on top of any machine. So anything -- any machine you see here in the forum, or any brand that's out there. The intent is to sit on top and to be able to deliver the farmer value regardless of what that underlying brand is. Now when it comes to one of our AGCO products, there, we have our common electronics architecture. There, we have the features that with our Fuse portfolio, we can continue to add because there -- the Fuse portfolio is built off of that common electronics portfolio. So when we talk about how much can we address with the Fuse brand, it really depends on how many of the AGCO products have the common electronics architecture, that's been out there for about 10 years now. So you can take our installed base over the last 10 years. When you look at the 2020 architecture from a retrofit precision planning standpoint, that's any machine that anybody has produced out there. And I'm aware of -- if you look at the core business for Precision, those are planters. I mean there are hundreds of thousands of planters out there, that can take that technology. And we retrofit some really old machines. And yet, we have some customers who will order just a bar -- the planter bar, the mounting bar from some of our competitors out there in the OEM world and then put all of our, what's often called a gray unit, a collet Precision planting unit so all of it is actually ours. And so they'll spend actually more on the components from us than they spend on the bar from the competitors, gives you an idea. So how big is the addressable market for retrofit? My answer to that, I always say it's the same, and that is there's only a cap if we stop innovating. As long as we're innovating, we'll continue to grow that cap as we go forward because there is no less desire for a farmer to make less from an income standpoint, economic standpoint. They want to improve their agronomic output. And I don't think we're going to see the regulation slow down anytime soon when it comes to fertilizers, chemicals, et cetera.

This is John Joyner with the Bank of Montreal. So maybe either Eric or Seth, when you talk about that boost to $900 million from $800 million, I guess, first, how much of that is organic? And then maybe can you talk a little bit more about your [ see and spraying ] technology, which I believe you're in the process of commercializing? How does that compare with competitors? And where does that stand?

Well, when you say how much is organic on the existing performance that we've seen financially, Essentially, it's all organic up to this point. We've not included in the lift any of the acquisitions that -- because they came in during the year, they've not really materially added any financials. So the gain we saw in 2021 was all from Precision planting, just minimal to little revenue there from the acquisitions. That's really going to start kicking in 2022 because a lot of those acquisitions really played out towards the latter half of 2021. So that's the first question. And then the second question was on Targeted Spraying and where do we stand. We're coming up with 2 systems. It's got the -- the backbone is vision systems and then intelligence to be able to identify artificial intelligence, background to identify the difference between a weed and a plant. We have 2 systems, green on brown and green and green. Those will be retrofit platforms that will go on any brand sprayer. So building on and the control system will be what Seth talked about. Just as a reminder, a way to think about 2020, it's not a year. It came from having 2020 vision, having perfect vision into what's going on and that started with being with perfect vision of what's going on in the planter, now I'll have a perfect vision of what's going on with the sprayer. And so we'll have both systems. They're both running this summer on several test customers, and we'll probably be announcing this fall some specific dates.

Yes. John, I'd like to add to Eric's answer. He mentioned that the growth was 100% organic. I said it came from Precision Planting. It came from what was in our portfolio. So Precision Planting and Fuse and from the charts we showed they're both in a race, both are growing more rapidly than the industry is reported to be growing that there's no formal industry measurement for Precision Ag, but we believe both are growing. We know both are growing at close to a 20% CAGR or more. And so that's what drove that growth.

Yes. Sorry, I forgot to mention Fuse. Good point. Thanks, Seth.

Time for one more question.

In terms of Precision Ag products, can you give us any numbers to kind of quantify farmer engagement with the different products and how that's changed over the last few years?

Do you want me start with that or do you want me to...

Go ahead.

Okay. So farmer engagement. Yes, we -- each quarter, we give you an update on the percent growth of Precision planter grows, so intelligent planting rows as well as sprayer adoption. And we've been seeing planter growth rate -- between planter and sprayers, we've been seeing growth rates in 20% to 30% range with our intelligent Combine compared to regular, we've been seeing IDEAL Combine growing more in the 80% to 90% range. And that's what those are all leading to the technology underpinning all of those is growing faster than the industry. The industry is growing 10% to 15%, and the AGCO Precision Ag business is growing more like 20%. And target for the next 5 years is to continue that 20% growth rate.

And with that, I think we'll wrap up our Q&A session. I want to go ahead and thank all of those that are listening to us on the webcast. Thank you for your attention today. We look forward to continue our conversation around Precision Ag and sustainability. Thank you.