Stanley Elliott: And just, I guess, a point of clarification. So the $300 million that’s going to come from Trimble this year, those are only the sales to AGCO, and that kind of strips out your sales to other parties that Trimble used to sell to? And then if that’s the case, at what point or can you help us with kind of a time frame when you think you recoup some of those sales?
Damon Audia: Yes. So Stanley, I think it’s the — just be a little bit more of the inverse. So the $300-plus million of sales that I showed on the slide are to sales to everyone excluding AGCO. We do — there is some sales. And if you looked at the 8-K that we filed about a month ago, you would have saw that last year, there was about $35 million of sales that the Trimble JV would have sold to AGCO. Because we now consolidate that business, those numbers are stripped out as part of the corporate eliminations. And so the 300-plus are all third-party sales.
So again, similar to as we’ve talked to Wall Street about our precision ag business, as you know this well, we talk about 2 pieces of that business. We talked about the Precision Planting, the retrofit third-party sales, that’s usually been about half of the number. And then we talked about our Fuse business, which is the OE sales that we’re selling to high technology into Fendt, into Massey, into Valtra.
Same thing that we’re going to have to communicate to you guys now about PTx Trimble because we’ll continue to make the sales third party. And again, that’s $300 million plus. But there will be a growth in the AGCO sales that you won’t necessarily see in that number. So we’ll have to give you that similar overview of sort of what’s the combined number versus what’s in the reported number. I hope that makes sense.
Operator: We have our next question from the line of Tami Zakaria from JPMorgan.
Tami Zakaria: So just wanted to understand the guide a little better. I think you’re excluding PTx Trimble that you expect about $300 million plus. The core business, the new guide suggests like it’s down by almost $400 million versus the previous guide. So can you just help me understand the buckets of this guide down?
How much is North America versus South America versus if there’s any FX in there. So really trying to understand what’s the delta between the current and previous outlook for the core business ex Trimble.
Damon Audia: Sure. No problem, Tami. So we went from 13 6 to 13 2 on the core business. I would tell you, just call it was around about $150 million of that is related to the currency weakness, give or take. You got about $200 million related to the change in the South American market. And then the delta would be the pricing coming down from about 1.5% down to around 1%. Those are the 3 big buckets.
Tami Zakaria: Got it. Okay. And then I saw in the presentation, I think you’re expecting a high 20% EBIT margin from the Trimble, PTx Trimble, which I would think is a little lighter than what Trimble as a standalone company used to do. So again, I know probably sales are down this year, but can you just help me understand what drives that high 20% EBIT margin? And where do you eventually see it going as, hopefully, that market recovers at some point?
Damon Audia: Yes. So again, Tami, what we’re showing you is the revenues excluding AGCO sales. So keep that in mind. Again, last year, that was $35 million. So — but if I think about what we said is Trimble or PTx Trimble margins in the high 20s. If you look at what we showed in September, we would have shown an EBITDA margin in the low 30s.
So again, I think if you add in about $5 million of depreciation, these numbers do reflect some TSA costs, and we’re doing a transitional services agreement with Trimble. So there’s a few million dollars embedded in these numbers. That will work its way out of the system over the next couple of years as we start to integrate them more into our system. So that will help pick up the margins there.
And then again, with the revenues coming down, again, you’re losing some of that leverage, which is depressing the margins a little bit. And then again, I would layer in, if, again, $35 million of good margin business, with no real change in the SG&A cost is what’s bringing the margins down a little bit as well. So overall, when we look at the products and we look at the gross margin of what we’re selling them in the marketplace, we feel really good about it. And then we start to talk about the synergies and the revenue growth as we integrate that more into the AGCO portfolio here going forward.
Operator: The next question is from the line of Mig Dobre from RW Baird.
Mircea Dobre: Yes. I also want to follow up on the Trimble JV. Look, maybe I’m a little bit confused here. But using the information that you put out in the 8-K about a month ago, it strikes me that the margins that we saw there, the operating margins for the Trimble JV were a little bit lower than the high 20s that you’re talking about here.
So when I’m kind of looking at what’s going on in terms of volume compression and obviously, the fact that the CNH business is going away from Trimble, I’m kind of curious how to square to that $300 million revenue guide that you provided but also to the high 20s margin here. So what assumptions are you making on the core Trimble revenue and on the CNH-related business?
Damon Audia: Yes. So Mig, I guess when I think about the 8-K where we published the standalone financial statements, again, I think it’s important to remember that this was a segment or a portion within the Trimble business that they were reporting. And as they went through or as we created with Trimble, the standalone cost, there were certain allocated costs that were applied to create, in theory, the pro forma of that business that we filed in that 8-K.
That doesn’t necessarily reflect all of the cost that we have taken over as part of the business or cost that we would incur because we’d be able to leverage many of our operating resources. And so again, it was trying to create — the goal of that 8-K is to create a standalone financial statement for what that business, which has included some of the allocated costs that Trimble would not have shown or that we would not have shown in the — when we did the announcement back in September but are not actually reflective of the ongoing cost structure.
So hopefully, that explains — when we give you the numbers that we’re talking about now, it’s the business that we’re controlling, the cost structure that we see in the business. We see the revenues right now for the balance of the year. And again, that’s for the remaining 3 quarters, we see that being about $300 million.
We do see the CNH business coming down. Again, if you look at the revenue in that 8-K, we said the revenues were just over $500 million or right around $500 million. When you layer in the first quarter of what Trimble will ultimately announce related to this business, directionally, let’s say, you’re going to see about the numbers coming down around $100 million year-over-year, which is not surprising because when we think about that, our markets have come down since our initial announcement have come down around 10%. So you have around $50 million of revenue related to lower market.
We do expect the CNH OE business to come down. We talked about that in September. We continue to expect that. I would say that’s probably going to come down directionally $40 million or so year-over-year. And then the rest of the number is a little bit of the churn that we knew with the CNH dealer channel as they were beginning to either sign up with Trimble as a Vantage dealer or if they were going to be going elsewhere.
And so again, when you look at the numbers, the decline year-over-year, we look at the margins, again, we still see this to be a great business. And again, we feel comfortable with these high 20s operating margin and growing as that volume continues to come back here over the next couple of years.
Operator: The next question is from the line of Jerry Revich from Goldman Sachs.
Unknown Analyst: This is Clay on for Jerry. As a follow-up on the CNH side dealers, are you seeing sign-ups for those — how — can you just update us on the progress for sign-ups for those to become the Vantage dealers? Or is there still some destocking as we look forward?
Damon Audia: Yes, Clay. So I think, again, the relationship with CNH and Trimble, they made that change long before the announced joint venture between us and them. And again, they had, had some very good success in signing up many of these dealers to begin to sell the Trimble products directly.
We’ve continued to see good momentum as the sales teams have been out with the dealers, as some of our team members now over the last 1 month have begun to work with the Trimble team as well in working to update and connect with these dealers about the value and the benefits of the PTx Trimble products. And again, really no change in how we’re approaching this.
With our Precision Planting business, we’re very much focused on the farmers and servicing all makes in all models. So our Precision Planting Group is very much similar to what the Trimble Group had been. And the key for us and with the dealers is that, again, we want them to be able to service the farmers the way the farmers want to be serviced. And whether that’s with a competitive product or an AGCO product, we’re agnostic to that.
We’re there to service them, make them more productive and drive their yields, reduce their input costs and make them more profitable. So I’d say we’re seeing good momentum. Obviously, the market environment is a little bit more challenged.
Farmer incomes in many parts of the world are lower this year than they were last year. So you’re seeing a little bit of hesitation more just on farmer spending. But I would tell you the momentum that we’re seeing with our team now engaging with the PTx Trimble team has been very good, and the engagement from the dealers has been very good as well.
Again, we still have to work through some of the history of how many of these dealers receive their Trimble product because that would have come directly from the OE. And as this now transitions from the JV, we would continue to expect a little bit of churn here in the first half of this year and then hopefully normalizing as we move into the back half of the year.
Unknown Analyst: And separately, you have an update for us on just the GSI portfolio review timing and what the last 12 months EBITDA has been?
Damon Audia: Yes. So we continue to be under the strategic review of the grain and protein business units. Significant amount of external interest on this. And also the team continues to execute exceptionally well as we started the first quarter.
What we’ve historically said is the EBIT margins for this business are sort of in that mid-single digits. Again, credit to the grain and protein team. They’ve done exceptionally well and had a great first quarter here. So I think we’ll be in a position to sort of come to a final conclusion on that sort of in the summer here of this midsummer time frame.
