And then, we still are on-track — we still are standing behind our commitments of short-term accretion and longer-term growth to a $2 billion Precision Ag business being the industry leader in serving mixed fleet Precision Ag farmers all around the world, whether it’s through retrofit or serving over 100 other OEMs in a very confidential and unique bespoke way or through AGCO machine enhancements. We’re really excited about that.
Tami Zakaria: Super helpful. And then one quick question to clarify something. So your production hours are expected down 10%. But sales, you expect down 6% this year. And pricing up 1.5%, I think you said. So help me understand, what’s the bridge from sales down only 6% versus production down 10%.
Damon Audia: Yes. So I think, Tami, you’re looking at some parts growth, you’re looking at Precision Ag growth, looking at some Grain & Protein growth in there and then obviously, mix, as I alluded to, for — specifically in Europe with some of the new Fendt products. So directionally, that’s what’s driving the differences.
Operator: Our next question comes from Seth Weber from Wells Fargo.
Seth Weber: I wanted to just think about North America margins for ’24. Specifically, on the Precision Ag business, I know you’re kind of moderating your growth rate there. But there were a lot of disruptions with the supply chain and stuff in — over the last couple of years. So is there any reason why your Precision Ag margins shouldn’t be up in 2024 versus ’23, even with more moderate growth this year?
Damon Audia: Yes. Seth, I don’t — Precision Ag margins have been relatively — the gross margins, again, when I think about the products have been relatively consistent. We are seeing the revenue has been fluctuating but the pricing and the margins we’re getting have been relatively stable. So I don’t see any real significant changes in overall margin related to that business as we go into 2024.
Seth Weber: Okay. And then just in your prepared remarks, Damon, I think you were talking about efficiencies, cost cut — cost measures and stuff like that. Is AGCO actually planning any more proactive cost actions? Or is this all just sort of normal course of business, your normal sort of efficiency measures that you usually do? Or is there — are there more kind of structural actions that you guys are contemplating in this softer environment?
Damon Audia: Yes. The way I would look at it, Seth, is when — as we look — engage with our supply base, I would say there’s a heightened level of focus, incremental to what you would probably see in a normal year. So I would layer that on as — that’s additional to the day-to-day operations is driving cost down in the supply base versus where we were in the last couple quarters — or last couple of years. As I think about the larger scale, if you’re referring to like an SAG restructuring, things of that nature, again, right now, we’re not announcing anything like that. We’re watching the markets. We’re — I go back to that value-creation line that we’ve showed you guys. I showed it in the slides today. We’re going to measure ourselves relative to that line, understanding where the market is, what the team is able to deliver in productivity and that’s on the SAG side as well.
And to the extent we’re not meeting that or the markets are weakening more, we’re going to look at all alternatives. I would also tell you that the team is being very aggressive as we move into these global businesses, global brands, as we talk more about Fendt as a global brand, trying to look for back-office consolidations. Again, you don’t hear us do anything in a broad brush announcement. But we are looking to create commonality and a common skeleton within parts of AGCO that create efficiencies for us longer term. So I would say we’re doing that in 2024 as well. But again, nothing massive that you’re — I think if you’re alluding to a large restructuring, we’re not announcing anything like that, obviously.
Operator: And this concludes our question-and-answer session. I would like to turn the conference back over to Eric Hansotia for any closing remarks. Please go ahead.
Eric Hansotia: Yes. Just briefly, I’ll close today by saying thank you very much for your participation and your support of our — of AGCO. We’re really proud of our performance through 2023. It was an absolute record year in so many ways for our customers, for our employees, for our investors. It sets us for a — on a trajectory path for our results to be much more resilient through the cycle. And we’ve been talking about that for a couple of years now and it’s all coming home to roost and I would hope that you’re as excited about that as we are. The key to our success is the continued execution of our Farmer-First strategy. Our focus is on growing our margin-rich businesses like Fendt, parts and service and our Precision Ag business which we’ve been investing in heavily over the last few years.
The announcement of the pending AGCO-Trimble joint venture represents the biggest agtech deal in history and will enable AGCO to become the global industry leader in mixed fleet Precision Ag solutions with our unique focus on retrofit solutions. Over the last few quarters, we’ve touched on many of the factors supporting our markets, including growing populations, changing diets, low stocks-to-use levels, increased demand for biofuels and relatively healthy commodity prices. All of these trends give us confidence in the long-term health of our industry. We’re excited. We look forward to seeing many of you in the coming weeks and months. Thank you and have a great day.
Operator: The conference has concluded and you may now disconnect. Have a great day.
