Translation: Original comment published in Finnish on 2/7/2024 at 6:58 am EET

The American agricultural machinery manufacturer released its Q4’23 report yesterday, opening its market prospects for 2024. The comments were in line with what Deere said about the market already last year. Componenta and Kesla, which we know/assume to be suppliers of AGCO (Valtra), are not supported by the outlook comments and rely increasingly on Valtra’s production in Finland developing in line with the ambitious targets.

AGCO is pessimistic about the 2024 tractor market

AGCO expects the volumes of the agricultural tractor market to decrease by 5-10% in Europe y/y and by 10% in North and South America y/y in 2024 The market is depressed everywhere by the lower income of farmers, although the dairy and livestock sectors in Europe are faring better. AGCO’s view of the 2024 market is in line with what Deere presented already in November.

Componenta's and Kesla’s expectations are under pressure

We have previously estimated that AGCO/Valtra and its factories in Suolahti and Linnavuori are a significant customer for Componenta and Kesla. For both of them, hopes for good development in Valtra in 2024 increasingly rely on Valtra’s production volumes growing as planned. Last fall, we explained how Valtra has invested in the Suolahti plant, how the production of the new S-series tractor will start there this year, and how the market share targets have been set high. As neither Componenta nor Kesla are expected to comment on any of their customers’ business in connection with their earnings releases, we hope to receive more information about the development in 2024 either from professional publications or in the best case scenario from AGCO/Valtra themselves. The outset for Valtra’s year is not the best in terms of the market's demand outlook, and AGCO’s Q4 report probably increased the pressure on Componenta's and Kesla's 2024 guidance somewhat. Both Componenta and Kesla will release their Q4 reports on March 1.