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© Noealt Corporate Services. 2014. All Rights Reserved.
The company logos displayed herein &
throughout the report are intellectual property
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purposes only.
Noealt Corporate
Services
November 2014
Strategic Factor Analysis Summary (SFAS) Framework Analysis - 2015
World’s 6 Leading Agriculture Equipment Manufacturers
© Noealt Corporate Services. All Rights Reserved.
Published By:
Noealt Corporate Services
www.noealt.com
For any queries or information mail
to: [email protected] November 2014
Copyright Statement
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permission of Noealt Corporate Services. This report is an outcome of comprehensive & detailed research work. The contents of this report are proprietary in
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the report are based on analysis & assessments and present possible & likely outcomes only and thus should not be construed as or substituted for
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Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – 2013 Vs. 2012 &
Q1-Q3 FY2014 Vs. Q1-Q3 FY2013
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 1
John Deere & Co.
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Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – 2013 Vs. 2012,
Q1-Q3 2014 Vs. Q1-Q3 2013 & H1 2014 Vs. H1 2013
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 2
CNH N.V.
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Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – 2013 Vs. 2012 &
Q1-Q3 2014 Vs. Q1-Q3 2013
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 3
AGCO Corporation
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Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – 2013 Vs. 2012
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 4
CLAAS Group
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Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – 2013 Vs. 2012
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 5
SAME Deutz-Fahr
Group S.p.A.
© Noealt Corporate Services. 2014. All Rights Reserved.
Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section - 1 Business Structure & Snapshot a) Founded b) Headquartered c) Business Segments d) Employees e) Revenues f) Market Capitalization g) Key Executives h) Shareholding/Ownership Pattern & Structure Section – 2 Financial Performance Snapshot – FY2014 Vs. FY2013
& H1 FY2015 Vs. H1 FY2014
- Sales Revenues Growth - Gross Earnings & Margin - Operating Earnings & Margin - Net Earnings - Profitability Growth - Profit Margins - Cash Flow from Operations
Table of Contents - 6
Kubota Corporation
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Internal Factor Analysis Summary
(IFAS) Matrix
External Factor Analysis Summary
(EFAS) Matrix
Strategic Factor Analysis Summary
(SFAS) Matrix
Section – 7 Global Agriculture Equipment Industry – Force Field Analysis
Section – 8 Key Industry Trends, Issues, Risk Factors, Challenges & Industry Outlook
Table of Contents - 7
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About Strategic Factor Analysis Summary (SFAS) Framework - 1
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Background :-
Strategic Factor Analysis Summary(SFAS) matrix, also referred to as Quantitative SWOT Analysis, is a framework developed by T. L. Wheelen and J. D. Hunger, which
is used widely across organizations globally as a key strategic planning tool. The framework trifurcates an organization’s operating environment into Societal, Task &
Internal environment respectively with the societal & task environments together constituting the firm’s external environment :
--Societal Environment: Refers to Generic Macroeconomic forces & factors at play
--Task Environment: Comprises of industry environment that includes customers, suppliers, competitors etc.
--Internal Environment: Refers to the firm’s internal structure, resources, capabilities & functioning that form the basis of firm’s strengths & weaknesses.
The framework, thus, outlines, summarizes & generates an insightful snapshot of key strategic factors of an organization based on a comprehensive external
environmental assessment to identify potential opportunities & pertinent threats based on an External Factor Analysis Summary (EFAS) matrix along-with a detailed
analysis of organization’s internal environment to identify core strengths & weaknesses through an Internal Factor Analysis Summary (IFAS) matrix. The framework finally
reviews the firm’s potential strategic options.
The framework generates a snapshot of the prevailing, overall strategic equation for an organization at a given point in time by identifying, weighing, prioritizing & ranking
strategic factors in the internal & external environment based on their significance & potential degree of impact along-with the organization’s corresponding response to
the factors.
Usefulness over Traditional SWOT:-
The framework scores over traditional SWOT analysis framework in terms of its ability to quantify strengths, weaknesses, opportunities & threats respectively based on
the potential degree of effect of each strategic factor being analyzed and the organization’s commensurate degree of responsiveness to that; thereby making it much
more effective from the perspective of strategic planning, competitive assessment & analysis standpoint.
About Strategic Factor Analysis Summary (SFAS) Framework - 2
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Methodology:-
The SFAS Framework is comprised of three matrices, i.e., IFAS (Internal Factor Analysis Summary), EFAS (External Factor Analysis Summary) & SFAS (Strategic Factor
Analysis Summary) respectively.
IFAS & EFAS matrices each contain factors classified under Strengths & Weaknesses for IFAS and Opportunities & Threats for EFAS.
1. Up to 5 factors are included in the IFAS & EFAS matrices based on the relevance of factors to the organization and are sorted in the first column.
2. In the second column, each of the factor’s significance is assessed (by assigning weights ranging from 0 – least significance to 1 – greatest significance),
depending on their influence on/magnitude of the strategic positioning of the organization. Greater the weight of the factors, larger the influence & potential
magnitude on the organization’s positioning. Total sum of the weights is equal to 1, no matter the number of factors. The abi lity of the organization to respond to each
of these factors & the organization’s current/existing degree of responsiveness(assessed based on strategic initiatives, developments & activity) with reference to
that factor is then analyzed, taking into consideration their importance for that specific organization.
3. Ability & the existing degree of responsiveness of the organization to respond to each of these factors is rated in the third column, with rating from 1 to 5 (1-
inadequate, 5 -excellent).
4. Multiplication of the weight of the factor and the organizations’ current degree of responsiveness gives a weighted score for each individual factor (fourth column).
5. In the fifth column comment is given about the analysis & potential implications.
Total weighted score is thus a combination of strategic positioning & the degree of responsiveness to strategic factors and indicates the degree of organization’s
responsiveness & effectiveness in responding to external as well as internal strategic factors having varying degree of magnitude of potential impact on the
organization.
SFAS matrix synthesizes & integrates results of EFAS and IFAS analysis and reprioritizes & ranks strategic factors once again by reassigning weights and re-rating them
to generate a fresh weighted score for each factor. The SFAS ultimately provides a single, total SFAS score on the organization by summing up weighted scores for
Strengths, Weaknesses, Opportunities & Threats respectively.
© Noealt Corporate Services. 2014. All Rights Reserved.
IFAS, EFAS & SFAS Scores – Interpretation
The scores or rating is based on the strategic positioning & responsiveness of an organization with respect to its internal & external environment.
Better positioning of the organization will reflect in higher rating consequently.
• A score of 3 indicates average positioning meaning neither well nor poorly positioned organization & average responsiveness.
• A number higher than 3 would mean that the organization is doing well in terms of understanding & responding to internal as well as external strategic factors.
• A score of 4 or over 4 indicates superior & excellent positioning & responsiveness.
• A score of 5 indicates that the organization’s positioning as well as degree of responsiveness are outstanding.
Part 1
Business Overview
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Business Snapshot
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Market Cap Source: * Bloomberg based on no. of Shares outstanding .
Data Sources: SEC Filings, Company website, Financial Results.
John Deere & Co. - Key Numbers – In $ Million
Revenues Split by Key Business Segments
Founded: 1837
Headquartered: Moline, Illinois, United States
Employees: 67,044 as of December 31, 2013.
Business Segments :
• Agriculture & Turf
• Construction & Forestry
• Financial Services
•
Key Executives:
Samuel R. Allen: Chairman & CEO
Rajesh Kalathur : Senior Vice President & CFO
James M. Field: President, Agriculture & Turf Division –
Americas, Australia and Global Harvesting & Turf Platforms
John C. May: President, Agricultural Solutions & Chief
Information Officer (CIO)
Market Capitalization : USD 30.15 Billion as of October 16,
2014.
Ownership Structure: 66% stocks owned by Institutional &
Mutual Fund Owners. Vanguard Group Inc. held about 5.66% of
shares while the State Street Corporation owned 4.24% shares
in John Deere & Co. as of June 30, 2014.
Nov13-Jul14
Nov12-Jul13
Agriculture & Turf Equipment Segment – Snapshot
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Source: Company website, SEC filings. Financial Results.
Note: Equipment Operations includes Agriculture & Turf and Construction & Forestry Segments
John Deere & Co. – Agriculture & Turf Division - Key Numbers – In $Million John Deere & Co. – Agriculture & Turf Division – Operating Margin Trend
John Deere & Co. – Asset Base Distribution by Segment John Deere & Co. – Equipment Operations – Revenues Split by Geographic
Regions
North America still
the Core Market &
plays an
Indispensable Role in
Revenues Generation
Nov13-Jul14
Nov12-Jul13
July 31, 2014 Total
Assets: $61.74 Billion
October 31, 2013
Total Assets: $59.52 Billion
Financial Snapshot - 2013
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, SEC filings. Financial Results.
Note: Equipment Operations includes Agriculture & Turf and Construction & Forestry Segments
John Deere & Co. – Agriculture & Turf Division - Key Numbers – In $Million John Deere & Co. – Revenues Split by Key Business Segments
John Deere & Co. – R&D and Capital Expenditure – In $Billion John Deere & Co. – Agriculture & Turf Division – Key Numbers – In $Million
2013
2012
16.06% 14.45%
Operating
Margin
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Part 1
IFAS, EFAS & SFAS Matrices
1.2
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Internal Factor Analysis Summary(IFAS) Matrix
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Internal Factors Weight Rating Weighted
Score Comments
Strengths
1.Diversified Business & Product Portfolio spread across
Agriculture, Construction & Forestry Equipment Segments. 0.15 4 0.60
JD has a strong & diversified product portfolio spread across Agriculture,
Construction & Forestry Segments besides its Fledgling Maintenance,
Repair, Overhaul & Aftermarket Business
2.Market Leadership in North America & Strong Profitability
of JD’s North America based Operations. 0.20 5 1.00
John Deere leads the industry in terms of profitability of its operations with
operating margin touching the 14.68% for the first three quarters of FY2014
as against 16% for the first three quarters of FY2013 & 14% for FY2012.
3.Significant Brand Equity & Extensive Global Geographic
Footprint, especially, for the Agriculture Equipment
Segment.
0.15 4 0.60
The company has strong brand equity, especially, in the North American
market with respect to Agriculture Equipment segment and has extensive
global geographic footprint.
4. Huge, significant Global Installed Machinery Base. 0.10 3 0.30
Deere & Company has significant global installed base of agriculture,
construction & forestry equipment providing steady revenue streams
originating from service & sustainment support.
0.60 2.50
Weaknesses
1.Faces Potential Market Concentration Risks. 0.10 4 0.40
JD derives the largest share of its revenues from the North American
market (61% for the first three quarters of FY2014, 64.5% for Q1-Q3
FY2013 & 62% for FY2012).
2.Lacks the Capability to Hedge Industry Cyclicality Trends
Effectively. 0.15 3 0.45
Lacks a strong & significant presence outside the agriculture equipment
segment (which generated about 75% for Q1-Q3 FY2014, 82% for FY2013
& 80% for FY2012) with the inadequate size & scale of construction &
forestry equipment segments to be able to effectively hedge against the
industry cyclicality trends in the agriculture equipment segment.
3.Low Profitability of International Operations. 0.15 3 0.45 Profitability of international operations(located outside North America) is
limited (8.26% for Q1-Q3 FY2013 & 4.41% for FY2012)
0.40 1.30
Total Scores 1 3.80
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary(EFAS) Matrix
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External Factors Weight Rating Weighted
Score Comments
Opportunities
1.To Expand the share of revenues originating from
Emerging Markets over Medium to Long Term. 0.10 4 0.40
To effectively capitalize on the shifting global dynamics, leverage a strong
& suitable product portfolio with strong, long-term industry fundamentals
requiring global agriculture output to double itself through 2050.
2.Extension of existing Product Lines through Product
Innovations. 0.10 5 0.50
Hydraulic Excavators & High Horse Power Tractor Segments entail
significant Growth Potential.
3.To Leverage significant Operational, Financial & Resource
Synergies across Agriculture, Construction & Forestry
Equipment Segments for enhanced efficiency. 0.10 3 0.30
Scope to realize potential financial, operational & resource synergies
across agriculture, construction & forestry segments for enhanced cost
competitiveness, especially, across international markets.
4.Consolidation of Farm Sizes across Traditional Markets. 0.10 4 0.40
Provides significant growth avenues for larger machinery across traditional
markets entailing higher profitability for OEMs.
5.Development of New Products, Innovative Technologies to
Stimulate Potential Replacement Demand. 0.10 5 0.50
Driven by enhanced/innovative, new capabilities developed from scratch
offering enhanced operating economics & total cost of ownership for the
end user.
0.50 2.10
Threats
1.Plummeting of Crop Prices with Record Harvest to Impact
Equipment Sales significantly over Near Term. 0.15 4 0.60
Record harvest across NAFTA, EU & LATAM regions has led to a slide in
crop prices of-late which is impacting farm incomes & is likely to impact
agriculture machinery purchase decisions over near term.
2.Slowing down of World Economy with Stalling of EU
Economic Recovery & Difficult Economic Conditions across
Brazil & Russia. 0.10 3 0.30
Slowing down of world economy in general besides stalling of economic
recovery in the EU besides economic difficulties across Russia & Brazil to
impact capital goods sector over near term.
3.Sporadic Global Currency Exchange Rate Fluctuations &
Continued Strength of U.S. Dollar to Impact Profitability. 0.10 3 0.30
Sporadic fluctuations in the global currency exchange rates and the
continued strength of U.S. Dollar against most global currencies to impact
profitability with JD deriving about 60% of its revenues from North America.
4.Proposed Easing of Ethanol Mandates across NAFTA & EU
to Impact Corn Prices & Machinery Sales over Near Term. 0.15 3 0.45
Likely to impact corn crop dynamics significantly given a significant
increase in corn planting acreage over recent years with alteration of crop
planting patterns which has already led to oversupply issues.
0.50 1.65
Total Scores 1 3.75
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary(SFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Strategic Factors Weight Rating Weighted Score Short Intermediate Long
S2 Market Leadership in North America & Strong Profitability of
JD’s North America based Operations. 0.15 5 0.75 X
S1 Diversified Business & Product Portfolio spread across
Agriculture, Construction & Forestry Segments. 0.10 4 0.40
X
X
X
0.25 1.15
W1 Potential Market Concentration Risks. 0.10 4 0.40 X X
W3 Low Profitability of International Operations. 0.10 3 0.30
X
0.20 0.70
O2 To Realize Potential Synergies across Business Segments. 0.10 3 0.30 X X
O5 Development of Innovation driven New Products &
Technologies. 0.10 5 0.50 X X
0.20 0.80
T1 Plummeting of Crop Prices to Impact Machinery Sales. 0.15 4 0.60 X
T2 Slowing Down of Global Economy & Proposed Easing of Ethanol
Mandates over Near Term. 0.10 3 0.30 X X
T3 Currency Exchange Rate Fluctuations & Continued Strength of
U.S. Dollar to Impact Profitability. 0.10 3 0.30 X
0.35 1.20
Total Score 1 3.85
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
© Noealt Corporate Services. 2014. All Rights Reserved.
Part 2
Business Overview
Business Snapshot
Founded: 1999 with the merger of New Holland N.V. & Case
Corporation. Further, the merger of Fiat Industrial S.p.A. & CNH
N.V. in September 2013 created CNH Industrial N.V.
Headquartered: Burr Ridge, IL (CNH Global N.V.)
Employees: About 71,192 as of December 31, 2013
Business Segments :
• Agriculture Equipment
• Construction Equipment
• Trucks & Commercial Vehicles
• Powertrain
• Financial Services
•
Market Capitalization : USD 10.44 Billion as of October 15, 2014 (for
ticker CNHI listed on New York Stock Exchange) & EUR 8.25 Billion for
the company’s listing on BrsaItaliana.
Shareholding Structure: CNH Industrial N.V. issued 1,348,867,772
common shares post merger with Fiat Industrial S.p.A. shareholders
receiving 1 newly allotted common share in CNH Industrial N.V. for
each ordinary share held in Fiat Industrial N.V. while CNH Global N.V.
shareholders received 3.828 newly allotted common shares in CNH
Industrial N.V. for each common share held by them in CNH Global
N.V. The CNH Industrial share began trading on NYSE & the MTA on
September 30, 2013.
Key Executives:
Sergio Marchionne: Chairman of the Board
Richard J. Tobin: Chief Executive Officer (CEO)
Massimiliano Chiara: Chief Financial Officer (CFO)
Source: Company website, Financial Results.
Note: Revenues split is based on revenues depicted under IFRS by the company & excludes eliminations.
Sales revenues for CNH Industrial stand at $16,652 for H1 2014 under IFRS. © Noealt Corporate Services. 2014. All Rights Reserved.
CNH Industrial N.V. - Key Numbers – In US$ Million – Under U.S. GAAP
CNH Industrial N.V. - Revenues Split by Key Business Segments
H1 2014
H1 2013
CNH Industrial N.V. – Financial Snapshot – Q1-Q3 2014
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
Note: Financial Data based on U.S. GAAP
except Trading Profit which is in IFRS.
CNH Industrial N.V. - Key Numbers – In U.S. $ Million CNH Industrial N.V. – Revenues Split by Key Business Segments
CNH Industrial N.V. – Operating Margin by Business Segments CNH Industrial N.V. – Agriculture Equipment Segment – Key Numbers – In
U.S. $ Million
Q1-Q3 2014
Q1-Q3 2013
CNH Industrial N.V. – Agriculture Equipment – H1 2014
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
CNH Industrial N.V. – Agriculture Equipment Segment - Key Numbers –
In $ Million
CNH Industrial N.V. - Agriculture Equipment Segment - Operating Margin
Trend
CNH Industrial N.V. – Agriculture Equipment Segment - Revenues Split by Key
Geographic Markets
CNH Industrial N.V. – Agriculture Equipment Segment – Sales Growth Trend
by Key Global Markets & Regions
H1 2014
H1 2013
CNH Industrial N.V. – Financial Snapshot - 2013
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
CNH Industrial N.V. - Key Numbers – In EUR Million CNH Industrial N.V. – Revenues Split by Key Geographic Markets
CNH Industrial N.V. – Revenues Split by Key Business Segments CNH Industrial N.V. – Operating Margin Trend by Business Segments
2013
2012
2013
2012
© Noealt Corporate Services. 2012. All Rights Reserved.
Part 1
IFAS, EFAS & SFAS Matrices
2.1
© Noealt Corporate Services. All Rights Reserved.
Internal Factor Analysis Summary (IFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Internal Factors Weight Rating Weighted
Score Comments
Strengths
1.Structural Balance & Diversification of CNH’s overall
Business Portfolio across Industries & Sectors. 0.15 4 0.60
CNH’s business portfolio is well diversified across industrial markets comprising
of Agriculture & Construction equipment, Commercial Vehicles & Powertrains.
2.Well-Developed Geographic Presence & Industrial
Footprint and Well-diversified revenue base distributed
across NAFTA & EMEA regions.
0.20 4 0.80 Bolsters profitability given & high profitability of the value driven wide body
aircraft segment.
3.Merger with Fiat Industrial has Reinforced & Expanded
CNH’s Financial, Technological & Resource Strength
Significantly.
0.20 4 0.80
Well-developed global footprint of CNH’s agriculture equipment business with
37 manufacturing facilities located across the globe supported by a strong
sales & distribution network operating across 170 countries. CNH’s overall
revenue base is well-diversified across key global markets with a good blend &
distribution of revenue base across traditional & emerging markets.
0.55 2.20
Weaknesses
1. Profitability of CNH’s Operations remains a Key Concern. 0.15 4 0.60
Needs further improvement in profitability of operations. CNH is undertaking
initiatives to align cost base & inventory position with market demand levels &
pursuit of Industrial & Functional Cost flexibility enhancement measures with
projections for an operating margin of 6.5%-6.9% for 2014 for industrial
activities. Operating margin for the Agriculture segment for Q3 2014 stood at
11.8%. Plans to double net income to $2.2 billion by 2018 with significant
investments towards expansion & market development across key Asian
economies.
2. Needs a more cohesive, synchronized & integrated
business approach as well as strategy for International
Operations.
0.15 3 0.45 Will provide the ability to leverage significant operational, financial, resource &
market synergies across group businesses that will enhance efficiency & bolster
overall profitability.
3. CNH’s current strategy of leveraging, specific regional
industrial hubs for production of specific product lines may
impact overall competitiveness amid difficult market
conditions.
0.15 3 0.45 May hamper cost base management ability over medium to long term despite
providing significant industrial flexibility & cost savings from a near term
perspective.
0.45 1.50
Total Scores 1 3.70
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary (EFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
External Factors Weight Rating Weighted
Score Comments
Opportunities
1.To leverage merger with Fiat Industrial as the catapult to
further strengthen & extend positioning & market share in
the global agriculture equipment market. 0.20 4 0.80
Merger with Fiat Industrial has strengthened CNH’s financial, technological
& resource strength tremendously & has provided the ability to hedge
industry cyclicality trends effectively.
2.To realize significant potential operational, financial,
resource & market synergies across agriculture,
construction equipment & commercial vehicle segments. 0.10 3 0.30
To bolster profitability by harnessing significant synergies across group
businesses effectively.
3.Deepening of local roots across emerging markets with
continued expansion & diversification of industrial footprint
to provide significant growth avenues over medium to long-
term with mechanization of agriculture sectors across
emerging markets. 0.15 4 0.60
Continued expansion of CNH’s geographic & industrial footprint across
emerging markets will enhance market positioning & provide the ability to
capitalize on potential growth opportunities effectively.
0.45 1.70
Threats
1.Record harvest & sliding of crop prices to impact new
machinery sales over near term, especially, for high
horsepower tractors & combines. 0.20 4 0.80
Record harvest across NAFTA, EU & LATAM regions has led to a slide in
crop prices of-late which is impacting farm incomes & is likely to impact
agriculture machinery purchase decisions over near term. CNH derived
over 70% of its revenues for 2013 from NAFTA & EMEA regions combined.
2.Strengthening of U.S. Dollar against most global currencies
to impact profitability.
0.10 3 0.30
The recent surge in U.S. Dollar against most global currencies is likely to
impact profitability of OEMs & competitiveness of exports amid visible
pressures on top line growth emanating from difficult market dynamics.
3. Increased competitiveness of Japanese OEMs in the U.S.
market with significant weakening of Japanese Yen against
the U.S. Dollar. 0.10 3 0.30
The softening of Japanese Yen against the U.S. Dollar has enhanced the
competitiveness of Japanese OEMs, especially, Kubota, which is likely to
lead to a significant increase in competitive intensity in the NAFTA market.
4. Proposed easing of Ethanol mandates across NAFTA &
EU regions to impact corn prices & machinery sales
significantly over near term. 0.15 4 0.60
May impact corn pricing & farm incomes adversely given continued supply
side easing with an increase in corn planting acreage across NAFTA, EU &
LATAM regions over recent years.
0.55 2.00
Total Scores 1 3.70
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary (SFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Strategic Factors Weight Rating Weighted
Score Short Intermediate Long
S2 Well-developed geographic, industrial footprint & well-
diversified revenue base across key markets & regions. 0.15 4 0.60 X
X
X
S3 Merger with Fiat Industrial has reinforced & expanded CNH’s
financial, technological & resource strength significantly. 0.15 4 0.60
X
X
X
0.30 1.20
W1 Profitability of CNH’s Agriculture Equipment business. 0.10 4 0.40 X X
W2 Need for a more cohesive, synchronized & integrated
business approach as well as strategy. 0.10 3 0.30
X X
0.20 0.70
O1 To leverage merger with Fiat Industrial as the catapult to
further strengthen & extend positioning & market share in the
global agriculture equipment market. 0.15 4 0.60
X X
O2 Mechanization of Agriculture sector across emerging markets
for enhanced efficiency & crop yield over medium to long
term. 0.10 4 0.40
X X
X
0.25 1.00
T1 Record harvest & sliding of crop prices to impact new
machinery sales over near term, especially, across harvesting
& high horsepower row crop sectors across NAFTA & LATAM
regions through 2015. 0.15 3 0.45
X
T2 Proposed easing of Ethanol mandates across NAFTA & EU
regions to impact corn prices & machinery sales significantly
over near term. 0.10 3 0.30
X
X
0.25 0.75
Total Score 1 3.65
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
Part 3
Business Overview
© Noealt Corporate Services. 2013. All Rights Reserved.
Business Snapshot
Founded : 1990
Headquartered : Duluth, Georgia, United States
Employees : 22,111 as of December 31, 2013
Business/Geographical Segments:
• North America
• South America
• Europe/Africa/Middle East
• Asia/Pacific
•
Market Capitalization: USD 4.19 Billion as of October 15, 2014
as against 5.39 Billion on January 21, 2014.
Shareholding Structure: About 92% of the shares are held by
Institutional & Mutual Fund investors. SouthernSun Asset
Management, Inc. held 5.35% of AGCO’s shares followed by
LSV Asset Management & Vanguard Group, Inc. who each
owned 5.29% of AGCO’s share capital as of June 30, 2014.
Key Executives:
Martin Richenhagen: Chairman, President & CEO
Andrew H Beck : Senior Vice President & CFO
Hans-Bernd Veltmaat : Chief Supply Chain Officer & Sr. VP
Gary L Collar : Senior VP, GM-Asia-Pacific Region
© Noealt Corporate Services. 2014. All Rights Reserved.
Market cap source: Bloomberg,.
Source: Company website, Annual Results.
AGCO Corporation - Key Numbers –In $ Million
AGCO Corporation - Revenues Split by Key Geographic Markets & Regions
H1 2014
H1 2013
Financial Snapshot – 1 – H1 2014
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
AGCO Corporation – Sales Growth Trend by Key Geographic Markets &
Regions – H1 2014 Vs. H1 2013 AGCO Corporation – Operating Margin for Key Geographic Markets
& Regions
Profitability of AGCO’s Asia-
Pacific based operations
remains an area of concern for
the company with continued
market development costs
being incurred in China.
Sales revenues originating from the South
American market for AGCO contracted by 21%
for H1 2014 with sugar producers facing
significant financial pressures & difficulties with
slide in sugar prices due to oversupply
impacting demand for agriculture equipment,
unfavorable currency exchange rate besides
delay in implementation of Government support
programs
AGCO Corporation – Operating & Net Profit Margin Trend AGCO Corporation – Sales & Operating Profit Growth
Significant growth in & sustained
profitability for AGCO Corporation
with operating margin staying over
the 8% level for 2013 & H1 2014
despite pressures on sales across
key geographic markets & regions
Financial Snapshot – 2 – Q1-Q3 2014 Vs. Q1-Q3 2013
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
AGCO Corporation – Key Numbers – In $Million AGCO Corporation – Revenues Split by Key Markets & Regions
AGCO Corporation – Sales Growth by Key Markets & Regions – Q1-Q3
2014 Vs. 1-Q3 2013
AGCO Corporation – Operating Margin for Key Geographic Markets
& Regions
Pressure on top line growth across all key markets
& regions with softening of crop prices impacting
demand for agriculture machinery. South America
registered the biggest decline with pressure on
sugar producers, unfavorable currency exchange
rate & delay in implementation of Government
financing programs in Brazil
Q1-Q3 2014
Q1-Q3 2013 Operating Margin: 7.33%
for Q1-Q3 2014 as against
8.87% for Q1-Q3 2013
Financial Snapshot – 2 – 2013
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
AGCO Corporation – Key Numbers – In $Million AGCO Corporation – Revenues Split by Key Product Segments
AGCO Corporation – R&D Expenditure Trend – In $Million AGCO Corporation – Revenues Split by Key Geographic Markets &
Regions
2013
AGCO’s R&D Expenditure has
grown at a CAGR of 16.44%
over the 2009-2013 period with
strong investment focus
towards new product &
technologies development
CAGR 16.4%
2013
Financial Snapshot - 3 – 2012 Vs. 2011
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
AGCO Corporation - Key Numbers - 2012
Operating & Net Profit Margin Trend Key Numbers - Growth Trends
AGCO Corporation - Revenues Split by Key Product Segments -
2012
2012
Working towards Improving
overall operating margin
driven by bid to improve
operating efficiencies, optimize
procurement & new product
development efforts. AGCO’s
Operating margin for Q2 2013
crossed the 10%mark & stood
at 9.25% for H1 2013
© Noealt Corporate Services. 2012. All Rights Reserved.
Part 1
IFAS, EFAS & SFAS Matrices
3.1
© Noealt Corporate Services. All Rights Reserved.
Internal Factor Analysis Summary(IFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Internal Factors Weight Rating Weighted
Score Comments
Strengths
1.World’s Largest, Pure-play Manufacturer of Agriculture
Machinery. 0.10 4 0.40
Enables AGCO to establish strategic, long-term relationships with key clients &
the farming community and to focus on and work closely with the end-users with
respect to development of new and innovative products as well as solutions
2.Strong Market Presence & Significant Operating
Experience across Emerging Markets. 0.20 4 0.80
Has a strong market presence & significant operating experience across
emerging markets, especially, Latin America
3.Well-diversified Revenue Base Distributed evenly across
Key Geographic Markets & Regions. 0.15 3 0.45
AGCO has a well-diversified revenue base distributed evenly across traditional
as well as emerging markets. The company derived about 51% of its revenues
for 2013 from EMEA while it derived 25% of its revenues from North America &
19% from South America.
0.45 1.65
Weaknesses
1.Lacks a Significant & Substantial Industrial Presence
outside the Global Agriculture Machinery Industry. 0.15 3 0.45
Does not have any substantial or significant presence outside the Global
Agriculture industry. Thus, subject to significant industry concentration risks.
2.Limited overall Size & Scale of Operations and limited
Financial & Resource Strength from a Competitive
Standpoint.
0.15 3 0.45
AGCO has a relatively limited size and scale of operations when compared
against way larger industry competitors possessing significant financial as well
as resource strength & capabilities. AGCO’s key competitors, CNH & John
Deere, both have the competitive advantage of being able to leverage overall
size & scale of operations through their presence in agriculture, construction &
forestry equipment segments besides an extensive geographic footprint.
3.Derives a Major Proportion of Revenues from International
Markets. 0.15 3 0.45
AGCO derived about 75% of its annual revenues for 2013 from outside North
America and is thus exposed to significant currency fluctuation risks besides a
multitude of risks emanating from international regulatory frameworks, taxation,
economic conditions, political conditions/risks and regulatory policies.
4.Limited Market Presence & Low Profitability of Asia-Pacific
Operations. 0.10 3 0.30
AGCO derived a mere 5% of its revenues for 2013 from the Asia-Pacific region
with an operating margin of -2.31% for H1 2014 & -1.64% for Q1-Q3 2014.
0.55 1.65
Total Scores 1 3.30
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary(EFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
External Factors Weight Rating Weighted
Score Comments
Opportunities
1.Rapid Mechanization of Agriculture Sector across
Emerging Markets. 0.15 5 0.75
To further Deepen existing Roots across Emerging Markets with strong,
long-term industry fundamentals requiring rapid mechanization for global
agriculture output to double itself through 2050. Growth pursuits in Africa.
2.R&D driven New Product Development & Technological
Innovations to stimulate Replacement Demand. 0.10 4 0.40
Introduction of New Products featuring a range of cutting-edge
technologies & innovations to drive replacement demand over medium
term. Near term pressures on sales likely with decrease in farm incomes.
3.Growth Avenues for GSI Business with growing focus on
Grain Storage & Protein Production Systems. 0.15 3 0.45
Significant growth avenues for GSI with growing focus on grain storage &
protein production systems, especially, across emerging markets driven by
need for enhanced operating efficiency & an increase in protein
consumption .
0.40 1.60
Threats
1.Faces Threat to existing, Strong Market Positions across
Emerging Markets. 0.10 4 0.40
AGCO will need to defend its existing, strong market presence across
emerging markets aggressively with both John Deere & CNH making
significant, strategic investments towards deepening presence across
emerging markets under their aggressive global growth plans & strategies.
2.Sporadic Global Currency Exchange Rate Fluctuations &
Continued Strength of U.S. Dollar to Impact Profitability.
0.15 3 0.45
Continued strengthening of U.S. Dollar to impact profitability with over 75%
of AGCO’s revenues originating from outside North America.
3.Faces Stiff Competition from Larger & More Resourceful
Industry Competitors. 0.15 4 0.60
Increasing competitive intensity from Deere & Co. and CNH as they focus
on international diversification of industrial footprint leveraging significant
financial & resource strength and pursue growth opportunities outside
North America more aggressively. JD’s 2018 growth strategy focuses on
capabilities integration and rapid BRIC expansion to achieve a revenue
growth target of $50 billion through 2050. CNH, too, plans to invest
significantly towards expanding presence in Asia with plans to double
operating income to $2 billion by 2018.
4. Softening of Crop Prices to Impact Sales over Near Term. 0.20 4 0.80 Significant contraction in sales expected over near term.
0.60 2.25
Total Scores 1 3.85
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary(SFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Strategic Factors Weight Rating Weighted
Score Short Intermediate Long
S2 Strong Market Presence & Operating Experience across
Emerging Markets. 0.10 5 0.50 X
X X
S1 Well-Diversified Revenue Base Distributed evenly across Key
Global Markets & Geographic Regions. 0.10 4 0.40
X
X
X
0.20 0.90
W1 Faces Industry Concentration Risks. 0.10 3 0.30 X X
W2 Limited Size, Scale of Operations and Limited Financial &
Resource Strength from a Competitive Standpoint. 0.10 3 0.30
X
0.20 0.60
O1 Rapid Mechanization of Agriculture Sector across Emerging
Markets. 0.15 5 0.75 X X X
O3 Growth Avenues for GSI Business. 0.10 4 0.40 X X
0.25 1.15
T1 Threat to existing, Strong Market Positions across Emerging
Market. 0.10 4 0.40 X X
T2 Currency Exchange Rate Fluctuations & Continued Strength of
U.S. Dollar. 0.10 3 0.30 X
T4 Softening of Crop Prices to Impact Sales significantly over Near
Term. 0.15 4 0.60 X
0.35 1.30
Total Score 1 3.95
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
© Noealt Corporate Services. 2014. All Rights Reserved.
Part 4
CLAAS Group
Business Snapshot
Founded: 1913
Headquartered: Harsewinkel, Germany
Employees: 9697 as of December 31, 2013.
Business Segments:
• Agricultural Equipment
• Production Technology
• Industrial Engineering
•
Shareholding/Ownership Structure: CLAAS Group is a
privately held/family owned company.
Key Executives:
Lothar Kriszun: Speaker of the Executive Board wef October
01, 2014 with the retirement of Dr. Theo Freye
Thomas Böck: Technology & Quality wef October 01, 2014
post retirement of Dr. Hermann Garbers
Hans Lampert: Finance & Controlling
Jan-Hendrik Mohr: Sales
Lothar Kriszun: Tractors
Dr. Henry Puhl: Grain Harvest
Source: Company website, Financial results for 2013.
© Noealt Corporate Services. 2014. All Rights Reserved.
CLAAS Group - Key Numbers – In EUR Million
CLAAS Group - Revenue Split by Key Geographic Markets & Regions
2013
2012
CLAAS Group – Financial Snapshot
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
CLAAS Group – Key Growth Rates – 2013 Vs. 2012 EBIT Margin Trend
CLAAS Group – Revenues Growth for Key Geographic Markets & Regions CLAAS Group – R&D & CAPEX Growth Trends
Continued growth in R&D outlay &
CAPEX for CLAAS Group with
strong focus on new product &
technology development and
geographic expansion
© Noealt Corporate Services. 2012. All Rights Reserved.
Part 1
IFAS, EFAS & SFAS Matrices
4.1
© Noealt Corporate Services. All Rights Reserved.
Internal Factor Analysis Summary (IFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Internal Factors Weight Rating Weighted
Score Comments
Strengths
1. Depth of Technological Capabilities which has been the
Group’s Real Backbone. 0.20 5 1.00
Depth of technological capabilities has been the group’s real backbone, a key
differentiator & significant source of competitive advantage with development of
a number of award winning technologies & products over recent years.
2. Strong Product Portfolio with availability of Products across
the entire Price & Performance Spectrum. 0.15 4 0.60
Strong product portfolio with availability of products across the price &
performance spectrum covering each strategic checkpoint effectively,
especially, in the combines segment. CLAAS group, in fact, is one of the very
few pure-play agriculture OEMs, which derives a larger proportion of its
revenues from combines instead of tractors.
3. Significant Heritage as well as Equity of CLAAS group
Branding across key European Agriculture Equipment
Markets.
0.15 4 0.60 CLAAS is well entrenched in the European market, especially, Western Europe,
which is also the group’s largest market contributing to about 64% of its
revenues for 2012.
0.50 2.20
Weaknesses
1. CLAAS is more of a Regional Player with Operational
Focus and Scope more or less limited to Continental
Europe at Present.
0.20 4 0.60
The group derived about 63% of its revenues from Western Europe for 2013
and about 22% of its revenues from Central & Eastern Europe, thereby, making
the total revenues originating from continental Europe to about 85% for 2013.
There is a significant scope to further diversify & extend the group’s existing footprint & presence across global markets.
2. Faces significant Limitations on account of the overall Size
& Scale of Operations from a Competitive Standpoint. 0.15 4 0.60
Faces significant limitations on account of the overall size & scale of operations
while competing against way larger, global competitors possessing tremendous
financial as well as resource strength, especially, with a disadvantageous ownership structure limiting access to capital.
3. Exposed to significant Industry Concentration Risks.
0.15 3 0.45
Lacks a presence outside the global agriculture equipment industry thereby
getting subjected to significant industry concentration risks.
prevail over medium term.
0.50 1.65
Total Scores 1 3.85
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary (EFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
External Factors Weight Rating Weighted
Score Comments
Opportunities
1.To Further Enhance Technological Innovation based
Product Differentiation which is proving to be a Significant
Source of Competitive Advantage. 0.20 5 0.75
The ongoing R&D activity & active pursuit of new platform & technology
development provides significant opportunities to further enhance technological
innovation based product differentiation proving to be a significant source of
competitive advantage as part of the overall technological innovation driven
business growth strategy.
2.To Grow & Evolve from being a Regional Player to an
Internationally Diversified group with the Expansion of
International Footprint outside Continental Europe. 0.15 4 0.60
The ongoing expansion of the group’s international footprint outside continental
Europe with the regional hub strategy provides significant avenues to grow &
evolve from being a regional player to become an internationally diversified
group providing a hedge against cyclicality in the European market besides
providing opportunities to capitalize on growth opportunities across emerging
markets more effectively.
3.To Expand Market Presence & Deepen Roots in China with
the Recent Acquisition of a key Chinese Agriculture
Machinery Manufacturer. 0.15 4 0.60
Acquisition of Shandong Jinyee Machinery Manufacture Co. Ltd. in China
provides significant avenues to expand market presence & deepen local roots
in the Chinese market.
0.50 1.95
Threats
1.Increasing Competitive Intensity across Emerging Markets
from Larger & More Resourceful Competitors. 0.15 4 0.60
Faces stiff competition from leading Global & Regional OEMs, especially,
across Emerging Markets with the players having outlined aggressive growth
plans & strategies.
2.Decline in Crop Prices to impact farm incomes & agriculture
machinery sales over near term significantly.
0.20 3 0.60
Sales of combines & high horsepower tractors are likely to be most impacted.
CLAAS group to be impacted significantly with its strong market presence &
positioning in the European Combines market. CLAAS group, in fact, is one of
the very few pure-play agriculture OEMs, which derives a larger proportion of its
sales revenues from combines instead of tractors.
3.Stalling of Economic recovery in EU & Proposed Easing of
Ethanol Mandates in EU over near term. 0.15 3 0.45
Slowing down of economic recovery in the EU and significant risks of further
decline in corn prices over near term from proposed easing of Ethanol
mandates which could lead to a further contraction in demand for agriculture machinery.
0.50 1.65
Total Scores 1 3.60
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary (SFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Strategic Factors Weight Rating Weighted
Score Short Intermediate Long
S1 Depth of Technological Capabilities. 0.15 5 0.75 X
X
S2 Strong, Diversified Product Portfolio with positioning of
Products across the entire Price & Performance Spectrum. 0.10 4 0.40
X
X
0.25 1.15
W1 CLAAS is more of a Regional Player with Limited Operational
Focus and Scope Concentrated within Continental Europe.
0.15 4 0.60
X X
W3 Exposed to significant Industry Concentration Risks. 0.10 3 0.30
X X X
0.25 0.90
O1 To Further Enhance Technological Innovation based Product
Differentiation. 0.10 4 0.40 X X
O2 To Evolve from being a Regional Player to an Internationally
Diversified group. 0.10 4 0.40
X X
X
0.20 0.80
T1 Decline in Crop Prices to Impact Agriculture Machinery sales
significantly over Near Term. 0.15 4 0.60 X X
T3 Stalling of Economic recovery in the EU & Proposed easing of
Ethanol mandates over Near Term. 0.15 3 0.45
X
X
0.30 1.05
Total Score 1 3.90
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
Part 5
Business Overview
© Noealt Corporate Services. 2014. All Rights Reserved.
Business Snapshot
Founded: 1927
Headquartered: Treviglio, Italy
Employees: 3039 as of December 31, 2013
Key Brands:
• SAME
• Deutz-Fahr
• Lamborghini
• Hürlimann
• Grégoire
•
Ownership Structure:
SAME Deutz-Fahr Group S.p.A. is a privately held business
entity. The group, however, has a 8.44% equity stake in Deutz
A.G. and operates through a network of global subsidiaries.
Key Executives:
Vittorio Carozza: Chairman of the Board of Directors
Aldo Carozza: Vice Chairman
Francesco Carozza: Vice Chairman
Lodovico Bussolati: Chief Executive Officer
Andrea Paganelli: EVP & Managing Director ,SAME Deutz-
Fahr Deutschland GmbH
© Noealt Corporate Services. 2014. All Rights Reserved.
Market cap source: Bloomberg,.
Source: Company website, Annual Results.
SAME Deutz-Fahr - Key Numbers –In EUR Million
Revenues Split by Key Product Segments
2013
2012
Financial Snapshot - 1
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
SDF Group – Revenues & EBIT Trend
SDF Group – Sales Revenues Split by Geographic Regions SDF Group - Key Numbers - Growth Trend
SDF Group – Key Numbers – Growth Trend
Improving Profitability of
Operations with a 80
basis points
improvement in
Operating Margin & a
0.78% improvement in
Net Profit Margin
SDF’s EBIT has grown at
60.3% CAGR over the
2010-2013 period while
Sales Revenues have
grown at 12.3% CAGR
2013
2012 SDF Group consistently
derives over 80% of its
annual revenues from the
EU zone posing significant
potential regional
concentration risks
Financial Snapshot - 2
© Noealt Corporate Services. 2014. All Rights Reserved.
Source: Company website, Company Reports
SDF Group – Tractor Sales by Engine Power – Units – 2013 Vs. 2012
SDF Group – Tractor Sales Split by Brands – In Unit Terms SDF Group – Tractor Sales growth by Engine Power Segment –
2013 Vs. 2012
SDF Group – Tractor Sales Split by Engine Power – In Value Terms
Total
2013
Sales:
34,348
Units
Total
2013
Sales:
EUR 929
Million
Total
2012
Sales:
EUR 907
Million
Total
2012
Sales:
31,937
Units
2013
2012
Strong 43% sales growth registered in the
0-50 hp tractor segment followed by the
>200hp segment which registered a 76%
growth in unit sales
0-50 hp & >200 hp segments continue
to spearhead sales growth in volume
terms as well with 91.3% & 90%
growth respectively
Deutz-Fahr Brand at the Core of Business &
Gaining Further Significance. Expansion of
brand portfolio with the SHU-HE brand used
for tractors produced in the Chinese market
© Noealt Corporate Services. 2012. All Rights Reserved.
Part 1
IFAS, EFAS & SFAS Matrices
5.1
© Noealt Corporate Services. All Rights Reserved.
Internal Factor Analysis Summary (IFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Internal Factors Weight Rating Weighted
Score Comments
Strengths
1. Very well entrenched in the EU market as a key regional
industry player. 0.20 4 0.80
Well entrenched as a leading regional player with strong market presence in the
EU market.
2. Strong Brand Portfolio comprising of a range of strong,
aboriginal brands with strong brand equity. 0.15 4 0.60
Possesses strong, aboriginal brands, namely Deutz-Fahr, Lamborghini, SAME,
Hürlimann & Grégoire possessing significant brand equity as well as heritage,
especially, in continental Europe.
3. Strong Technological, New Product Development &
Product Design Capabilities. 0.15 4 0.60
Significant technological capabilities through the existing strategic technolgoy
agreement with Deutz AG as showcased by the indigenous development of the
Continuous Variable Transmission(CVT) system for the mid-size tractors &
expansion of high horsepower tractor portfolio with the introduction of 9 series.
Additionally, strategic agreement with Giugiaro Design for product design has
transpired into a significant focus on aesthetics as well as functionality as
showcased by a number of prestigious awards won by SDF products of-late for
product design.
0.50 2.00
Weaknesses
1. Regional focus with the group deriving over 80% of its
revenues from Europe consistently. 0.20 4 0.80
The SDF group is a regional player with over 80% of the revenues originating
from within Europe consistently .
2. Limited Size & Scale of Operations as against Key Global
Industry Competitors. 0.15 3 0.45
SDF’s limited size & scale of operations limits the ability to compete effectively
with larger & way more resourceful industry competitors.
3. Low Profitability of Operations. 0.15 4 0.60 The operating margin has been improving over the years (6.85% for 2013) with
the implementation of efficiency enhancement measures, however, it is still
below industry average.
0.50 1.85
Total Scores 1 3.85
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary (EFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
External Factors Weight Rating Weighted
Score Comments
Opportunities
1. Strong, sustained Demand Growth projections for
Agriculture Machinery over Long Term. 0.20 4 0.80 Translates into significant growth avenues for SDF over long-term.
2. Mechanization of Agriculture Activity across Emerging
Markets. 0.15 4 0.60
Will drive demand for agriculture machinery over medium to long term and
translates into a growing share of global demand for machinery from
emerging markets.
3. To Grow & Evolve from being a Regional Player to an
Internationally Diversified group over Medium Term with a
Significant Expansion of International Footprint outside
Continental Europe. 0.15 4 0.60
Expansion of SDF’s industrial footprint & market presence globally with
specific focus on emerging markets aimed at capitalizing on growth
opportunities effectively.
0.50 2.00
Threats
1. Projections towards Decline in Global Demand for
Agriculture Machinery over Near Term with Plummeting of
Crop Prices. 0.20 3 0.60
Near term projections for farm incomes indicate towards contraction
through 2016 with declining of crop prices which translates into a significant
decline in global demand for tractors & combines over near term.
2. Proposed easing of Ethanol Mandates in the EU over Near
Term likely to impact Corn crop dynamics & equipment
sales directly.
0.15 3 0.45
To impact corn prices & demand for agriculture impact significantly as there
has already been a significant increase in crop planting acreages across
key geographic regions globally that has driven the record harvest for 2014
& the subsequent fall in corn prices.
3. Stalling of Economic Recovery in the EU. 0.15 3 0.45
May impact equipment financing, access to capital sources &
subsequently, sales of agriculture machinery.
0.50 1.50
Total Scores 1 3.50
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary (SFAS) Matrix
© Noealt Corporate Services. 2014. All Rights Reserved.
Strategic Factors Weight Rating Weighted
Score Short Intermediate Long
S1 Market Positioning in the EU Market. 0.15 4 0.60 X
X X
S3 Strong Technological, New Product Development & Product
Design Capabilities. 0.10 4 0.40
X
X
0.25 1.00
W1 Regional Focus limited to EU. 0.10 4 0.40 X X
W3 Low Profitability of Operations. 0.15 4 0.60
X X
0.25 1.00
O1 Strong, sustained Demand Growth projections for Agriculture
Machinery over Long Term. 0.15 4 0.60 X X X
O2 Mechanization of Agriculture Activity across Emerging
Markets. 0.10 4 0.40
X X
X
0.25 1.00
T1 Projections towards Decline in Global Demand for Agriculture
Machinery over Near Term with Plummeting of Crop Prices. 0.15 3 0.45 X
T2 Stalling of Economic Recovery in the EU. 0.10 3 0.30
X
0.25 0.75
Total Score 1 3.75
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
Part 6
Business Overview
© Noealt Corporate Services. 2014. All Rights Reserved.
Business Snapshot
Founded: 1890
Headquartered: Osaka, Japan
Employees: 33,845 as of March 31, 2014.
Key Business Segments:
• Farm & Industrial Machinery
• Water & Environment
•
Market Capitalization: JPY 1909.7 billion as of October 16, 2014.
Shareholding Structure: About 39,117 shareholders hold over
1.25 billion shares of Kubota Corporation. About 49.5% of the
Kubota shares are owned by Japanese institutions while 36.37%
of stocks are held by foreign institutional holders. The Master Trust
Bank of Japan, Ltd. (Trust Account) is the largest shareholder in
Kubota Corporation owning 9.11% shares as of March 31, 2014
followed by Nippon Life Insurance Company that held 5.53% of
Kubota’s shares.
Key Executives:
Masatoshi Kimata: President & Representative Director
Toshihiro Kubo: Representative Director & EVP
Shigeru Kimura: Director & Senior Managing Executive Officer
Kenshiro Ogawa: Director & Senior Managing Executive Officer
Yuichi Kitao: Director, Managing Executive Officer & GM-Farm &
Utility Machinery Division
© Noealt Corporate Services. 2014. All Rights Reserved.
Market cap source: Bloomberg,.
Source: Company website, Annual Results.
Note: FY2014 refers to April 01, 2013 to March 31, 2014 Period.
Kubota Corporation - Key Numbers –In JPY Million
Revenues Split by Key Business Segments – FY2014
FY2014 Total
Revenues: JPY 1508.6
Billion
Kubota – Farm & Industrial Machinery Segment – Snapshot - 1
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Source: Company website, Company Reports
Kubota Corporation – Farm & Industrial Machinery - Revenues & Operating
Income - In JPY Billion
Kubota Corporation – Farm & Industrial Machinery Segment – Operating Margin
Trend
Kubota Corporation – Farm & Industrial Machinery Segment - Revenues
from International Markets
Kubota Corporation – Farm & Industrial Machinery Segment - Revenues
Split by Key Sub-Segments
FY 2014
FY 2013 Revenues
Growth
+29.2%
Profitability
Growth
+69.15%
A 400bps improvement in
Kubota’s operating margin for
the Farm & Industrial
Machinery segment for
FY2014 boosted by
significant weakening of Yen
against the U.S. Dollar
Growth in Revenues
Originating from
International Markets as
Part of Kubota’s Overall
Strategy
Spike in sales growth in
Japan driven by
purchases made before
the consumption tax hike
& agriculture related
supplemental budget. NA
growth driven by
expansion of product line
& continued economic
recovery
Kubota – Financial Snapshot – 2 – FY2014
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Source: Company website, Company Reports
Kubota Corporation – Revenues Split by Key Geographic Markets & Regions
Kubota Corporation – Operating & Net Profit Margin Trend Kubota Corporation – Sales Revenues Growth Trend for Key Geographic
Markets & Regions
Kubota Corporation – Revenues from International Markets
FY 2014
FY 2013
Significant improvement in
profitability for Kubota for FY2014
with a 340bps improvement in
operating margin & a 230bps
improvement in net margin driven
by significant sales growth globally
& the effects of significant
depreciation of Yen against the US
Dollar.
Kubota’s share of revenues
originating from
international markets has
been growing steadily as
per the company’s
underlying plans
Kubota has been able to
register tremendous growth
rates across all its key
markets, especially, NA,
Europe & Asia despite difficult
market conditions supported by
Yen’s weakness against the
USD enhancing
competitiveness of Kubota’s
products. NA growth driven by
introduction of new product
lines & economic recovery.
Kubota – Financial Snapshot – 3 – Q1 FY2015
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Source: Company website, Company Reports
Kubota Corporation – Key Numbers – In JPY Million – Q1 FY2015
Kubota Corporation – Farm & Industrial Machinery Segment – Key Numbers –
In JPY Million
Kubota Corporation – Sales Revenues Split by Key Geographic Markets &
Regions
Kubota Corporation – Revenues Split by Segments – Q1 FY2015
Q1 FY 2015
Q1 FY 2014
Q1 FY 2015
Q1 FY 2014
Kubota – Financial Snapshot – 4 – H1 FY2015
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Source: Company website, Company Reports
Kubota Corporation – Key Numbers – In JPY Million – H1 FY2015
Kubota – Farm & Industrial Machinery Segment – Operating Margin Trend Kubota Corporation – Sales Revenues Growth for Key Geographic Markets
& Regions
Kubota Corporation – Farm Equipment & Engines - Revenues Split by
Markets – H1 FY2015
H1 FY 2015
H1 FY 2014
Revenues from Japan contracted by 22%
with the Consumption Tax hike in prior
fiscal year while revenues from
international markets grew by 7.8% with
continued demand growth across North
America driven by economic recovery &
introduction of new product lineup while
European sales grew with strong demand
in the U.K..
Pressure on profitability for
Kubota for Jul-Sept 2014 quarter
with contraction of sales growth
in Japan despite a favourable
Yen-USD impact & strong sales
growth across North America &
Europe
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Part 1
IFAS, EFAS & SFAS Matrices
6.1
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Internal Factor Analysis Summary (IFAS) Matrix
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Internal Factors Weight Rating Weighted
Score Comments
Strengths
1. Well-entrenched in & has a strong presence as well as
brand equity across Key Asian markets. 0.20 4 0.80
Kubota has a strong market presence across key Asian markets, namely,
Japan, China, Thailand & Indonesia with significant market shares driven &
spearheaded by rice cultivation segment.
2. Strong & High Profitability of Operations with Operating
Margin standing at 17% for FY2014. 0.20 4 0.80
Has been able to maintain & sustain a high level of profitability aided by the
favorable JPY-USD equation which has enabled Kubota to invest significantly
towards R&D, new product development & global expansion.
3. Strong Positioning & Leadership of the North American
Sub-Compact Tractor Market. 0.10 4 0.40
Kubota has virtual leadership of the North American market for sub-compact
tractors in the 30hp-50hp segment which has enabled the company to establish
a significant presence in North America.
0.50 2.00
Weaknesses
1. Potential Concentration Risks with Kubota deriving over
61% of its sales revenues from Asia consistently. 0.15 4 0.60
Potential emergence of concentration risks with Kubota consistently deriving
over 60% of its sales revenues from Asia albeit plans to expand presence
across North America & EU markets rapidly.
2. Lacks the ability to hedge industry cyclicality trends
effectively with a limited presence outside the agriculture
equipment industry.
0.15 3 0.45
Kubota lacks a sizeable & significant presence outside the global agriculture
industry with the farm & industrial machinery segment comprising over 76% of
Kubota’s revenues for FY2014. The company, thus, lacks the capability to
hedge industry cyclicality trends effectively.
3. Concentration of industrial footprint & centralization of key
functions within Japan. 0.10 4 0.40
A significant proportion of Kubota’s total annual production capacity & asset
base is based in Japan along-with a number of other key, centralized functions
which increases the risks from natural disasters while limiting the overall pace of
responsiveness, decision-making, flexibility & customization as well as
alignment of approach with local market requirements.
4. Exposed to significant currency exchange rate fluctuations
with over 55% of revenues originating from outside Japan. 0.10 4 0.40
Kubota is exposed to significant currency exchange rate fluctuations, especially,
the JPY-USD exchange rate equation with over 58% of revenues originating
from outside Japan consistently.
0.50 1.85
Total Scores 1 3.85
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
External Factor Analysis Summary (EFAS) Matrix
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External Factors Weight Rating Weighted
Score Comments
Opportunities
1.Rapid mechanization of agriculture activity across key
emerging markets based in Asia. 0.20 4 0.80
Emerging markets based in Asia are investing significantly towards
mechanization of their agriculture sectors for enhanced efficiency & crop
yield to meet significant, projected growth in food demand over long term
presenting significant growth opportunities for Kubota. Additionally, plans to
accelerate business development for upland farming across key Asian
markets to open significant growth avenues over medium to long term.
2.Recent surge in U.S. Dollar against Japanese Yen has
enhanced Kubota’s competitiveness in the North American
market. 0.15 4 0.60
The weakness of Japanese Yen against the USD, which is at a 6 year low,
has enhanced competitiveness of Kubota’s products in the North American
market and has bolstered profitability of operations which could be
leveraged to further expand market presence in North America.
3.Continued, strong activity in the dairy & livestock sectors
provides growth opportunities with Kubota’s strong product
positioning & leadership of the North American market for
sub-compact tractors. 0.15 4 0.60
Continued activity & growth in the dairy & livestock sectors present
significant opportunity to further consolidate presence in the North
American market for sub-compact tractors.
0.50 2.00
Threats
1.Projections for significant decline in farm income across
NAFTA, EU & LATAM regions to impact agriculture
machinery sales over near term. 0.20 4 0.80
Recent decline in crop prices emanating from record harvest across key
geographic regions is likely to impact agriculture machinery sales over near
term.
2.Plans by key industry OEMs to expand presence in the
Asia-Pacific region to increase competitive intensity
significantly.
0.15 3 0.45
Plans by key industry OEMs to expand market presence in the Asia-Pacific
region is likely to increase competitive intensity significantly & pose a threat
to Kubota’s market shares in the region.
3.Faces constant threat to profitability emanating from USD-
JPY exchange rate equation with over 58% of Kubota’s
revenues for FY2014 originating from outside Japan. 0.15 4 0.60
Faces constant threat to profitability with over 58% of sales revenues
originating from international markets exposed to the USD-JPY exchange
rate equation.
0.50 1.85
Total Scores 1 3.85
Note: Weight indicates the strategic significance of the factors for the company.
Rating refers to the perceived degree of average responsiveness of the company to
the respective factors on a scale of 1-5 with 1 representing the lowest.
Strategic Factor Analysis Summary (SFAS) Matrix
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Strategic Factors Weight Rating Weighted
Score Short Intermediate Long
S1 Well entrenched across Key Asian Markets with strong brand
equity. 0.15 4 0.60 X
X
S2 Strong & High Profitability of Kubota’s Operations. 0.15 5 0.75
X
X
0.30 1.35
W1 Potential Market Concentration Risks. 0.10 4 0.40 X X
W2 Lacks the ability to hedge industry cyclicality trends
effectively. 0.10 3 0.30
X X
0.20 0.70
O1 Mechanization of agriculture activity across key Asian
markets 0.15 4 0.60 X X X
O2 Recent surge in U.S. Dollar against Yen has bolstered
Kubota’s competitiveness & profitability of operations. 0.15 4 0.60 X
0.30 1.20
T1 Projected decline in farm incomes across NAFTA, EU &
LATAM regions to impact machinery sales over near term. 0.10 4 0.40 X
T2 Expansion plans by key industry OEMs for Asian markets to
increase competitive intensity significantly. 0.10 3 0.30
X
X
0.20 0.70
Total Score 1 3.95
Impact Duration
Note: The average score for organizations across industries is about 3. Higher scores reflect higher degree of organization’s responsiveness towards strategic factors & better strategic positioning.
Relative SFAS Scores – Ranking based on Total SFAS Scores
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Ranking of Companies Total SFAS
Score
1. AGCO Corporation 3.95
2. Kubota Corporation 3.95
3. CLAAS Group 3.90
4. John Deere & Co. 3.85
5. SAME Deutz-Fahr Group 3.75
6. CNH Industrial N.V. 3.65
Note: SFAS scores are a factor of each company’s strategic positioning & its favorability as well as alignment with prevailing & emerging market dynamics and the degree of strategic responsiveness. The scores, thus, indicate towards the overall mix of strategic positioning & responsiveness.
© Noealt Corporate Services. 2014. All Rights Reserved.
Findings, Analysis & Outlook
1. The SFAS scores for industry players range between 3.65 to 3.95 indicating that the 6 industry OEMs are positioned relatively close to each other.
2. Regional & pure-play agriculture industry players, namely, AGCO, Kubota & CLAAS have scored higher than global players, namely, John Deere & CNH with their higher
degree of strategic responsiveness to internal & external environmental factors & nimble strategic management.
3. AGCO & Kubota jointly lead the list of OEMs with each garnering a score 3.95. AGCO’s pursuit of technological innovations, especially, the integration & incorporation of
technological innovations onto its product portfolio at an early stage and the latest bid towards deeper integration & interconnectivity across equipment under Fuse Technology
initiative as part of AGCO’s Global Precision Farming Strategy clearly reflect a high degree of anticipation & responsiveness . Additionally, AGCO’s proactive establishment of
strong market presence across emerging markets & the recent pursuit of African growth strategy as a key strategic initiative that aims to transform the agriculture sector in
Africa in collaboration with local farming community further proves the point. Kubota, on the other hand, is positioned favorably with a strong presence across a number of
emerging markets based in the Asia-Pacific region which are poised to invest significantly towards mechanization of agriculture activity over medium to long term. Additionally,
Kubota holds a sizeable presence across North America & EU markets & is working towards expanding presence along with diversification of its industrial footprint across
these markets, especially, with plans to establish a new production facility for high horsepower tractors based in France which is likely to become operational from April 2015.
Additionally, Kubota has effectively harnessed the Yen-USD exchange rate equation to derive top line growth bolster profitability over recent years. Further, Kubota has a
diversified exposure to a range of crops across regions & markets with plans to further expand presence to upland farming across emerging markets over medium term which
will enable the company to protect its profitability amid difficult market conditions and open significant growth avenues over medium to long term.
4. The industry outlook over long-term remains robust with strong, long-term industry growth drivers & fundamentals for the global agriculture industry linked directly to a rapidly
growing global population which necessitate a doubling of global food production output by 2050 to match the rate of demand & global population growth. However, the
industry faces significant pressures over short term emanating from an altered supply side economics with projected, record crop production for 2014 across key geographic
regions impacting crop prices & farm incomes directly & significantly which is likely to have a significant bearing on agriculture machinery sales over near term. The Global
Agriculture Industry faces significant, near term pressures emanating from record harvest for corn & soyabean across North America, Europe & Latin America regions in 2014
that have plummeted crop prices & have subsequently impacted farm incomes and ultimately demand & purchase decisions for agriculture machinery. The net farm income in
the U.S. is projected to contract by 14% for 2014 (113.2 billion as per USDA & 111.6 billion as per IHS Global Insight) and decline further to 97.3 billion & 94.4 billion for 2015
& 2016 respectively as per projections by IHS Global Insight. The global demand for tractors is projected to remain flat in 2015 while the demand for combines is projected to
contract by 10%-15% in 2015.
5. Further, recent surge in U.S. Dollar against most key global currencies, significant increase in corn planting acreage across key regions globally, ongoing correction in farm
land prices in the U.S. & proposed easing of existing ethanol fuel mandates across the U.S. & EU over near term paint a grim picture for the industry over near term despite
strong, long-term fundamentals & demand drivers.
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Part 7
Key Industry Trends
Key Industry Trends - 1
Traditional Markets Still
Making a Recovery from the
Global Economic Crisis
The world economy, especially, traditional markets, have been making a steady recovery from the global economic crisis with
continued improvements for 2013 & a continued, confirmed upward trend through the first half of 2014 albeit slowing down of the
overall growth rate. The U.S. economy made a strong comeback in Q2 2014 after an unexpected contraction in Q1 2014.
The EU economy continues on its recovery path, however, the rate of growth has been moderate & asymmetric across regions &
states. However, the growth across most EU economies, France, Germany & Italy, seems to be slowing down considerably with
mounting debt levels & a limited scope left for fiscal policy interventions. Amongst emerging markets, the Chinese economy continues
to spearhead growth. However, other emerging markets, especially, Brazil & Russia are witnessing difficult economic situations with
Western sanctions on Russia post the Ukraine crisis impacting the country’s economy significantly. Additionally, the U.S. Dollar, which
is on a 4 year high, continues with its strength against most global currencies In the U.S. which could make profitability a concern for
machinery exports & farm exports from the United States given the fact that the U.S. is the world’s biggest agricultural exporter. The
housing starts have been strong so far in 2014, which are likely to touch 1.18 million for 2014 as per projections and thus augur well
for the economy overall. Additionally, significant increase in political risks as highlighted by the state of affairs in the Middle East & the
potential risks of escalation of the ongoing Ukraine crisis remains a key concern for the world economy. Still, the impact of these
global events on the industry has more or less been limited so far and a further deterioration in global macroeconomic environment
could have an unfavorable impact.
Strong, Long-Term Industry
Fundamentals & Growth
Drivers for Agriculture
Activity Globally
The global agriculture equipment industry is driven by strong, long-term industry fundamentals with the global agricultural
output required to double itself by 2050, in order, to match the rate of global population growth. Additionally, diminishing
natural resources make the need for precision farming more urgent, especially, across emerging markets where the
agricultural efficiency & yield needs to be increased significantly to meet growing food demand with a rapidly growing
population thereby further necessitating the role of mechanization of agriculture sectors across these markets. The agriculture
industry, thus, has strong fundamentals besides multiple, long-term strong growth drivers.
Significant Decline in Crop
Prices Impacting Profitability
across North America & EU
The crop prices for key agriculture commodities, namely, Corn, Soyaben & Wheat; have softened significantly of-late across the U.S.,
EU & Latin American markets with easing of supply side driven by record farm produce across these markets which threatens to
impact farm income across markets. In the U.S., the farm incomes are projected to contract by 14% to $113.2 billion for 2014, as per
projections by the U.S. Department of Agriculture, as against the record level of $131.3 billion for 2013 impacted by the drop in crop
prices with oversupply, increase in production costs & reduced government subsidies as per the latest farm bill. The combination of
these forces is also projected to drive a correction in farmland prices over near term which have been soaring registering a 8% growth
between 2013 & 2014. The debt to assets ratio across farms in the U.S. is projected to stay at historically low levels of 10.8% for 2014
as per projections by the U.S. Department of Agriculture. The corn prices in the U.S. alone have contracted significantly(20% since
last year to a 4 year low) from the highs of $7-$8 per bushel level for the 2006-2012 period, which were driven by strong biofuels
demand & adverse weather conditions globally, to the $3-$4 per bushel range in 2014 with a significant increase in plantation acreage
across North America, Latin America & the EU & a record produce. Corn production in the U.S. is projected to touch an all time high of
14 billion bushels for 2014 as against 13.93 billion bushels in 2013. Additionally, corn prices face further significant risks of plummeting
with the U.S. Government proposing plans to cut down on the existing ethanol fuel mandate, which has been a key driver of demand &
surge in corn prices over the recent years with an attribution factor of over 3 billion corn bushels, in term of demand, since 2006. The
slide in crop prices is likely to impact the agriculture equipment manufacturers equally severely.
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Key Industry Trends - 2
Key Global OEMs
Strengthening & Deepening
Presence across Emerging
Markets
Almost, all key global OEMs are making significant investments towards strengthening & deepening local roots across emerging
markets via organic as well as inorganic routes, especially, China, Latin America, Africa & India anticipating strong growth over the
medium term for agriculture equipment segment with increasing emphasis on mechanization with a shift in focus away from
unproductive labor intensive methods across these markets for agriculture activity with enhancing efficiency as well as productivity
becoming key priorities as the number of farms continues to increase. Deere & Company has embarked on an ambitious plan to
significantly build up production capacity across emerging markets as part of its plan to derive further business growth and reach its
target of achieving $50 billion in mid-cycle sales by 2018. As part of the plan, Deere & Company is setting up 7 new manufacturing
facilities across emerging markets, including, 3 new facilities based in China for large farm machinery, engines & construction
equipment; 2 in Brazil; 1 located in India for farm tractors and 1 in Russia for producing seeding, tillage & application equipment.
Further John Deere has increased tractor production capacity by 10% at its Waterloo, Iowa based plant and has expanded production
capacity for hydraulic cylinders at its Moline, IL plant. CNH, too, has set up a manufacturing facility in Russia for assembly of
combines while it expanded its presence in Central Asia with the opening of second tractor production facility in mid-2014, opened its
new industrial manufacturing complex in China and is setting up a new production facility in Argentina for combines & harvesters in
Latin America. AGCO’s core focus so far has been the African market where it opened a new tractor manufacturing facility based at
Algeria through a JV besides investing about $100 million towards development of distribution infrastructure & training sites.
Emerging Markets to
Spearhead Demand for
Agriculture Equipment
through 2016
The global demand for agriculture equipment is likely to grow to $175 billion through 2016 at an average growth rate of 6.8
Percent with about 49% of the demand likely to originate from the Asia-Pacific region, as per a study by the Freedonia group. Key
industry growth drivers will primarily be the demand growth in emerging markets, especially, China, Brazil, and India, with these
nations focusing on mechanization of their agriculture sectors driven by rapid population expansion and strong economic Growth
exerting pressure on their agricultural sectors to become more efficient and productive, that is likely to lead to a significant growth in
agricultural machinery sales. China is projected to overtake the United States & become the largest producer of agriculture equipment
by 2016 with the industry demand projected to grow at 10.8% through 2015 to reach 225 billion yuan with farm tractors as the largest
product segment.
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Key Industry Trends - 3
© Noealt Corporate Services. 2014. All Rights Reserved.
Future of Industry to be
Shaped by Technology
The landscape of the global agriculture equipment industry has been changing rapidly with technological evolutions at the forefront
of shaping it. The technological innovations continue to work relentlessly to enhance various aspects of functionality & the key
technological trends currently shaping the future of industry include:
• Alternate Fuel Based Drivetrain Technologies: Development & production of highly fuel efficient as well as eco-friendly
engines incorporating path-breaking, alternative fuel-based drive-train technologies powered by a range of Bio-fuels, Fuel-cells
and Electric technologies aimed at lowering the total ownership as well as operating costs, in view, of the global oil prices
continuing to be uncertain & staying towards the higher side.
• Integration of ICT Technologies: Incorporation of a host of ICT(Information & Communications) technologies aimed at
enhancing operating efficiency as well as performance. John Deere’s Remote Display Access is based on the same strategy &
the company plans to extend the scope of technological intensiveness of its equipment further in the near to medium term.
• Material Science Innovations: Incorporation of a lighter metals, especially, Aluminum & Magnesium is finding greater
prevalence in the industry of-late aimed at reducing the equipment weight for enhanced fuel efficiency while maintaining the metal
strength, especially, in wake of the recent softening of the global commodity prices. Further, alternate materials, like
CFRP(Carbon Fiber Reinforced Plastics/Polymer), offer way higher strength as well as other performance characteristics,
including, dimensional stability, stiffness, fatigue strength & corrosion resistance while being way lighter than steel
simultaneously, thereby, reducing the overall equipment weight leading to a direct impact on the overall operating costs. The
development & subsequent, tremendous success of the CFRP material in the global defense & aerospace industry; now being
followed by the increasing usage across the automotive industry over upcoming vehicle platforms is likely to drive down the costs
further with the set up of scalable production facilities presently underway. CFRP may find its roots in the agriculture equipment
industry as well over medium term.
• Usage of Integrated Electronics or CANbus for engine power management & headland management
• Research on Tractor Power Management with ongoing research on the role & the potential applications of harnessing
hydraulic and electric power towards enhancing efficiency of tractor implement system.
• Improving Tire Technology with the development of new radial tires by Michelin, Firestone & CLAAS providing improved
traction & capable of carrying more payload with minimal soil compaction.
© Noealt Corporate Services. 2013. All Rights Reserved.
Part 8
Key Issues, Risk Factors & Challenges
Key Issues, Challenges & Potential Risk Factors - 1
OEMs Need to Expand
Manufacturing Footprint
across Emerging Markets
Rapidly in-line with
Emerging Industry
Dynamics
The most crucial challenge associated with the ongoing shift in the global agriculture equipment industry towards emerging markets is
the need for all global OEMs to establish and expand their overall manufacturing footprint across emerging markets rapidly, in order, to
capitalize on emerging growth opportunities effectively as cost competitiveness is one of the most important factors for succeeding
across these markets requiring durable & reliable equipment at an affordable price tag. The OEMs need a significant industrial base
across these markets for cost competitiveness & for ensuring cost effectiveness through a high degree of component localization. The
process of operating across international markets requires a significant operating experience, market know-how, investments and a
considerable risk appetite, especially, when compounded with a short time-frame. The European players, in this regard, are likely to
have a slight advantage over their American counterparts with international exports being an integral part of their operations
traditionally & a key focus area on account of the limited size of their domestic economies thereby rendering significant market know-
how & operating experience besides established ties & relationships.
Oversupply Driven Slide in
Crop Prices to Impact
Industry OEMs Significantly
Significant slide in crop prices of-late driven by oversupply is likely to impact farm incomes significantly with the U.S. market
estimated to register a 14% contraction in farm incomes for 2014 as per projections by the U.S. Department of Agriculture. Corn
prices, especially, have come down to the $3-$4 range in 2014 with oversupply driving a slide in corn prices as against the $7-$8
level for the 2006-2012 period which drove a significant increase in planting acreage for corn across North America, Europe & Latin
America regions. For most North American OEMs, especially, John Deere & AGCO, the stock performance have traditionally been
closely linked to the prevailing corn price trend and with corn prices heading southwards, the stock prices for these players have
already shown signs of weakness along with pressures on top line & profitability. The impact is going to be especially severe for pure
play agriculture equipment manufacturers like AGCO & CLAAS. AGCO cut its sales forecast for the year 2014 as part of its H1 2014
results to $10.1-$10.3 billion as against $10.8-$11 billion originally marking a first ever decline in sales in over 5 years. AGCO
projects a significant 20% contraction in its Latin America sales for 2014 as sugar producers struggle with financial pressures from
low sugar prices while it projects EU sales to contract by 5%-10% with softening of demand for agriculture machinery emanating from
slump in crop prices as crop production levels for 2014 are anticipated to touch record highs across North & South America and
Europe. North American market leader, John Deere, too has been impacted significantly with the company forecasting a 10% decline
in sales revenues for farm & turf segment for 2014 with weak commodity prices driving down farm incomes. John Deere announced
plans in August 2014 to layoff over 1000 workers across its Tractor production facilities based in Waterloo, Ankeny & Quad Cities to
align cost base with the market demand level.
© Noealt Corporate Services. 2014. All Rights Reserved.
Key Issues, Challenges & Potential Risk Factors - 2
Global Currency
Fluctuations Impacting
Competitiveness,
Profitability & Economic
Recovery
Sporadic, recent global currency movements & fluctuations have been impacting profitability across almost all key industry players.
The U.S. Dollar continues to maintain its strength against most global currencies having risen by over 7% against most global
currencies since May 2014 and is on a 4 year high level driven by strong performance of the U.S. economy while most other global
economies slow down and an anticipated monetary policy intervention in the U.S. with an increase in interest rates by the Fed. The
U.S. Dollar has strengthened by over 8.5% against Euro between July 1st & mid-October 2014. The continued strengthening of the
U.S. Dollar is likely to put significant pressure on profitability for U.S. based industry OEMs. Additionally, the continued strength of
USD is likely to impact competitiveness of U.S. farm exports given the fact that U.S. is the world’s largest agricultural exporter.
The recent drop in Japanese Yen against the U.S. Dollar, with the Japanese Yen at a 6 year low level against the USD (110.09 yen
per Dollar as of Oct 01 2014), as of early October 2014, is likely to benefit Japanese machinery manufacturers considerably making
their products more competitive in the international markets. The continued & sustained weakening of the Japanese Yen against the
USD may also trigger a potential Chinese response with respect to a commensurate weakening of the Chinese Yuan to maintain
exports competitiveness & parity with the Yen which is likely to lead to enhanced competitiveness & surge of Chinese & Japanese
exports to the EU & the U.S. markets and is likely to significantly impact economic growth & job creation across the EU & the U.S.
economies which are already facing significant risks of deflation.
© Noealt Corporate Services. 2014. All Rights Reserved.
© Noealt Corporate Services. 2014. All Rights Reserved.
Part 9
Force Field Analysis
Force Field Analysis – Global Agriculture Equipment Industry
© Noealt Corporate Services. 2014. All Rights Reserved.
Driving Forces
Restraining Forces
Strong Long-Term
Demand Drivers &
Industry Fundamentals
driven by Growing World
Population
Technological
Developments &
Innovation Driving
Down Overall Operating
& Ownership Costs
Supportive Low Interest
Rate Environment ,
especially, in the U.S.
Market which likely to
Continue through 2014 &
early 2015
Recovery in EU Meat
Production over Near
Term after 2 Years of
Low Supplies as per
Projections by the
European Commission
Increasing Need for
enhanced Efficiency &
Crop Yield across
Emerging Markets
Driving Increasing Need
for Mechanization
Sporadic Global Currency
Exchange Rate
Fluctuations & Continued
Strengthening of U.S.
Dollar Impacting U.S.
Exports & Putting
Pressure on Profitability
Emerging Economies
Battling Inflationary
Pressures & Witness
Slowing Down of
Growth Rate
Uncertain & Difficult
Macro Environment
across Europe & NA
Marked by Slow
Economic Recovery and
Rising State Debt Levels
& Deficits
Softening of Crop
Prices with Record
Crop Production
across Key Regions
Impacting Farm
Incomes
Proposed Plans by the
U.S. Government to
Reduce Ethanol
Mandate to Impact
Corn Crop Dynamics
Significantly
Plummeting of Sugar
Prices in South
America due to
Oversupply Impacting
Producers & Demand
for New Agriculture
Equipment
Note: The color coding & height of the arrows indicates towards relative strength of each active force in respective direction.
Strong
Medium
Weak
Strong
Medium
Weak
Increasing Farm Sizes
across Traditional Markets
Driving Demand for Larger
Agriculture Machinery
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Intelligence & Research as well as Organizational Development & Intervention to a client roster comprising of Global Fortune 500 Organizations, Key
Global & Regional Players, Big 4 Consulting Firms, Key Global B-Schools, Universities & Educational Institutions and SMEs across a broad range of
Key Global Industries & Sectors. By extending an array of products & services solutions configured on a perfect blend of proven & innovative as well
as cutting-edge capabilities and practices; Noealt enables players across these industries & clients to maintain as well as enhance their lead &
competitiveness over peers & competitors while simultaneously focusing on multi-dimensional growth ultimately transpiring into tangible business
results & effectively converging with the overall business growth trajectory.
Products & Services Portfolio
Integrated Intelligence & Research Solutions: Syndicated Competitive & Market Intelligence as well as Business & Market Intelligence Solutions
and Publications in addition to Custom Research Services & Solutions.
• Business & Industry Intelligence
• Market Intelligence & Research
• Competitive Intelligence
Organizational Development Interventions through People, Process, Potential and Performance Solutions.
© Noealt Corporate Services. 2014. All Rights Reserved.
© All Rights Reserved 2013
Noealt Corporate Services
www.noealt.com
© Noealt Corporate Services. All Rights Reserved.