By now, most of the agricultural and sportsturf machinery manufacturing companies have announced their end of year results. The vast majority of them have reported good results for 2021, showing profits from strong demand and increased sales.
When you read more carefully into the reports the words used are very interesting. Not only do they show the performance over the previous twelve months, but they also give an outlook for the year ahead. This is where the use of carefully chosen words is important. You may read CEO’s saying “The year ahead looks promising but challenges remain” or “We managed a profit during this difficult year and hope to continue this for 2022”.
Markets will react either positively or negatively to such comments. The critical number in the report is the earnings per share figure (EPS). Will it be ahead or behind of forecasts? Back in the old days it would take stockbrokers some time to sift through the long pages of company annual reports before the markets react. Now they are analysed electronically in a split second, with the software instantly picking out the EPS figure and words in the reports such as ‘we remain hopeful’ ‘disappointed’ or ‘exceeded expectations’. As an exercise it is worth looking at the live graph of a company share price on a stock exchange a few minutes before the company announces its results. The second the results are released you will see a sudden upswing or downswing in the share price. Some of the bigger companies such as Facebook, Amazon, Netflix and Google (collectively known as the FANG companies) announce their results after market hours to avoid such huge share price swings.
I have seen this year’s end of year results of companies in our own industry and they are almost consistent with each other. Profits and sales are up, which is great, but the big concern among them, at the moment, is the affect of component shortages. This is a great unknown for 2022. Other concerns include the price increase of raw materials such as steel; the extra cost of transport brought about by the huge surge in oil prices; the global supply chain of items such as semiconductors. These are all still a concern.
According to the European Agricultural Machinery Association (CEMA) their Business Barometer report for February says that more than half of the companies participating in the survey expect a production stop due to the shortage of certain parts in the coming months. It goes on to report “Even more critical appears the situation for combine harvester and tractor manufacturers, where again two out of three are forced to temporarily stop production in the coming four weeks”. You can visit cema-agri.org to get more details on this.
There are a lot of ifs and buts that lie ahead but demand for tractors and equipment is still very strong with some companies reporting order books at record levels. If the supply chain issue can be soon addressed then 2022 should be a good year for our industry.
