Ladies and gentlemen, thank you for standing by, and welcome to the AGCO 2022 Q1 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Greg Peterson, AGCO Head of Investor Relations. Mr. Peterson, please go ahead. Thank you, Lorenz, and good morning. Welcome to all of you who are joining us for our AGCO's Q1 2022 Earnings Conference Call. This morning we do have slides we'll refer to, and those are posted on our website at www.agcocorp.com. The non-GAAP measures used in that presentation are reconciled to GAAP metrics in the appendix of the presentation. We'll also make forward-looking statements including demand, product development, and capital expenditure plans, production levels, engineering expense, exchange rate impacts, pricing, share repurchases, dividends, future commodity prices, crop production, our supply chain inflation, component deliveries, retail revenue, margins, earnings, cash flow, tax rates, and other financial metrics. We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year-end 31 December 2021. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. These factors include, but are not limited to, adverse developments in the agricultural industry, including those resulting from COVID-19, including plant closings, workforce availability, and product demand, supply chain disruption, the war in Ukraine, weather, exchange rate volatility, commodity prices, and changes in product demand. We disclaim any obligation to update any forward-looking statements except as required by law. We'll have a replay of our conference call available on our corporate website later today. On the call with me this morning are Eric Hansotia, our Chairman, President, and Chief Executive Officer, and Andy Beck, our Chief Financial Officer. With that, Eric, please go ahead. Thank you, Greg, and good morning. We appreciate your interest in AGCO and your participation on the call today. The headline this morning is that the financial health of our farmer customers continues to be very strong and demand for AGCO's major end markets remains robust. However, supply chain disruptions and inflationary cost pressures, further compounded by the war in Ukraine, have created an extremely challenging operating environment. Despite these obstacles, AGCO reported record Q1 sales and earnings, resulting in sales growth and margin improvement as compared to the Q1 of the prior year. You can see from slide three that our Q1 sales grew nearly 13% compared to what were record levels the Q1 of 2021. Adjusted operating margins improved by almost 80 basis points as favorable pricing helped to offset most of the material cost inflation in the Q1. However, we expect continued headwinds from higher material costs during the remainder of the year. The market remains receptive to our strong product lineup and technology. We have raised our pricing outlook for the full year. Our customers' growing interest in AGCO's precision ag solutions is supporting strong order boards. We expect healthy market conditions to continue, and our new financial outlook for 2022 reflects this optimism. We have increased our sales and earnings forecast and expect to generate significant free cash flow this year. The strong performance supports our technology-related investments aimed at advancing our digital capabilities and growing our precision ag business. We will also continue to return cash to our shareholders. Last week, we announced a variable special dividend of $4.50 per share, as well as a 20% increase in our regular dividend. Slide four details industry unit retail sales by region for the Q1 of 2022. Elevated grain prices are supporting healthy farm income this year despite significantly higher farm input costs. The underlying demand for agricultural equipment remains strong. Despite the favorable conditions, supply chain constraints limited global industry production and the corresponding retail sales in the Q1. As you can see, industry retail sales in the Q1 of 2022 were actually below last year's levels in Europe and North America as a result of the restricted production. North American industry retail tractor sales were down approximately 1% in the first three months of 2022 compared to last year. Lower sales of smaller tractors, which declined from record levels in 2021, were partially offset by increased sales of higher horsepower tractors. Despite continued strong demand, retail sales of large row crop agricultural equipment, now this includes tractors, combines, and sprayers, was 11% below the Q1 of 2021 due to supply chain constraints which limited deliveries. We still expect strong 2022 demand in North America. Industry retail tractor sales in Western Europe, which also were restricted by supply chain challenges, decreased by approximately 6% in the first three months of 2022 compared to strong levels in the Q1 of 2021. Farmer sentiment has been negatively impacted by the war in Ukraine, as well as input cost inflation. However, forecasts for healthy farm income in Western Europe are expected to support solid retail demand for equipment throughout 2022. In South America, industry sales increased during the first three months of 2022 in both Brazil and Argentina. Strong crop production levels as well as elevated commodity prices are supporting positive economic conditions for farmers who continue to replace an aged fleet. AGCO's 2022 factory production hours are shown on slide five. As I mentioned, we continue to face supply chain and logistics challenges as well as material and freight cost inflation. The supply chain issues have impacted our ability to produce and ship units as well as contributed to labor inefficiencies. In addition, the volatile supply chain environment is still requiring us to keep higher than normal levels of raw material and work in process inventory on hand. We're facing supplier bottlenecks and delays in all regions and expect significant challenges in the quarters ahead as we work to meet expected increases in end market demand. Total company production hours were up approximately 6% for the Q1 of 2022 versus a high level of production in the Q1 of 2021. For the full year of 2022, we currently project production hours to increase approximately 5%-10% compared to 2021 levels. At quarter end, AGCO's order board remained extended. Orders for tractors and combines were significantly higher in North America and Europe and were down modestly in South America compared to a year ago. Now remember, we are continuing to truncate our order board in Brazil at three months to give ourselves more pricing flexibility. I want to take a few minutes to provide an update on our precision ag business, which is one of our more important growth opportunities. We have been focused on building our precision ag capabilities over many years and have developed a broad and highly competitive offering with much more to come in the future. In addition to the significant development work within our Precision Planting business and our Fuse smart farming teams, we completed a number of targeted acquisitions in the past year to further our capabilities in key areas to help us meet our ambitious technology roadmap. Yesterday, we announced the acquisition of JCA Industries, which specializes in electronic systems and software development to automate and control agricultural equipment. JCA will support AGCO's delivery of machine automation and autonomous systems that improve farmer productivity. We're seeing strong interest in our Fuse OEM precision ag solutions as farmers are looking to capture increased yields and to contain the cost of expensive inputs like fertilizer and diesel. More of our AGCO machines are leaving the factory with advanced precision ag features like our FendtONE and our Fendt TI Headland. Our Precision Planting business was impacted by supply chain issues in the Q1. However, we remain confident in the growth opportunities from our new product pipeline as well as our unique retrofit approach. Retrofit allows customers to utilize the latest technology with a lower investment. Precision Planting introduced a new family of retrofit sprayer products during the Q1 at our winter conference. They launched vision and application technologies that include vision guidance, vision scouting, vision weed ID, and targeted spraying technology. They also launched two other retrofit smart spraying options, ReClaim boom priming and recirculation, and SymphonyNozzle control system. We're looking forward to showcasing our precision ag capabilities at our technology event in Germany in late June. I'm going to close my comments by highlighting our progress with sustainability. Last month, we published our sustainability report, which you can find on our website. I hope you'll take some time to read through it and note the progress we've made. We've put sustainability at the heart of our corporate purpose, farmer-focused solutions to sustainably feed our world, and are taking actions across our brands and regional operations to advance sustainability within our company as well as for our agriculture in general. Sustainability shouldn't be a burden on farmers, but an enabler. We are committed to helping farmers adopt tools and practices that are as good for the planet as they are for our businesses. We are also taking action with respect to governance. We've established a sustainability committee on our board of directors in April. The new committee will provide important oversight and guidance for our sustainability efforts. Slide seven highlights some of our sustainability progress. I'm not going to go through all of these items, but we'll mention a few. We've converted 32% of our operations to renewable energy sources with a goal to reach 60% or more by 2025. Energy intensity is another key area for us, and for 2021, we reported an 8% reduction in our intensity. The health and safety of our employees has been a top priority for us, especially throughout the pandemic. We're pleased to announce that we've had a 12% reduction in our incident rate in 2021. With that, I'll hand it over to Andy, who will provide details on our Q1 results. Thank you, Eric, and good morning to everyone. I'll start on slide eight, which looks at AGCO's regional net sales performance for the Q1 of 2022. AGCO's net sales were about 18% up compared to the strong Q1 of 2021, excluding the negative impact of currency translation. Robust end market demand as well as favorable pricing of approximately 8% drove the increase. Europe & Middle East segment reported an increase in net sales of approximately 15%, excluding the negative impact of currency translation compared to the high-level sales in the Q1 of the prior year. Stronger growth in France and Scandinavia were partially offset by lower sales in Russia and the Ukraine. Net sales in North America increased approximately 15%, excluding the unfavorable impact of currency translation compared to the levels experienced in the Q1 of 2021. The increase resulted from the impact of pricing to mitigate inflationary cost pressures, along with increased sales of tractors as well as Grain & Protein equipment, partially offset by lower sales of Precision Planting products. AGCO's Q1 net sales in South America grew approximately 42% compared to the Q1 of 2021, excluding favorable currency translation impacts. Sales were up strongly across all the South American markets. High horsepower, mid-size tractors and Grain & Protein equipment showed the most increase. Net sales in our Asia Pacific Africa segment increased about 18% compared to the high sales levels in the Q1 of 2021 on a constant currency basis. Higher sales in Australia, Africa and Japan were offset by lower sales in China. Consolidated replacement parts sales were approximately $446 million for the Q1 of 2022, compared to $399 million for the Q1 of 2021. Part sales for the Q1 are approximately 12% higher than the Q1 of 2021 on a reported basis. Moving to slide nine, we examine AGCO's sales and margin performance. AGCO's Q1 2022 adjusted operating margins improved by approximately 80 basis points versus the comparable period in 2021. Margins were supported primarily by improved operating leverage, resulting from higher levels of net sales and production, partially offset by the impact of higher material costs net of pricing. While Q1 price increases of approximately 8% offset the significant material and freight cost inflation on a dollar basis, it was not sufficient to offset the impact on a margin basis. For the full year of 2022, we expect pricing to be in the 9%-10% range. The Europe Middle East segment reported increase of approximately $18 million in operating income compared to the Q1 of 2021, resulting primarily from higher net sales and production. North American operating income for the first three months of 2022 decreased approximately $20 million compared to the same period in 2021. A weaker sales mix, primarily caused by chip-related supply constraints related to the Precision Planting business, as well as the impact of higher production costs, resulted in lower Q1 operating results. Operating margins on our South America region reached 12.9% in the Q1, and operating income improved by nearly $30 million from the same period in 2021. Significant increases in end market demand and a healthy sales mix supported the growth. In our Asia Pacific Africa segment, operating margins expanded to 15.1% in the quarter, reflecting an improved sales mix. Slide 10 details Grain & Protein sales by region and by product. Sales increased about 12% in the Q1 of 2022 compared to 2021. Globally, grain equipment sales increased approximately 38%, with our South American Asia Pacific Africa region showing the largest increases. Protein production sales declined by approximately 15% in 2022, with the weakest demand in the Asia Pacific Africa region. Grain equipment demand has been stronger, supported by improved grain prices and profitability of farms. However, North American demand has been muted by the significant price increases by manufacturers to cover surging steel costs. The protein production equipment markets remain challenged due to labor issues and higher input costs, such as grain. Protein prices are improved, so profitability is recovering. Slide 11 details free cash flow for the Q1 of 2022 and 2021, which represents cash used in or provided by operating activities, less capital expenditures. Additional working capital requirements caused by higher inventory levels resulted in lower free cash flow for the Q1 of 2022 versus the same period in 2021. For the full year 2022, we expect our raw material and work-in-process inventory to remain elevated to help us manage through the difficult supply chain environment. Our free cash flow forecast reflects a significant increase from 2021 due to projected earnings growth. AGCO's capital allocation priorities include investments in our precision ag offerings and digital capabilities, as well as opportunistically adding bolt-on acquisitions like the JCA acquisition Eric just discussed. AGCO's capital allocation framework includes regular quarterly dividends and annual variable special dividends, along with share repurchases to return cash to shareholders. Following our strong free cash flow generation in 2021 and our favorable outlook for 2022, we were in position to increase our quarterly dividend, as well as announce an annual variable special dividend for the second consecutive year. Last week, we announced a 20% increase in the quarterly dividend and a $4.50 variable special dividend payable in June. We will consider modest share repurchases in the second half of this year. Future returns of cash to shareholders will be based on cash flow generation, our investment needs, which includes capital expenditures and acquisition opportunities, as well as our market outlook. Other details for the quarter include the losses on sales or receivables associated with our receivable financing facilities, which are included in other expense net, were approximately $7.9 million for the Q1 of 2022 compared to $4.6 million in the same period of 2021. Turning to the full year market forecast for 2022, our outlook for the three major regional markets has not changed and is captured on slide 12. Despite the slower than expected start in the Q1 due to supply chain limitations, we currently expect higher retail industry demand across all three major regions. In North America, higher commodity prices and healthy farmer sentiment is expected to result in increased 2022 sales. Higher demand to replace an aged fleet of larger equipment is expected to be partially offset by modestly softer demand for smaller equipment after several years of strong growth. We project North American industry unit sales to be up 5%-10% in 2022 compared to 2021. EU farm economics are expected to remain supportive in 2022. Elevated commodity prices are expected to offset higher fertilizer and diesel costs. Economics are positive for dairy producers as well as milk prices remain above the 10-year average and are offsetting higher feed costs. Western Europe industry demand is expected to be flat to modestly up compared to 2021 levels. Supportive commodity prices and favorable exchange rates are expected to produce additional growth in South America during 2022 as farmers continue to replace aged equipment and planted acres are expected to expand. In total, industry demand in South America is expected to improve 5%-10% from 2021 levels. On slide 13, we highlight the assumptions underlying our 2022 outlook. Our priorities continue to be maintaining a safe working environment for our employees and providing proactive support to our customers and dealers. In addition to focusing on meeting the robust end market demand, we will make significant investments in the development of new solutions to support our Farmer-First strategy. AGCO's results are expected to be heavily dependent on its supply chain performance in 2022. Our outlook is based on current estimates of component delivery levels we expect in 2022. AGCO's results will be impacted if the actual supply chain delivery performance differs from these estimates. Our sales plan includes price increases of 9%-10% aimed at offsetting higher material cost inflation during 2022. At current exchange rates, we expect currency translation to be negatively impacting sales by about 6%. Engineering expenses are expected to increase by approximately 15%-20% compared to 2021. The increase is targeted at investments in smart farming and precision ag products, as well as the continued rollout of our platform designs. Operating margins are expected to improve, driven by higher sales and production, favorable pricing, net of material costs, and improved factory productivity, partially offset by increased investments, our engineering and digital initiatives, as well as inflationary cost pressures. We're targeting an effective tax rate ranging from 28%-29% for 2022. Slide 14 lists our view of selected 2022 financial goals. The ability of the company's supply chain to deliver parts and components on schedule is currently difficult to predict. The following outlook is based on AGCO's current estimates of our supply chain capacity. AGCO's results will be impacted if the actual supply chain delivery performance differs from these estimates. We are projecting sales to be in the $12.5 billion-$12.7 billion range. With 2022 earnings per share targeted in a range from $11.70 to $11.90. We expect capital expenditures to be approximately $325 million and free cash flow to be in the $600 million range. For the Q2 of 2022, we project a modest improvement in operating income compared to the Q1 of 2021. Our Q2 operating income is expected to benefit from higher net sales in all regions, with margins pressured by the impact of material cost inflation and higher engineering expenses. Q2 net income is expected to be negatively impacted by a higher tax rate compared to the Q2 of 2021. As a result, our current estimate for the Q2 of 2022 is for our earnings per share to be modestly below last year. As you can imagine, forecasting with accuracy is difficult in the current supply chain environment. This estimate and our actual results are highly dependent on component availability from suppliers and the resulting timing of production, which is difficult to predict. With that, I'll turn it back over to Greg for Q&A. Thanks, Andy. To encourage broader participation, we'll ask that you limit yourselves to one question and one follow-up. Lorenz, with that, we're ready to move into the Q&A session. At this time, if you would like to ask a question, please press star one on your telephone keypad. Again, that is star one on your telephone keypad. Your first question comes from the line of Seth Weber from Wells Fargo. Your line is open. Hi. Thanks. Good morning, everybody. Wanted to ask about the Precision Planting hiccup in the Q1. I'm just trying to understand whether those sales do you think will still happen later this year, in the Q2 or later this year, or whether you think those sales are lost. That's my first question. Thanks. Yes, Seth. As we pointed out in our comments and you're pointing out, our Precision Planting business was impacted by supply chain issues, particularly around chips and availability of chips. Our Q1 sales were down about 16% in the Q1. If you would have excluded the acquisition impact, it would have been more like 25%, so fairly significant impact. As we look through the year, we're expecting this to catch that up. We'll be a little bit flatter in the Q2, and then in the back half, we expect to you know catch up with the rest of those sales. Our target is that our sales would be up about 10%-15% for the full year with acquisitions and up about flat to up 5% without the impact of those acquisitions. You know, our order board's very strong in Precision Planting. The interest level is still extremely high. Although we're gonna miss some of the season and some of these customers are not gonna be able to use it in the planting season for this year, you know, they're still anxious to get their hands on this technology. We really think that, you know, we'll be able to catch up a lot of this in the second half of the year. Our Q4 of last year was relatively weak. We were already experiencing a lot of issues with chip availability, and so we expect a lot of this to be caught up in the Q4. Okay, thanks. Just my follow-up question, Andy, can you just talk a little bit about, you know, the cost of doing business in Europe today? You know, just AGCO's operating costs for running factories and just, you know, your ability to source, what you need just to run the factories and things like that. Can you just talk about what you're expecting for the Europe footprint, in particular, for the balance of the year? Yeah, in general, Seth, I'll take that. This is Eric. Europe is typically not as cyclical as the rest of the other markets, so the demand is more moderate in terms of its cycles. Our ability to supply is really our main focus, and then your question is also about inflation. We have had challenges with our European supply base, and it's caused us to miss a few shifts here and there. I think if I'm reading into your question, you're asking, has it gotten significantly worse? We would say, not really. Maybe we had a little bit of uptick in terms of challenge with the Ukraine crisis. There're a few suppliers that we had to work around, but it's nothing significant. It's really in line with all the comments Andy made about the overall challenges with supply chain globally. I wouldn't point to anything unique in Europe right now. Maybe one other comment is that prior to the Ukraine invasion, we had a task force that we launched maybe a month before and looked at all of our energy sourcing to identify proactively any alternatives that might be available in case something did happen. We're really thankful we did that pre-work because for right now, we're, you know, knock on wood, but right now we're in a good position throughout the energy to the factories. That answered the question. Thanks very much, Eric. Appreciate it, guys. Yeah. Your next question comes from the line of Stephen Volkmann from Jefferies. Your line is open. Hi. Good morning, guys. Thank you. I wanted to start off just on pricing. I see you raised your pricing expectations a couple of points, and I guess I had sort of thought most of your backlog was probably kind of fixed price. Just what's the dynamic where you can kind of push that extra pricing this quickly? You know, we didn't expect it to be this severe, but we saw inflationary pressure coming already at the end of last year. We put together a task force or a team, cross-functional team, that was looking at our global pricing process and worked even with an outside partner to be able to really get data access, quick analytics, be able to move, and then be able to create a whole menu of options of what to do with different levels of discounts, what to do with top-line pricing, and in some cases, even what to do with some surcharges. The pricing team now is being able to capture that data, react very fast, use some data analytics tools, and then depending on the market, select off of this menu which tools to use into the marketplace that are appropriate for those conditions. So far, I think that proactive team has paid off, and we've stayed ahead of the inflationary price challenges with the pricing we've put into the market. We continue to keep that in place for the rest of the year for sure. It's a tool that's working well and so we're just gonna keep that in place. Great. Okay, that's helpful. Thanks. Eric, maybe for you, I just find it interesting that the sentiment indices that we all look at are pretty weak in the U.S. and in Europe and seems to fly in the face of what you guys are seeing relative to demand trends. I'm just curious, as you think about, like, looking sort of over the horizon of your current backlog, you know, are you worried about the trends in the business, or do you think something else really accounts for those weak sentiment readings? Well, the sentiment, I think, is just a bit of a reflection of the high degree of uncertainty in the market. You turn on the news, and no matter whether it's farming or automotive or any industry, there's just an enormous amount of uncertainty, and that gets replayed and replayed in the media. I think at some point, that weighs on farmers' perceptions. Now, when it comes right down to it, they're still ordering. They're ordering. You know, our order board, order book continues to go up. They still accept the price increases. So you know, why is that? Because grain's at record prices. Corn's over $8, soybean's over $16, wheat's over $11. Those are record high prices. Farmers are able to lock those prices in for next year. Now, they're also seeing higher input costs. Diesel, fertilizer, seed, and other chemicals are going up. Net-net, farmers are still in a very profitable situation. I think it's a lot about the bombardment of uncertain media pressure that they're surrounded by that has them answer what they do. At the end of the day, they still buy. Okay, good. I hope they're not reading sell-side research to make that worse, but thank you for that. I'll pass it on. You bet. Your next question comes from the line of Kristen Owen from UBS. Your line is open. Hey, guys. Thanks for taking the call. Just wanna understand kind of, $300 million raise to revenue guidance seems to be more on the volume side than on pricing. One, am I thinking that right? And two, is that Q1 came in better than you expected, or are you seeing improvement that's giving you more confidence for the rest of the year? Yeah, as you point out, we raised the guidance a slight bit, reflecting the increase in pricing. We upped that 200-300 basis points. We did lose a little bit on exchange with the euro dropping, so there was some actual volume increases that we put in there. I would say they were weighted primarily to South America and a little bit to Europe, based on, you know, our order levels and what we foresee we can accomplish in terms of the supply chain. Again, our order boards are, you know, very strong. It's really still all about, you know, what amount of supply chain performance can we achieve during the year. We're just tweaking those, you know, those assumptions as we go throughout the year. Our Q1, the revenue was pretty close to what we thought it would be. I wouldn't say we outperformed there. It was more on the margin side that we did better in the Q1. Got it. All right. I'll hop back in line. Thanks, guys. Your next question comes from the line of Jamie Cook from Credit Suisse. Your line is open. Hi, this is Chigusa Katoku on for Jamie. Thanks for taking my question. I was wondering if you could share your thoughts around the current Russia-Ukraine situation and what you think that means for commodity prices longer term, and if we could argue for, like, a stronger for longer ag cycle. I have a follow-up question after. Thanks. Yes. There's two factors. You know, if you look at the macro sense of what's happening because of the Russia-Ukraine situation. Number one, a lot of grain came out of circulation, and that's the short-term hit. Where something like 13% of the exportable calories. No longer made it to the market. That's one of the primary reasons you've seen the grain prices go up strongly in the short term. In the midterm to maybe two, three years, the other thing that came out of the marketplace is a lot of fertilizer. They were a source of fertilizer not only to their own markets, but to Europe and South America and North America. Around the world, in general, farmers won't put on as much fertilizer as they should this year, which means yields will be lower than they otherwise could have been. The grain stocks are just not gonna get replenished like they could have been if there was more fertilizer available. That's why you're seeing the projections out there in terms of the futures prices are remaining high. Short term, grain availability, midterm, fertilizer availability, and the impact on yields. We think that this is gonna push high prices out for our farmers into the future and probably extend the you know, the top end of this business cycle or, you know, the strong business portion of the cycle that we're in right now, for some additional period. Okay, that's helpful. Thank you. My second question is on the EPS guide. You beat Q1 consensus by more than $0.40, but the midpoint is up only $0.30. I was wondering if you're seeing any incremental cost pressure since last quarter, and will that mostly hit Q2? Thanks. I think, you know, in terms of reconciling to the last guidance, I think the real key factor there is we did have to bring down our the exchange rate impact. That's impacting us to some extent, I just mentioned, trying to offset that with some actual volume increases. Secondly, as you pointed out, the material cost levels, we've forecasted them to increase more than what we had expected in the first set of guidance we gave. That's why we've had to increase our price guidance as well. We're working hard to offset that, but there is some challenges as a result. Lastly, you know, a little bit higher on the tax rate than where we thought we'd end up. Those were the main things. All in all, looking to increase, you know, we've increased our guidance since the last guidance we gave at the beginning of the year. Okay. That's helpful. Thank you. Your next question comes from the line of Tami Zakaria from BMO. Your line is open. Thank you so much for taking my question. I have one question. It's more of a longer term one. How do you feel about your long-term operating margin as you sit here today? I think you want it to be 10%+. You're probably gonna be that by the end of this year. Where can margins go, especially in light of what your other competitors are seeing? Can you remind us what are the likely sources of leverage over the medium to long term as we sit here today? Sure. We absolutely wanna continue to focus on operating margin improvement. As you said correctly, our first goal was to reach 10%, and then we'll establish new goals to exceed that going forward. The key drivers for margin improvement are additional operating leverage through growth, and we also wanna grow our high margin businesses. That means growing our precision ag businesses, which carry high margins, growing our premium product brands like the Fendt brand. We wanna grow in North America, which we perceive as an important high horsepower market. The highest horsepower equipment drives improved margins as well. We're constantly looking to be more productive within our purchasing capabilities and as well as you know, our efficiencies in our plants. We have some businesses that we're trying to improve, like, I think we've done a great job with South America. You see where that's gone in the last few years. There's some other ones like Grain & Protein that we believe there's margin expansion opportunities there that we're working on. Got a lot on the list of opportunities there that we'll be working on, you know, very hard over the next few years to keep those margins going up. Great. Thank you. If I could ask a follow-up. I think you mentioned your volume outlook for Europe is a bit better now than you were expecting to begin the year. Is that improved volume outlook demand driven, or are you seeing some easing in the supply chain that makes you more hopeful? Yeah, I would say that's mainly just a little bit of tweaking what we think we're gonna get out of our supply chain, for the most part. It's not really a change in our outlook in the market. Understood. Thank you. Your next question comes from the line of Stanley Elliott from Stifel. Your line is open. Hey, good morning, everybody. Thank you all for taking the question. Quick question on the precision side. You know, lots of acquisitions here recently. Does the launch now that you have the FendtONE platform out there allow for all of these different businesses to be integrated in a much faster clip so that we, you'll potentially see this, you know, part of the business accelerating even more so? Stanley, thanks for the question. I'd have you think about it in two ways. One is the FendtONE platform is our customer portal, and that's the base for which new technology can be deployed, either on the machine or off-board and the customers to enjoy it. That's for the OEM sales platform for our new technology. Retrofit is the other one, and I wanna make sure that we never lose sight of that. I think AGCO is really, really focused on the retrofit market. Precision Planting is a market leader in that regard, and we're continuing to add to that. Appareo, we closed on them in January. They had a retrofit channel. JCA is gonna be added to that. There'll be a two-pronged approach to the market. One is fast technology deployment through the retrofit for those early adopters willing to upgrade their machine, make a dumb machine into a smart, high-tech machine that automates features. As those technologies become mature, then they migrate onto the OEM platform, FendtONE being one of them. Perfect. That was it for me. Thanks, guys. Best of luck. Yep. Your next question comes from the line of John Joyner from BMO. Your line is open. Hey, good morning, and thank you for taking my questions. Eric, you briefly touched on higher inventories being affected by, you know, lingering supply chain constraints. Then Andy, you mentioned there are some tweaks to your outlook for maybe supply chains. I don't know if you'd really say getting better but maybe slightly. I guess, can you reconcile that and maybe give more color on, for example, you know, if you look at your work-in-process inventory, it almost doubled from year-end. When I look at that, I kind of assume that maybe the supply chain issues actually had gotten worse. Can you, I guess, add a little bit more color around that? Yeah. Early in the year, we put together an aggressive plan for what we communicated to our suppliers and what we set our factories at. We wanted 'Cause we've got so many orders. We've got a highest order bank in the history of the company. We're essentially sold out in almost all products for 2022, and we're selling into 2023 in many cases. The whole deal is build as much as we possibly can. We are expecting that during the course of the year that the supply chain would heal. It's not healed as fast as we had hoped, and in fact, in some cases, because of the Russia-Ukraine thing, it got a little worse. What's happened is 95% of the suppliers are supplying on time. It's those few percent that are hand-to-mouth and constraining our overall output. When you have a few suppliers not being able to deliver, many times we can build the machine, put it in our lot behind the factory and wait for that one last part to come in, put that part on, and then ship it. That's why you see some WIP increase, work in process increase, where it's machines mostly built. But we've also got extra raw material on-hand because most of the suppliers supplying on time. We're gonna pivot now, as we enter this phase of the year and consider how much inventory we have more strongly as we place the orders on the rest of the supply base and moderate that during the year and get our inventory back in line with where it should be for raw material. Okay. Thank you for that. Just one quick one, I guess. Can you tell us what's baked into your, I guess, outlook for precision ag mix for the rest of the year? precision ag. Our John, are you asking about sales for the rest of the year or what? Right. Correct. Yeah. Yeah, we've got precision ag total sales, if we include Precision Planting and our Fuse business. Last year, our revenue was a little over $540 million, and we're looking for that with these acquisitions as well to be up about 10%-15% year-over-year. Okay, great. Thank you so much. That's purely supply constraint. The demand is red-hot on these products. It would be much, much higher. If you think about our number one issue, like everybody, is semiconductor chips. The precision ag is loaded with semiconductor chips. Just about everything we sell has a chip in it, and many of them have multiple chips. That's it. It's constrained by supply, not at all by demand. Got it. Yeah. That's kinda why I was asking the question, so I appreciate the color. Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open. Yes. Hi, good morning, everyone. Morning. Morning. I'm wondering if you could just talk about the two solutions you folks outlined for crop protection and fertilizer and just step us through what's the order of magnitude of reduction in you know both sets of inputs that you folks are piloting and what level of improvement in yield the products are showing. Can you just provide a bit more color on that, if you don't mind? Sure. There's a number of solutions, and they're based on vision systems predominantly. There's also the Liquid Logic system that we have on our sprayers already. Let's talk about targeted spraying. It's a vision system that identifies the difference between a weed and a plant, sprays just the weed. In post-emergence spraying, that means you're spraying a weed after it's already come up, we can see savings in the 70%-80% of chemical application. Now we want to make sure. The reason I was careful about the wording on that is because there's still the need for pre-emergent application to a field, which is when you put chemical down to prevent the weeds that come up in the first place. It's really the big advantage is on post-emergence, spraying the weed after it's come up once you can see it. There's a significant reduction that's available there. We also have the Liquid Logic system. We got the Machine of the Year award this year at the farm shows and that new sprayer able to go into high clearance or standard clearance. It can and with this boom priming system, it can go into the field and immediately be productive because the boom's already primed and not have to dump chemical at the end of the field to waste chemical and have a sustainability issue. The combination of on-machine application as well as these new targeted spraying kits. As a reminder, Precision Planting is a retrofit solution, so these will go on all makes of sprayers, especially in North America to start off with. That's our first target market. We've got an AG OEM solution and a retrofit solution for all makes. Eric, thank you for the color. You mentioned, you know, it's a post-emergent solution. When you look at it on savings in chemicals per acre, what level of savings is that 70%-80% equivalent to? You know, how are you thinking about monetizing it? The cost of chemical applications is typically the largest cost for the farmer. Depending on the farming application, it's somewhere in the 30% of their total cost range. If we think about how we monetize it, we're looking at selling this at a price where the farmer. All of our Precision Planting technologies, we aim for a one-year payback, sometimes between one and two years. We aim for a system solution price that can get enough savings on a typical sized farm to be able to pay for the system in one year. That's how we think about the targeted spraying solution as well. Yeah, terrific. Thanks. Your next question comes from the line of Courtney Yakavonis from Morgan Stanley. Your line is open. Great, thanks. Good morning, guys. I was wondering if you could expand a little bit. I think you mentioned that Q2 EPS would be modestly below last year. Should we expect that similar to this quarter, really all of the margin pressure to show up in North America and still have, you know, margin expansion in the remaining divisions? Or is there anything else that we should be considering as we're modeling that out? Yeah, Courtney, you're very right on there. Most of the margin pressure is in North America. We expect to see those margins be down similar to what we saw in the Q1. Kind of slight improvements, flattish to slight improvements in margin in Europe and Asia/Pacific, Africa, and then South America with some pretty solid margin improvements in the Q2. Overall, when we think about the margin impact, you know, we've got the sales going up, but these material cost increases, we're again offsetting by pricing. But, you know, the margins are getting pressured because we're not offsetting them enough. We're offsetting them on just a dollar basis, but not on a margin basis. That's the real kind of big picture situation we see in Q2, and then we expect that to get better as we move throughout the year and get more pricing in place. Got it. I think you mentioned a couple times you'd expect, you know, some of these deferred precision ag revenues to flow through later in the year. Yeah. As you get chip availability. I think typically you'd see a sequential step down in 2Q sales. Should we be thinking about that a little bit differently this year, given the issues with the supply chain? No. The seasonality is still similar. For this year, we expect Q2 to actually be the lowest sales quarter for precision or for Precision Planting. Second half of the year, again, we're looking to, you know, catch up some of these lost units that we missed in the Q1 and first half. We see growth year-over-year in both Q3 and Q4. Okay, sorry. That was just for the Precision Planting business? Yes. that was for total revenues? Precision Planting. That was Precision Planting. Okay. Okay, great. Sorry, go ahead. No, that's it. Sorry, just lastly on the pricing increase. I think previously, you know, you'd been, you know, taking more pricing in South America and some of the other parts of the world and a little bit less in Europe. Any change there given, you know, the increase in pricing? Or should we think about that pretty evenly spread as well? No. Yeah. Courtney, you're right. Brazil still has the highest level of price increases, and that's just simply due to the level of inflation. The other markets are slightly less than what we've quoted in terms of company average. Not much, but a little bit less than that company average. Okay, great. Thank you. Your next question comes from the line of Chad Dillard from Bernstein. Your line is open. Hi. Good morning, guys. Morning, Chad. How far out does your order book go? Are you taking 2023 orders yet? If you can, you know, just give some color if so, just like how you're ensuring kinda like the right price cost balance and, you know, just any sense on just what sort of pricing you'll be taking there. Yeah. We've changed how we think about orders over the last year or two, and that is that. Excuse me, Greg. We're now back at the speakers up in the main conference. Hello, Greg? Yes, we're here. I can hear you now. Can you hear us? Yes, sir. Okay. Should we finish the last question that we started, or should we go? Do we still have our participants on the line? Yes, sir, we have. Your next question comes from the line of Kristen Owen from Oppenheimer & Co. Inc. Your line is open. It looks like maybe our participants have dropped off. Eric, why don't we go ahead and move right to the closing remarks and Okay. All right, I'll close this morning by saying thank you very much for everybody on the line for your participation and, actually, more importantly, your continued support of AGCO. We're off to a solid start in 2022, and we recognize there's still a lot of work in front of us for the balance of the year. We enjoy a record high order board level, loaded with demand for our new products and technology. Our focus, as we've mentioned, is to manage a difficult supply chain and in an inflationary environment so that we can continue to make progress growing our strong business, like Fendt, North America Large Ag, parts in our Precision Planting products. In addition, we're investing heavily with another large increase in R&D this year, as well as important technology acquisitions like JCA that we announced. We are continuing the development of farmer-focused solutions that are really solving critical farmer problems that have short payback. We're also engaging strongly on sustainability, helping our farmers make the transition to not only more productive farms, but more sustainable farms. We look forward to highlighting our technology in our Technology Day presentation next month. Thank you and have a great day. This concludes today's conference call.