Machinery group Bucher Industries forecast a slowdown in growth for agriculture machinery, after a strong start to 2022, as higher costs of inputs such as fuel and fertilizer weigh on the profitability of farmer customers.
The Swiss-based group said that its Kuhn business, which makes the likes of fertilizer spreaders, balers and seed drills, achieved a 7.6% rise to SFr97.9m in operating profits in the first half of the year.
Sales rose by 9.8% to SFr799.00, with the group reporting that “agricultural machines continued to be in strong demand… as farm incomes remained at satisfactory levels” thanks to factors including elevated agricultural commodity prices.
With rising machinery prices encouraging farmers into timely purchases, but at a time of “low inventory levels in the distribution network”, Kuhn received a “high level” of new orders – expanding its order book to $790.3m, up by 56% year on year.
The order book “remained extremely high even after the cancellation of orders from Russia and Ukraine”, Bucher said.
‘Increasing pressure on margins’
However, Bucher was more cautious on Kuhn’s prospects saying that “the division expects demand for agricultural machines to normalise” in the second half of 2022 – if holding “at a very high level”.
“The uncertainties caused by the [Ukraine] war and the increasing pressure on margins are likely to dampen agricultural producers’ willingness to invest,” the group said, noting rising costs of key farm inputs such as diesel, feed and fertilizer.
Kuhn also faced the likely continuation of “difficulties in the supply chain and logistics”, noting that “the shortage of ocean freight containers… continued to be an issue” in the April-to-June quarter.
A “lack of skilled staff”, particularly in the US, was also holding back output.
Nonetheless, Kuhn for the second half of 2022 “expects an increase in sales thanks to the high order book and an operating profit margin in the double digits”.
Shares slip
Bucher reported group earnings up 9.2% at SFr2.00bn for the January-to-June half, on revenues up 10.6% at SFr1.78bn.
However, for the full year, the group forecast profits “on a par with the high level” of 2021, as rising costs and wage bills offset the benefit of higher sales.
Bucher shares stood down 3.3% at SFr341.0 in lunchtime deals.