AgJunction warns of slowdown, blaming crop prices
12:52 UK, 19th Mar 2014, by Agrimoney.com

The revival in grain prices may take time to revive agricultural equipment, if AgJunction is a barometer, with the farming technology group AgJunction warning that its first-quarter earnings growth will fall short of investors' expectations.

The maker of satellite guidance and mapping technology, and soil analysis group, cautioned of "general softness" within its market, reflecting the tumble in grain prices which drove corn and wheat futures sharply lower in late 2013, to three-year lows in Chicago in January.

While values have subsequently staged a partial recovery, "weaker grain prices in 2013 may have tempered market strength typically experienced in the first part of the [calendar] year," the company said.

The group said that while its earnings for the first three months of 2014 would exceed those of the previous quarter, when it scraped $6,000 back into the black, its results would "trail" those of the January-to-March period of 2013.

Investors had been expecting the group, which reported earnings of $1.47m for the first quarter of 2013, to near-double profits, to $2.77m, in the current period.

Sales to tractor makers

Kansas-based AgJunction, formerly Hemisphere GPS's agriculture division, attributed the "earnings growth" during the last three months of last year,  that is, compared with a loss of $29.3m in the same period of 2012, on a strong period for its international operations.

Sales outside North America jumped 160% to overtake those in the home region.

European revenues soared 180%, as efforts bore fruit to sell the group's equipment to farm equipment makers for installation in new machinery, rather than AgJunction relying on sales to farmers themselves.

Indeed, Rick Heiniger, the group's chief executive, said that "we believe our global markets are generally making a transition from aftermarket to OEM [original equipment manufacturer] for core precision agriculture guidance technologies.

"We are working closely with our current and new OEM partners to support this trend."

Overall sales rose 37% to 160%.