German tractor registrations decrease 9% in March

German registrations for both low- and high-horsepower tractors decreased 9% year-over-year in March, and were down 12% for the first quarter of 2015.

William Blair Equity Research

Overall German tractor registrations decreased 9% year-over-year in March 2015 following a 21% decline in February 2015. In the trailing 12 months, only March and September of last year had positive comps. Year-over-year high-horsepower tractor registrations (100 hp+) decreased 11%, with tractors in the above 150 hp
category decreasing 5%. Low-horsepower (<100 hp) tractor registrations declined 6%.

Sequentially, overall tractors were up 86%, which is typical seasonality. The March sales were split into 34% low-horsepower tractors and 66% high-horsepower tractors, which is consistent with typical patterns. Usually high-horsepower tractors outperform in March. For the first quarter, tractors were down 12% year-over-year. This was 16% off from the highest first quarter in 2012, and almost 40% above the 2010 low point. On a trailing three-month basis, high-horsepower tractors were down 12% and low-horsepower tractors were down 13% year-over-year.

In late February 2015, a large farm equipment trade show (SIMA) took place in Paris. Our general sentiments were cautious from our trip to the show. The European outlook has been negative because of a variety of concerns, such as lower prices and margins, a relatively renewed equipment fleet, economic and geopolitical concerns, and lower subsidies in certain markets. The 12% decline in the first quarter is less severe than what we model for the region (down mid-20%), because of production cuts and weakness in other countries such as France that would be worse. This might suggest there could be a little upside in the European market, so it would be offset by weakness in Brazil and North America. We believe there will probably need to be further cuts to production later in the year. In March, Brazilian tractors decreased 5% year-over-year, following a 29% decline in February; Brazilian combines decreased 40%, and this is the fifth consecutive month in which they posted a roughly 40% decline. For the first quarter, Brazilian tractors were down 14% and Brazilian combines were down 42%. U.K. tractors were down 20% year-over-year in March and down 19% in the first quarter.