Agjunction Vision
* Well, the press release this morning gave us a small window into the vision of Agjunction. Unfortunately the statements are qualitative only. I'm hopping RH and team will provide more colour on the call. He also needs to provide some revenue and earnings guidance for this year, however I doubt he will given the comment that strategic plans have yet to be approved.
VISION
* Our first step in the restructuring process - to become a focused pure-play agricultural company is complete"
* The second phase of our restructuring is underway; simplifying and streamlining operations and the overall business model. To that end, our new management team is hard at work scrutinizing every aspect of the business
* During this period of slow growth in global markets, we are prioritizing the bottom line in 2013 as we maximize efficiencies and streamline operations,” (I read into this that 2013 is expected to be a relatively flat year on the top-line, so it's all going to be about stretching earnings through efficiencies. The comment does not jive with management's other comment that the opportunity in the industry is strong near-mid term. I think RH will need to explain himself)
* Strategic plans are being approved this month, ready to execute during the remainder of the year (In other words they are asking for a mulligan, saying they haven't had a chance to yet execute the operational strategy. The team has only been around for 2.5mths so its a fair comment)
* Clearly, our flagship business of guidance, steering, terminals and GNSS represent exciting opportunities ahead (I would actually argue it's not that clear given the drop in sales momentum. RH really needs explain why sales in 1Q13 are not indicative of the present product suites sales opportunity. Failure to discuss in detail/provide colour will cause the street to question the potential = languishing share price)
* We had a good quarter from the standpoint of OEM and Cloud Services sales, but offset by lower revenue in U.S. Outback sales (Does this mean the Claas on-board products are ramping? If so then I would say this ramping is below expectations at this point. OR does this mean general OEM sales are increasing and the incremental lift from the las Claas deal has yet to come? It would be nice to know what % of sales was OEM and what % was Cloud)
* The emerging AgJunction Agronomy Systems business provides us with a compelling longer term of highly profitable growth that will add nicely to our flagship growth well into the next decade (a small peak into the future of the company. Sales will still be dominated by guidance/steering and other Outback products, but Agjunction should become a meaningful part of the business (guessing 35%) longer term.
* We officially announced the availability of the Outback STX yesterday, a replacement for the successful Outback S3. Pre-sales of the STX have been encouraging and I am confident we are meeting the needs of a growing segment of auto-steer customers
* OEM uptake of automatic steering appears to be set for rapid acceleration over the coming years (see the connection to the STX announcement? I read into this that they expect STX to be a major driver of sales going forward. They may not fully recover the $3mm that did not occur in 1Q13 but at least 1/3rd of it could occur in 2Q13 so perhaps the second quarter will come in better than expected, especially as farm plantings ramp)
One comment I have is in response to "can Agjunction be profitable for the year". On an IFRS basis, yes they can given the gain from the non-core sale. On an operational basis, that's uncertain for investors at this point. RH needs to clarify what earnings type he was referring too when he said the company can be profitable.