Deere & Co. said its profit dropped 30% in the latest
quarter, blaming weak conditions in the global farm economy that
continue to affect the agricultural sector.
The results, however, were much better than feared, and Chief
Executive Samuel Allen called the results "noteworthy in light of
the weak conditions that continue to affect the global agricultural
sector."
Shares rose 1.7% in premarket trading.
The Illinois company, which is the world's sales leader in farm
equipment, bumped up its projection for net income for the year
ending in October—now expecting $1.9 billion, up from its
February prediction of $1.8 billion. The forecast includes a 4%
currency-related hit to equipment sales.
Dozens of other U.S. companies have cited unfavorable exchange
rates for squeezing their sales and profits when overseas business
is converted into U.S. dollars.
Deere, though, is facing the added hurdle of a severe slump in
farm machinery demand that started last year after a nearly decade
of elevated sales fueled by record-high prices for corn and
soybeans. Falling crop prices, weakening overseas sales and the
curtailment of U.S. tax incentives have dampened demand for farm
equipment, particularly for large models in the U.S. and Canada
where Deere dominates the market.
The company said Friday that it expects equipment sales to
decline about 19% this year and 17% in the current quarter.
That compares with a 20% drop in the latest quarter, with sales
in the U.S. and Canada off 14% and sales elsewhere down 28%.
Currency effects shaved 10% off international sales, the company
said. Operating profit from agriculture and turf plunged 48% to
$639 million.
Deere has aggressively scaled back equipment production and
slashed costs to align the company with lower demand. Deere last
month said it plans to lay off 910 workers at plants in Iowa and
Illinois after announcing in August that more than 1,000 jobs would
be cut.
In Deere's construction equipment business, which has been
helping to offset the company's weak farm machinery segment, sales
rose 2% from a year earlier to $1.6 billion. Operating profit from
the business grew 43% to $189 million.
Revenue from financial services increased 14% to $653 million.
Operating profit in the segment rose 16% to $265 million.
In all, for the quarter ended April 30, the company reported a
profit of $690.5 million, or $2.03 a share, down from a
year-earlier profit of $980.7 million, or $2.65 a share.
Revenue slid 18% to $8.2 billion. Equipment operations sales
dropped 20% to $7.4 billion.
Analysts expected $1.55 in per-share profit and $7.5 billion in
revenue.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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