Deere & Co. last week announced worldwide net income of $420 million, or $0.99 per share, for the third quarter ended July 31, a 27-percent loss from $575.2 million, or $1.32 per share, for the same period last year. For the first nine months of the year, net income was $1.096 billion, or $2.59 per share, compared with $1.708 billion, or $3.89 per share, last year, a 36-percent decline.
Worldwide net sales and revenues declined 24 percent, to $5.885 billion, for the third quarter and were down 15 percent to $17.778 billion for nine months compared with a year ago. Net sales of the equipment operations were $5.283 billion for the quarter and $16.030 billion for nine months, compared with $7.070 billion and $19.070 billion last year.
“John Deere has completed a solidly profitable quarter in the face of persistent global economic pressure and made further progress advancing its competitive position throughout the world,” said Samuel Allen, president and CEO. “We have seen continued benefit from strength in the U.S. market for large farm machinery and from our efforts to keep a tight rein on costs and inventories. Deere’s construction and forestry business, as an example, is successfully executing carefully designed plans to adjust expenses and asset levels in response to the severe decline in its markets.”
Net sales of the worldwide equipment operations decreased 25 percent for the quarter and 16 percent for nine months. Sales included an unfavorable currency-translation effect of 4 percent for the quarter and 5 percent for nine months and price increases of 6 percent for both periods. Equipment net sales in the United States and Canada declined 16 percent for the quarter and 9 percent year to date. Net sales outside the United States and Canada were down 37 percent for the quarter and 26 percent for nine months, with an unfavorable currency-translation effect of 7 percent for the quarter and 11 percent year to date.
Deere’s equipment operations reported operating profit of $452 million for the quarter and $1.387 billion for nine months, compared with $818 million and $2.377 billion last year. The deterioration in both periods primarily was due to lower shipment and production volumes and the unfavorable effects of foreign exchange, partially offset by improved price realization and lower selling, administrative and general expenses. In addition, higher raw-material costs affected nine-month results.
Financial services reported net income of $102.1 million for the quarter and $217.8 million for nine months compared with $83.4 million and $267.5 million last year. Results were higher for the quarter largely due to benefits from investment tax credits for wind energy projects, foreign exchange gains and lower selling, administrative and general expenses. Partially offsetting these factors were a higher provision for credit losses and narrower financing spreads.
Company equipment sales are projected to be down about 21 percent for the full year and down about 34 percent for the fourth quarter, including a negative currency-translation impact of about 4 percent for the year and about 1 percent for the quarter. Deere’s net income is anticipated to be approximately $1.1 billion for 2009, despite the largest expected single-year sales decline in at least 50 years. Affecting fourth quarter results will be significant production cutbacks that are being made in line with retail demand. The quarter also will include costs for rationalizing operations, as previously announced.
In the Agricultural & Turf division, sales declined 21 percent for the quarter and 9 percent for nine months largely due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by improved price realization.
Full-year sales of the agriculture and turf division are forecast to decrease by about 15 percent. At the beginning of the third quarter of 2009, the company combined the agricultural equipment and commercial and consumer equipment businesses. Voluntary employee separations related to the new organizational structure resulted in pretax charges of $16 million in the third quarter and will be approximately $85 million in the fourth quarter. Annual savings from the separation program are expected to be approximately $50 million to $60 million in 2010.
Construction and forestry sales declined 47 percent for the quarter and 45 percent for nine months, resulting in operating losses of $28 million for the quarter and $85 million year to date. Last year the division had operating profit of $93 million and $376 million for the same periods.
Deere’s worldwide sales of construction and forestry equipment are forecast to decline by about 47 percent for the year. The decline is attributable to a slumping global economy, historically low levels of U.S. construction activity, and further deterioration in forestry markets worldwide.
In spite of present economic conditions, the company believes underlying trends remain quite promising for its businesses.
Deere & Co. is headquartered in Moline, Ill.
