Deere 1Q08 Sales and Revenues Climb 18 Percent

Feb. 15, 2008
Moline, Ill.-based Deere & Co. last week announced worldwide net income of $369.1 million, or $0.83 per share, for the first quarter ended Jan. 31, compared with $238.7 million, or $0.52 per share, for the same period last year. Worldwide net sales and revenues increased 18 percent to $5.2 billion for the quarter compared with $4.4 billion a year ago. Net sales of the equipment operations were $4.5 billion for the period compared with $3.8 billion last year.

Moline, Ill.-based Deere & Co. last week announced worldwide net income of $369.1 million, or $0.83 per share, for the first quarter ended Jan. 31, compared with $238.7 million, or $0.52 per share, for the same period last year. Worldwide net sales and revenues increased 18 percent to $5.2 billion for the quarter compared with $4.4 billion a year ago. Net sales of the equipment operations were $4.5 billion for the period compared with $3.8 billion last year.

“Advanced product offerings that help John Deere customers be more profitable and productive are supporting the company's financial performance and helping expand our global market presence,” said Robert Lane, chairman and CEO. “Further, benefiting from our ongoing actions to create a fundamentally more resilient, more successful business, Deere's non-agricultural operations remain on a profitable course in spite of weakening economic conditions in the United States.”

Net sales of the worldwide equipment operations increased 19 percent for the quarter, including positive effects for currency translation and price changes of 6 percent. Equipment sales in the U.S. and Canada were up 9 percent for the quarter. Net sales outside the U.S. and Canada increased by 37 percent, which included a positive currency-translation effect of 11 percent.

Deere's equipment divisions reported operating profit of $457 million for the quarter compared with $270 million last year. The 69-percent improvement was largely the result of the favorable impact of higher sales and production volumes and improved price realization, partially offset by higher selling, administrative and general expenses and raw-material costs.

Trade receivables and inventories at the end of the quarter were $6.5 billion, or 29 percent of previous 12-month sales, compared with $5.7 billion, or 28 percent of sales, a year ago.

Financial services reported net income of $97.7 million for the quarter compared with $88.2 million last year. The improvement was primarily due to growth in the credit portfolio, higher crop insurance income and a lower effective tax rate. Higher interest expense resulting from increased leverage, higher selling, administrative and general expenses, and an increase in the provision for credit losses partially offset the improvements.

Company equipment sales are projected to increase by about 17 percent for full-year 2008 and to be up approximately 23 percent for the second quarter. Currency accounts for approximately 3 percent of the sales increase for both periods. Deere's net income is forecast to be about $2.2 billion for the year and in a range of $700 million to $725 million for the second quarter.

“We are making the investments necessary to serve a growing customer base in all our businesses,” Lane said. “At the same time, the company remains in a prime position to benefit from powerful trends sweeping the world, such as growing affluence, increasing demand for food and infrastructure, and the rising use of biofuels.”

Commercial & Consumer Division sales were up 16 percent for the quarter. LESCO operations, acquired in the third quarter of 2007, accounted for 14 percent of the sales increase. The division had operating profit of $8 million for the quarter, compared with $38 million a year ago. The profit decline was primarily due to higher selling, administrative and general expenses from LESCO, partially offset by higher sales volumes.

John Deere commercial and consumer equipment sales are projected to be up about 8 percent for the year, including about 7 percent from a full year of LESCO sales. Sales gains from new products, such as an expanded line of innovative commercial mowing equipment, are expected to more than offset market weakness related to the U.S. housing slowdown and rising costs for fertilizer and other lawn-maintenance supplies.

Though sales declined 6 percent in the Construction & Forestry division operating profit rose to $117 million for the quarter, versus $95 million a year ago. The profit increase was mainly because of improved price realization and the positive effect of production levels in closer alignment with retail demand, partially offset by higher raw-material costs and lower sales volumes.

U.S. markets for construction and forestry equipment are forecast to remain under continued pressure due in large part to a continuing slump in housing starts. It is expected that housing activity in 2008 will remain far below last year in spite of recent interest-rate reductions. Non-residential construction is expected to remain in line with last year's relatively strong levels. Although the U.S. housing sector is negatively affecting forestry equipment markets in the United States and Canada, forestry sales on a worldwide basis are projected to rise in 2008 due to economic growth in other regions.

Despite a generally weak environment, Deere expects its sales to benefit from new products and factory-production levels in closer alignment with retail demand. For 2008, the company's worldwide sales of construction and forestry equipment are forecast to be approximately equal to 2007.