Farm and Construction Weakness Drop Deere Results in Fiscal First Quarter

Feb. 25, 2016

Deere & Co.’s reported net income for the fiscal first quarter ended Jan. 31, of $254.4 million or $0.80 per share compared with $386.8 million or $1.12 per share for the same period a year ago.

Michael Roth

Deere & Co.’s reported net income for the fiscal first quarter ended Jan. 31, of $254.4 million or $0.80 per share compared with $386.8 million or $1.12 per share for the same period a year ago. Worldwide net sales and revenues for the first quarter declined 13 percent to $5.525 billion compared to $6.383 billion last year. Net sales of the equipment operations totaled $4.769 billion for the quarter compared with $5,605 billion in the year-ago quarter, a 14.9-percent slide.

Net sales of the worldwide equipment operations declined 15 percent for the quarter. Sales included price realization of 2 percent and an unfavorable currency-translation effect of 4 percent. Equipment net sales in the United States and Canada decreased 18 percent. Outside the U.S. and Canada, net sales were down 9 percent, with unfavorable currency-translation effects of 11 percent.

Deere's equipment operations reported operating profit of $214 million for the quarter, compared with $414 million in 2015. The decline for the quarter was primarily because of lower shipment volumes, the unfavorable effects of foreign-currency exchange and the impact of a less favorable product mix. Partially offsetting these factors were price realization, lower selling, administrative and general expenses and lower production costs.

"John Deere's first-quarter results reflected the continuing impact of the downturn in the global farm economy as well as weakness in construction equipment markets," said Samuel Allen, chairman and CEO. "At the same time, all of Deere's businesses remained solidly profitable, benefiting from the sound execution of our business plans and the success of actions to develop a more responsive cost structure."

Company equipment sales are projected to decrease about 10 percent for fiscal 2016 and to be down about 8 percent for the second quarter compared with the same period a year ago. Included in the forecast is a negative foreign-currency translation effect of about 3 percent for the full year and second quarter. For fiscal 2016, net income attributable to Deere & Co. is anticipated to be about $1.3 billion.

"Although Deere expects another challenging year in 2016, our forecast represents a level of performance much better than we have experienced in previous downturns," Allen said. "This illustrates the impact of our efforts to establish a more durable business model and a wider range of revenue sources. As a result, the company's financial condition remains strong and we are well-positioned to continue investing in innovative products, advanced technology and new markets. These actions, we're confident, will provide significant value to our customers and investors in the years ahead."