- Net sales and revenues increase by 15 percent.
- Demand remains strong for U.S. farm equipment while construction continues solid recovery.
- Company forecasts record full-year income of approximately $3.1 billion.
MOLINE, Ill., Aug. 15, 2012 /CNW/ - Deere & Company (NYSE: DE) today announced worldwide net income attributable to Deere & Company of $788.0 million, or $1.98 per share, for the third quarter ended July 31, compared with $712.3 million, or $1.69 per share, for the same period last year.
For the first nine months of the year, net income attributable to Deere & Company was $2.377 billion, or $5.88 per share, compared with $2.130 billion, or$5.01 per share, last year.
Worldwide net sales and revenues increased 15 percent, to $9.590 billion, for the third quarter and rose 13 percent to $26.365 billion for nine months. Net sales of the equipment operations were $8.930 billion for the quarter and $24.454 billion for nine months, compared with $7.722 billion and $21.563 billionfor the same periods last year.
"John Deere delivered record third quarter performance in both sales and income," said Samuel R. Allen, chairman and chief executive officer. "Although a strong quarter, we are not satisfied that sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products."
Allen noted that the company's global presence continues to grow due to strong customer preference for the innovative line-up of John Deere products that have been introduced in the past year.
Summary of Operations
Net sales of the worldwide equipment operations increased 16 percent for the quarter and 13 percent for nine months compared with the same periods a year ago. Sales included price realization of 5 percent for the quarter and 4 percent year-to-date and an unfavorable currency-translation effect of 5 percent for the quarter and 3 percent for nine months. Equipment net sales in the United States and Canada increased 28 percent for the quarter and 18 percent year to date. Outside the U.S. and Canada, net sales were essentially unchanged for the quarter and increased 7 percent for nine months, with unfavorable currency-translation effects of 11 percent and 6 percent for these periods.
Deere's equipment operations reported operating profit of $1.127 billion for the quarter and $3.347 billion for nine months, compared with $969 million and$2.883 billion last year. The improvement for both periods was primarily due to the impact of price realization and higher shipment volumes. These factors were partially offset by higher production costs and raw material costs, unfavorable effects of foreign currency exchange, as well as increased research and development expenses. The increase in production costs primarily related to new products and engine-emission requirements.
Financial services reported net income attributable to Deere & Company of $110.4 million for the quarter and $338.6 million for nine months compared with$125.6 million and $348.9 million last year. Results were lower for both periods primarily due to increased selling, administrative and general expenses, narrower financing spreads and higher reserves for crop insurance claims. These factors were partially offset by growth in the credit portfolio and a lower provision for credit losses.
Company Outlook & Summary
Company equipment sales are projected to increase by about 13 percent for both fiscal 2012 and the fourth quarter compared with the same periods a year ago. Included is an unfavorable currency-translation impact of about 3 percent for the year and about 4 percent for the fourth quarter. For the full year, net income attributable to Deere & Company is anticipated to be about $3.1 billion.
"Global economic conditions and dryness in several key markets warrant some caution in coming months," Allen said. "However, this year's drought could positively influence our outlook as it spotlights the need for John Deere's highly productive agricultural equipment. Our new John Deere products have been well received by customers around the world. This, combined with our increased focus on improved execution, gives us confidence that Deere is well-positioned to capitalize on favorable global agricultural trends over the long term."
Equipment Division Performance
Agriculture & Turf. Sales increased 14 percent for the quarter and 11 percent for nine months largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation.
Operating profit was $1.014 billion for the quarter and $2.991 billion year to date, compared with $859 million and $2.579 billion, respectively, last year. Results were up in both periods primarily driven by the impact of price realization and higher shipment volumes. These factors were partially offset by increased production and raw-material costs, unfavorable effects of foreign currency exchange, and higher research and development expenses.
Construction & Forestry. Construction and forestry sales increased 23 percent for the quarter and 24 percent for nine months mainly due to higher shipment volumes and price realization. Operating profit was $113 million for the quarter and $356 million for nine months, compared with $110 million and$304 million last year. Results were up for both periods primarily due to the impact of price realization and higher shipment volumes. These factors were partially offset by increased production and raw-material costs, as well as higher research and development and selling, administrative and general expenses.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to increase by about 13 percent for full year 2012, including a negative currency-translation impact of about 4 percent.
Industry sales for agricultural machinery in the U.S. and Canada are forecast to be up more than 10 percent for 2012. Full-year industry sales in the EU27 are now forecast to be flat as strength in the northern European market offsets weakness in the South. Sales in the Commonwealth of Independent States are expected to be up strongly in 2012.
Industry sales in Asia are projected to be down moderately for the full year due to softening in India and China. In South America, industry sales are projected to be down 5 to 10 percent as a result of uncertainty in Argentina and drought conditions earlier in the year in parts of the region.
As a result of dry weather, global grain supplies are expected to further tighten. This supports higher commodity prices and should result in robust field activity in the 2013 crop year in markets throughout the world.
U.S. and Canada industry sales of turf and utility equipment are expected to be flat to up 5 percent for 2012, reflecting the drought conditions in the U.S.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 17 percent for 2012. While construction equipment sales in the U.S. continue to show strong recovery, Deere has experienced slower than expected sales activity in some international markets. World forestry markets are projected to be flat in comparison to 2011.
Financial Services. Full year 2012 net income attributable to Deere & Company for the financial services operations is expected to be approximately $450 million, somewhat lower than the prior year. The forecast decline is primarily due to an anticipated increase in selling, administrative and general expenses, narrower financing spreads and higher reserves for crop insurance claims, partially offset by growth in the credit portfolio.
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