Deere & Company reports first-quarter 2014 earnings

Deere & Co. reports its net sales and revenues for the first quarter of 2014 increased 3% compared to the same time last year.

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Net income attributable to Deere & Company was $681.1 million, or $1.81 per share, for the first quarter ended January 31, compared with $649.7 million, or $1.65 per share, for the same period last year.

Worldwide net sales and revenues for the first quarter increased 3%, to $7.654 billion, compared with $7.421 billion last year. Net sales of the equipment operations were $6.949 billion for the quarter compared with $6.793 billion a year ago.

"With another record quarter, John Deere has started 2014 on a strong note," says Samuel R. Allen, Chairman and Chief Executive Officer. "Our results demonstrate the adept execution of our operating and marketing plans, which are aimed at expanding our global market position and helping our customers throughout the world be more profitable and productive," he says. "In addition, we are seeing further benefit from efforts to hold the line on costs."

Summary of Operations

Net sales of the worldwide equipment operations increased 2% for the quarter. Sales included price increases of 2% and an unfavorable currency-translation effect of 2%. Equipment net sales in the United States and Canada rose 3% for the quarter. Outside the U.S. and Canada, net sales increased 2%, including an unfavorable currency-translation effect of 3%.

Deere's equipment operations reported operating profit of $891 million for the quarter, compared with $837 million last year. Results benefited from price realization, partially offset by a less favorable product mix and the unfavorable effects of foreign-currency exchange.

Financial services reported net income attributable to Deere & Company of $142.2 million for the quarter compared with $132.9 million last year. The improvement was primarily related to growth in the credit portfolio and a more favorable effective tax rate. These factors were partially offset by lower crop insurance margins, increased selling, administrative and general expenses and less favorable financing spreads.  

Company Outlook & Summary

Company equipment sales are projected to decrease about 3% for fiscal 2014 and be down about 6% for the second quarter compared with the same periods of 2013. For the full year, net income attributable to Deere & Company is anticipated to be approximately $3.3 billion.

"Even in the face of moderating demand for agricultural equipment, Deere is well-positioned to deliver solid performance," says Allen. "We believe that our extensive investments in new products and new markets will provide strong support to our results and keep our strategic plans moving ahead." These plans are essential to helping meet the world's growing need for food, shelter and infrastructure, Allen says, and he expressed confidence they would produce significant benefits for the company's investors and customers over the long term.

Equipment Division Performance

Agriculture & Turf. Sales increased 2% for the quarter due largely to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit was $797 million compared with $766 million for the quarter last year. The improvement was due primarily to price realization, partially offset by a less favorable product mix and the unfavorable effects of foreign-currency exchange.

Construction & Forestry. Construction and forestry sales rose 4% for the quarter, with operating profit of $94 million compared with $71 million a year ago. The improvement in operating profit was due primarily to lower production costs, decreased research and development expenses, and price realization. These factors were partially offset by the impact of lower production volumes.  

Market Conditions & Outlook

Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 6% for fiscal 2014. Although farm incomes are expected to remain at healthy levels in 2014, they are forecast to be lower than in the previous year. In Deere's view, the decline will have a dampening effect on demand, especially for larger models of equipment. Partly as a result of these factors, industry sales for agricultural machinery in the U.S. and Canada are forecast to be down 5 to 10% for the year, with the decline mainly reflecting lower sales of high-horsepower tractors and combines.

Full-year industry sales in the EU28 are forecast to be down about 5% due to lower crop prices and farm incomes. In South America, industry sales of tractors and combines are projected to be down 5 to 10% from strong 2013 levels. Industry sales in the Commonwealth of Independent States are expected to be down slightly for the year, while Asian sales are projected to be up slightly.

In the U.S. and Canada, industry sales of turf and utility equipment are expected to be up about 5% for 2014 as a result of improved market conditions.

Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 10% for 2014. The gain reflects further economic recovery and higher housing starts in the U.S. as well as sales increases outside the U.S. and Canada. Global forestry sales are expected to be up for the year due to general economic growth and improved sales in European markets.

Financial Services. Full-year 2014 net income attributable to Deere & Company for the financial services operations is expected to be approximately $600 million. The outlook reflects improvement primarily due to expected growth in the credit portfolio and a more favorable tax rate. These factors are projected to be partially offset by an increase in the provision for credit losses from the low level in 2013, less favorable financing spreads, and higher selling, general and administrative expenses.

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