John Deere posted $5.625 billion in fiscal first quarter net sales and revenues, compared with $5.525 billion a year ago, a 1.8 percent increase. Net sales of the equipment operations were $4.698 billion for the quarter compared with $4.769 a year ago, a 1.5-percent decline.
"John Deere has started out the year on a positive note in the continued face of soft market conditions," said Samuel Allen, chairman and CEO. "Although the quarter's sales and earnings were somewhat lower than last year, all of our businesses remained solidly profitable. Deere's performance showed further benefits from the sound execution of its operating plans, the strength of a broad product portfolio and the impact of a more flexible cost structure. At the same time, we are seeing signs that after several years of steep declines key agricultural markets may be stabilizing."
Equipment net sales in the United States and Canada decreased 8 percent. Outside the U.S. and Canada, net sales increased 11 percent, with a favorable currency-translation effect of 1 percent.
Deere's equipment operations reported operating profit of $247 million for the quarter, compared with $214 million in 2016. The improvement for the quarter was primarily driven by price realization, partially offset by expenses associated with the previously announced voluntary employee-separation program, higher warranty costs and the unfavorable effects of foreign-currency exchange. Additionally, the current quarter benefited from a gain on the sale of a partial interest in the unconsolidated affiliate SiteOne Landscape Supply Inc.
Net income of the company's equipment operations was $80 million for the quarter, compared with $127 million for the same period last year. In addition to the operating factors mentioned above, a higher effective tax rate in 2017 reduced quarterly results.
Financial services reported net income attributable to Deere & Co. of $114.4 million for the quarter compared with $129.4 million last year. Lower results for the quarter were primarily because of less favorable financing spreads and voluntary separation expenses.
Company equipment sales are projected to increase about 4 percent for fiscal 2017 and be up about 1 percent for the second quarter compared with the same periods of 2016. Foreign-currency rates are not expected to have a material translation effect on equipment sales for the year or second quarter. Net sales and revenues are projected to increase about 4 percent for fiscal 2017 with net income attributable to Deere & Co. of about $1.5 billion.
Construction and forestry sales decreased 6 percent for the quarter, mainly as a result of lower shipment volumes and higher sales-incentive costs. Operating profit was $34 million for the quarter compared to $70 million in 2016. Lower results for the quarter were mainly attributable to higher sales-incentive expenses and the voluntary separation program.
Deere's worldwide sales of construction and forestry equipment are forecast to be up about 7 percent for 2017, with no material currency-translation impact. The forecast reflects moderate economic growth worldwide. In forestry, global industry sales are expected to be flat to down 5 percent, with soft conditions in North America offsetting strength in other regions.