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Despite Trade Issues, Deere Jumps 5.8 Percent in Fiscal Q2

Deere & Co. reported a 5.8-percent worldwide net sales and revenues hike in its fiscal second quarter, despite ongoing trade concerns between the United States and China.

Deere & Co. reported worldwide net sales and revenues of $11.342 billion for its fiscal second quarter ended April 28 compared to $10.720 billion in the same period a year ago, a 5.8-percent increase. For the first six months of the fiscal year, worldwide net sales totaled $19.326 billion compared to $17.633 billion a year ago, a 9.6-percent hike.

Net sales of the equipment operations for the quarter were $10.273 billion compared to $9.747 billion a year ago, a 5.4-percent increase. For the first six months, equipment operations net sales were $17.214 billion compared to $15.721 billion a year ago, a 9.5-percent hike.

"John Deere produced solid results for the quarter despite uncertain conditions in the agricultural sector," said Samuel R. Allen, chairman and chief executive officer. "Ongoing concerns about export-market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases. At the same time, overall economic conditions remain positive, a fact that along with a growing customer base has contributed to strong results from our construction and forestry business."

Company equipment sales are projected to increase by about 5 percent for fiscal 2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months of the prior year. This adds about 1 percent to Deere's net sales forecast for the current year. Also included in the forecast is a negative foreign-currency translation effect of about 3 percent for the year. Net sales and revenues are projected to increase about 5 percent for fiscal 2019. Net income attributable to Deere & Co. is forecast to be about $3.3 billion.

"Although the long-term fundamentals for our businesses remain favorable, softening conditions in the agricultural sector have led Deere to adopt a more cautious financial outlook for the year," said Allen. "The lower forecast is partly a result of actions we are taking to prudently manage field inventories, which will cause production levels to be below retail sales in the second half of the year. At the same time, Deere's long-term strategies remain on track and we are fully committed to their successful execution. We continue to expand our global customer base and are encouraged by the market's positive response to our line-up of advanced products and services."

On a Friday morning call with analysts, Josh Jepsen, director of investor relations, said in response to market dynamics Deere is reducing production in its agriculture business to levels below retail sales. Production will be lower at some of its large North American plants for the remainder of the year. Jepsen added that Deere is uncertain about a trade agreement being reached in the second half of the year. Deere announced the cuts as the U.S. and China increased tariffs on billions of dollars in imports. About 60 percent of U.S.-grown soybeans are exported to China.

Construction & Forestry sales increased 11 percent year over year to $2.99 billion compared to last year’s fiscal second quarter, aided by the Wirtgen acquisition, higher shipment volumes and price realization, somewhat offset by unfavorable foreign exchange. This segment reported operating profit of $347 million, an improvement of 34 percent from the year-ago quarter’s $259 million. The Wirtgen acquisition contributed operating profit of $102 million in the reported quarter. Apart from it, price realization and higher shipment volumes partially offset by higher production costs and less favorable product mix, contributed to drive profits.
 

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