Net Income Declines for Deere in Fiscal Third Quarter
Deere & Co.’s net income for its fiscal third quarter ended July 31 was $488.8 million compared to $511.6 million in last year’s fiscal third, a 4.5-percent decline. For the first nine months of the year, net income was $1.239 billion compared with $1.589 billion for last year’s first nine months, a 21.9-percent skid.
Worldwide net sales and revenues decreased 11 percent in the quarter to $6.724 billion. Net sales of equipment operations were $5.861 billion compared to $6.840 billion in the same quarter a year ago, a 14.3-percent plunge. For the first nine months of the fiscal year net sales totaled $17.737 billion compared to $19.843 billion for the same period a year ago, a 10.6-percent drop.
“John Deere’s performance in the third quarter reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets,” said Samuel Allen, chairman and CEO. “All of Deere’s businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year. As in past quarters, our results benefited from the sound execution of our operating plans, the impact of a broad product portfolio, and our success keeping a tight rein on costs and assets.”
Equipment net sales in the United States and Canada decreased 16 percent for the quarter and 13 percent year to date. Outside of the U.S. and Canada, net sales decreased 12 percent for the quarter and 7 percent for the first nine months, with unfavorable currency-translation effects of 4 percent and 6 percent for the respective periods.
Deere’s equipment operations reported operating profit of $625 million for the quarter and $1.526 billion for nine months, compared with $601 million and $1.842 billion last year. The improvement for the quarter was primarily driven by price realization, lower production costs and a decrease in selling, administrative and general expenses, partially offset by reduced shipment volumes and currency effects.
The company expects equipment sales to decrease about 10 percent for fiscal 2016 and be down about 8 percent for the fourth quarter compared with year-ago periods.
“Deere continues to perform well in the face of challenging market conditions, particularly in relation to agricultural downturns of the past,” Allen said. “This underscores the success of our efforts to develop a more durable business model and a wider range of revenue sources.”
Construction and forestry sales dove 24 percent for the quarter and 21 percent for nine months mainly because of lower shipment volumes. Operating profit was $54 million for the quarter and $197 million for the first nine months, compared with $129 million and $464 million for the corresponding periods last year.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.