Deere & Company announced Aug. 13 that net income attributable to the company was $850.7 million, or $2.33 per share, for the third quarter ended July 31, 2014, compared with $996.5 million, or $2.56 per share, for the same period of 2013. For the first nine months of the year, net income attributable to Deere & Company was $2.513 billion, or $6.79 per share, compared with $2.730 billion, or $6.97 per share, last year.
Worldwide net sales and revenues decreased 5 percent, to $9.500 billion, for the third quarter and were down 4 percent, to $27.102 billion, for nine months. Net sales of the equipment operations were $8.723 billion for the quarter and $24.918 billion for nine months, compared with $9.316 billion and $26.373 billion for the same periods last year.
“Deere’s third-quarter performance reflected moderating conditions in the global farm sector, which have negatively affected demand for farm machinery and contributed to lower sales and profits for our agricultural-equipment business,” said Samuel R. Allen, chairman and chief executive officer, Deere & Company. “At the same time, our construction and forestry and financial services divisions had higher profit, showing the benefit of a broad-based business lineup. Overall, it was a quarter of solid performance, with income exceeded only by last year’s record for the corresponding period.”
Summary of Operations
Net sales of the worldwide equipment operations declined 6 percent for the quarter and nine months compared with the same periods a year ago. Sales included price realization of 2 percent for the quarter and nine months. Additionally, sales included an unfavorable currency-translation effect of 1 percent for the nine months. Equipment net sales in the United States and Canada decreased 8 percent for the quarter and 7 percent year to date. Outside the U.S. and Canada, net sales were down 4 percent for the quarter, including favorable currency-translation effects of 1 percent, and down 3 percent for nine months, including unfavorable currency-translation effects of 1 percent.
Deere’s equipment operations reported operating profit of $1.135 billion for the quarter and $3.387 billion for nine months, compared with $1.443 billion and $3.943 billion last year. The decline for the quarter was due primarily to the impact of lower shipment volumes, higher production costs primarily related to engine-emission requirements, and the unfavorable effects of foreign currency exchange. The year-to-date decline was largely due to the impact of lower shipment volumes, unfavorable foreign-exchange effects, higher production costs, and a less favorable product mix. Declines for both periods were partially offset by price realization.
Net income of the company’s equipment operations was $680 million for the third quarter and $2.061 billion for the first nine months, compared with $846 million and $2.324 billion in 2013. In addition to the aforementioned operating factors, a lower effective tax rate benefited both quarterly and year-to-date results.
Financial services reported net income attributable to Deere & Company of $162.3 million for the quarter and $452.2 million for nine months compared with $150.0 million and $407.9 million last year. The improvement for the quarter was due to growth in the credit portfolio, partially offset by a higher provision for credit losses and higher selling, administrative and general expenses. Year-to-date results improved as a result of growth in the credit portfolio and a more favorable effective tax rate. These factors were partially offset by lower crop insurance margins, higher selling, administrative and general expenses and a higher provision for credit losses.
Company Outlook & Summary
Company equipment sales are projected to decrease about 6 percent for fiscal 2014 and to be down about 8 percent for the fourth quarter compared with the year-ago periods. Included is an unfavorable currency-translation effect of about 1 percent for the year. For 2014, net income attributable to Deere & Company is anticipated to be about $3.1 billion.
Although Deere’s full-year earnings are forecast to be somewhat lower than in 2013, Allen said the company is looking forward to completing another successful year and continues to believe the longer-term outlook for its businesses holds considerable promise. “For the balance of the year, the company will be scaling back production in line with demand for our agricultural products,” he stated. “These actions illustrate our commitment to responding with speed and decisiveness to changes in market conditions.”
Allen pointed out the company’s plans to expand its market presence throughout the world are on track and continuing to move ahead. “We remain confident the company is well positioned to earn solid returns throughout the business cycle and to realize substantial benefits from the world’s growing need for food, shelter and infrastructure well into the future,” he said.
For more information, visit www.deere.com.