Deere Construction Sales Up in 1Q

February 12, 2014

Deere & Co. reported a first-quarter net income of $681.1 million for the first quarter ended Jan. 31, 2014 compared with $649.7 million for the same period a year earlier. The company’s worldwide net equipment sales rose 2 percent, with sales in the Construction & Forestry segment rising 4 percent from the previous year.

Worldwide net sales and revenues for the first quarter increased 3 percent, 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," said Samuel R. Allen, chairman and CEO. "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. In addition, we are seeing further benefit from efforts to hold the line on costs."

Construction and forestry sales rose 4 percent 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. Sales in this segment are forecast to increase by about 10 percent 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.

Operating profit in the Agriculture & Turf segment was $797 million compared with $766 million for the quarter last year, and segment sales increased 2 percent over the same period. Segment sales are forecast to decrease by about 6 percent for fiscal 2014.

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.

Company equipment sales are projected to decrease about 3 percent for fiscal 2014 and be down about 6 percent 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.

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.

Financial services reported net income attributable to Deere & Company of $142.2 million for the quarter compared with $132.9 million last year. Net income attributable to John Deere Capital Corporation was $136.5 million for the first quarter, compared with $105 million last year. 

"Even in the face of moderating demand for agricultural equipment, Deere is well-positioned to deliver solid performance," Allen said. "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."