Deere & Company announced financial results for the third quarter ended July 31, 2014, with a net income of $850.7 million, down from $966.5 million in the same period of 2013. For the first nine months of the year, net income attributable to Deere & Company was $2.513 billion, compared with $2.730 billion 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 CEO. "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."
Net sales of the worldwide equipment operations declined 6 percent for the quarter and nine months compared with the same periods a year ago. Equipment net sales in the U.S. 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 operating factors mentioned above, a lower effective tax rate benefited both quarterly and year-to-date results.
Construction and forestry sales increased 19 percent for the quarter and 8 percent for nine months mainly as a result of higher shipment volumes and price realization. Increased sales for both periods were partially offset by the unfavorable effects of currency translation. Operating profit was $194 million for the quarter and $420 million for nine months, compared with $107 million and $259 million last year. Quarterly operating profit improved primarily due to higher shipment volumes and price realization, partially offset by a less favorable product mix. Year-to-date results increased mainly due to higher shipment volumes, lower production costs, and lower selling, administrative and general expenses.
Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 10 percent for full-year 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.
Agriculture & Turf sales fell 11 percent for the quarter and 8 percent for nine months due largely to lower shipment volumes, and the sales of John Deere Landscapes and John Deere Water. Additionally, year-to-date sales were lower due to the unfavorable effects of currency translation. These factors were partially offset by price realization in both the quarter and nine months. Operating profit was $941 million for the quarter and $2.967 billion year to date, compared with $1.336 billion and $3.684 billion, respectively, last year. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 10 percent for fiscal-year 2014, including a negative currency translation effect of about 1 percent.
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."