Deere Reports Decline in Profit as Sales Tumble

By Lisa Beilfuss 

Deere & Co. said profit in its latest quarter tumbled 40% as the farm-equipment maker continues to face weaker demand for its farm machinery.

Still, results surpassed analysts' expectations.

The Moline, Ill.-based company--the world's largest seller of tractors and harvesting combines--is struggling as lower crop prices in the U.S., weaker demand overseas and reduced U.S. tax incentives have driven down demand for its products. Amid what the company has called the deepest downturn in North American large ag equipment in a quarter-century, Deere has scaled back production of high-horsepower models to whittle inventories of unsold machines.

"John Deere's third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment," said Chief Executive Samuel Allen.

In the latest quarter, overall equipment sales dropped 22% from a year earlier. Profit from equipment operations nearly halved amid lower shipment volumes, a lower-margin product mix and the impact of the stronger dollar. Lower costs partially offset those factors. Sales of farm equipment declined 24%.

In Deere's construction- and forestry-equipment business, which had been helping to counter some of the weakness in farm machinery, revenue fell 13% during the quarter and profit dropped 34% to $129 million. Earnings in Deere's financial services business slipped 5.5% to $153.4 million.

Deere said Friday that it expects full-year world-wide sales of its farm machinery to decrease 25% from last year--slightly worse than the 24% decline it had forecast in May.

Deere continues to predict lower industrywide sales across nearly all its geographic markets and sees a worsening market in South America, where Deere now expects sales to drop by between 20% and 25% this year because of weak demand in Brazil. Sales in Asia will fall moderately, led by declines in India and China, while sales across Europe will drop about 10% this year. Deere projects a 25% decline in U.S. and Canada equipment sales, but said more positive conditions in the livestock sector will result in U.S. and Canadian turf and utility equipment sales that are flat to up 5%.

Overall, the company reported a profit of $511.6 million, or $1.53 a share, down from $850.7 million, or $2.33, a year earlier.

Revenue slid 20% to $7.59 billion.

Analysts projected $1.44 in per-share profit on $7.17 billion in revenue, according to Thomson Reuters.

Write to Lisa Beilfuss at [e-mail]

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August 21, 2015 08:27 ET (12:27 GMT)

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