Deere Sales Slump On Weak Farm-Equipment Demand--Update

By Michael Calia 

Deere & Co. reported a 17% drop in sales and warned of further difficulty as the farm-equipment maker continues to suffer from weak demand.

Still, the company's results topped analysts' expectations.

"Deere's first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income," Chief Executive Samuel R. Allen said in a news release.

The company, which cited the added pressure of foreign-exchange effects, said it expects equipment sales to fall 17% during the fiscal year, which ends in October, including a 19% decline in the current period. The company previously expected a 15% drop for the fiscal year.

Shares of Deere, up 7.7% over the past year through Thursday, fell more than 1% in premarket trading.

Deere has scaled back on production and taken other measures to contend with falling demand for its farm equipment as crop prices declined and federal tax incentives for equipment purchases were cut.

In January, the company said it planned to lay off 910 workers in Iowa and Illinois as part of its drawdown in production. Those layoffs came on the heels of more than 1,000 job cuts it announced in August.

For the quarter ended Jan. 31, Deere said equipment sales fell 19%, with sales dropping 14% in the U.S. and Canada and 28% abroad. The agriculture and turf segment's sales declined 27% to $4.08 billion; however, sales in the company's construction and forestry segment rose 13% to $1.52 billion.

Overall, the company posted a profit of $386.8 million, or $1.12 a share, down from $681.1 million, or $1.81 a share, a year earlier.

Total revenue, including the company's finance operations, fell to $6.38 billion. Net sales excluding the financial division fell 19% to about $5.61 billion.

Analysts polled by Thomson Reuters had projected 83 cents a share in earnings and $5.53 billion in revenue.

Write to Michael Calia at [e-mail]

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