Deere & Co. reported net income of $784.8 million for the fourth quarter ended Oct. 28, compared with net income of $510.3 million for the same period of 2017. Net income for the company’s fiscal year 2018 stood at $2.4 billion vs. $2.2 billion in fiscal year 2017.
The company’s agriculture & turf sales rose 3% for the quarter and 15% for the year due to higher shipment volumes and price realization. The full-year results also benefited from lower warranty claims.
Worldwide net sales and revenues increased 17% to $9.4 billion for the quarter and rose 26% to $37.4 billion for the full year. Net sales of equipment operations were $8.3 billion for the quarter vs. $7.1 billion in the same quarter last year and $33.4 billion for the year vs. $25.9 billion in 2017.
Financial services reported net income attributable to Deere & Co. of $261.4 million for the quarter and $942.0 million for the full year compared with $127.8 million and $476.9 million in 2017. Results for both periods benefited from a higher average portfolio and a lower provision for credit losses, partially offset by less-favorable financing spreads. Full-year results in 2018 also were aided by lower losses on lease residual values.
“John Deere has concluded another solid year in which the company benefited from a further improvement in market conditions and a favorable customer response to its lineup of advanced products,” said Samuel Allen, Deere & Co.’s chairman and chief executive officer. “In the fourth quarter, farm machinery sales in the Americas made further gains while construction equipment sales continued to move higher, helped in part by our Wirtgen road-building business, whose financial contribution has exceeded our original forecasts.”
Allen added the company is dealing with continued cost pressures for raw materials such as steel through “price actions and ongoing cost management.”
Summary of Operations
Net sales of the worldwide equipment operations increased 18% for the quarter and 29% for the full year compared with the same periods in 2017. Deere’s acquisition of the Wirtgen Group in December added 11% to net sales for the quarter and 12% for the year.
Equipment net sales in the U.S. and Canada increased 21% for the quarter and 25% for the year, with Wirtgen adding 4% for both periods. Outside of North America, net sales rose 13% for the quarter and 34% for the year, with Wirtgen adding 19% and 22% for the respective periods.
Deere’s equipment operations reported operating profit of $862 million for the quarter and $3.7 billion for the full year, compared with $680 million and $2.9 billion, respectively, in 2017. Wirtgen, whose results are included in these amounts, had operating profit of $79 million for the quarter and $116 million for the year.
Excluding Wirtgen results, the improvement for both periods was primarily driven by higher shipment volumes, price realization and lower warranty costs, partially offset by higher production costs and research and development expenses. Full-year results in 2017 included a gain on the sale of SiteOne Landscapes Supply Inc.
Net income of the company’s equipment operations was $514 million for the fourth quarter and $1.4 billion for the full year, compared with net income of $417 million and $1.7 billion for the same periods of 2017.
Equipment Division Performance
Deere’s agriculture & turf division sales rose 3% for the quarter and 15% for the year due to higher shipment volumes and price realization. Operating profit was $567 million for the quarter and $2.8 billion for the year, compared with respective totals of $594 million and $2.5 billion in 2017.
Results for the quarter were negatively affected by higher production costs, unfavorable effects of foreign-currency exchange and higher research and development costs, partially offset by higher shipment volumes and price realization. The year’s improvement was driven by higher shipment volumes, price realization and lower warranty-related expenses, partially offset by higher production costs and research and development expenses. Full-year results in 2017 included gains on the SiteOne sale.
Market Conditions & Outlook
Deere’s worldwide sales of ag and turf equipment are forecast to be up about 3% for fiscal year 2019. Industry sales of ag equipment in the U.S. and Canada are forecast to be flat to up 5%, helped by replacement demand for large equipment and continued demand for small tractors. Full-year industry sales in the 28 member nations of the European Union are forecast to be approximately flat as a result of drought conditions in key markets.
South American industry sales of tractors and combines are projected to be flat to up 5% benefiting from strength in Brazil. Asian sales are forecast to be flat to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2019.
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