Moline, Ill. — Deere & Co. reported net income of $722 million for the fourth quarter ended Nov. 3, 2019, compared with net income of $785 million for the quarter ended Oct. 28, 2018. For fiscal 2019, net income attributable to Deere & Co. was $3.253 billion compared with $2.368 billion in 2018.
Worldwide net sales and revenues increased 5% in both the fourth quarter and full year of 2019 to $9.896 billion and $39.258 billion, for the respective periods. Net sales of the equipment operations were $8.703 billion for the quarter and $34.886 billion for the year, compared with respective totals of $8.343 billion and $33.351 billion in 2018.
“John Deere’s performance reflected continued uncertainties in the agricultural sector,” said John C. May, chief executive officer. “Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment. Additionally, financial services results have come under pressure due to operating-lease losses. At the same time, general economic conditions have remained favorable. This has supported demand for smaller equipment and led to solid results for Deere’s construction and forestry business, which had a record year for sales and operating profit.”
Company Outlook & Summary
Net income attributable to Deere & Co. for fiscal 2020 is forecast to be in a range of $2.7 billion to $3.1 billion. “Despite present challenges, the longer term outlook for our businesses remains healthy and points to a promising future for Deere,” May said. “We are particularly encouraged by the adoption of precision technologies and believe we are well positioned to be a leader in the delivery of smarter, more efficient and sustainable solutions to our customers. At the same time, we are committed to the successful execution of our strategic plan and have initiated a series of measures to create a leaner organizational structure that can operate with more speed and agility. We’re confident these steps will lead to improved efficiencies and help the company focus its resources and investments on areas that have the greatest impact on performance.”
Net income in the fourth quarter and full year 2019 was favorably affected by discrete adjustments to the provision for income taxes, including those related to U.S. tax reform legislation. The adjustments related to tax reform were $41 million and $68 million for the respective periods. Prior-year results were favorably affected by $37 million in the fourth quarter and unfavorably affected by $705 million for the 12 month period due to discrete adjustments to the provision for income taxes related to tax reform.
Agriculture & Turf sales increased for the quarter and full year of 2019 due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit decreased for the quarter and year. The quarter’s decline was primarily due to higher production costs, higher selling, administrative and general expenses, the unfavorable effects of currency exchange and increased research and development expenses.
For the year, operating profit decreased largely due to higher productions costs, the unfavorable effects of currency exchange, increased research and development costs, higher selling, administrative and general expenses, and a less favorable sales mix, partially offset by higher shipment volumes. Both periods were positively affected by price realization.
Market Conditions & Outlook
Deere’s worldwide sales of agriculture and turf equipment are forecast to decline 5-10% for fiscal year 2020, including a negative currency-translation effect of 1%. Industry sales of agricultural equipment in the U.S. and Canada are forecast to be down about 5%, driven by lower demand for large equipment. Full year industry sales in the EU28 member nations are forecast to be approximately flat as are South American industry sales of tractors and combines. Asian sales are forecast to be about the same as the prior year. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about flat.