Deere & Company today announced worldwide net income of $420 million, or $0.99 per share, for the third quarter ended July 31, compared with $575.2 million, or $1.32 per share, for the same period last year. For the first 9 months of the year, net income was $1.096 billion, or $2.59 per share, compared with $1.708 billion, or $3.89 per share, last year.
Worldwide net sales and revenues declined 24%, to $5.885 billion, for the third quarter and were down 15% to $17.778 billion for 9 months compared with a year ago. Net sales of the equipment operations were $5.283 billion for the quarter and $16.03 billion for 9 months, compared with $7.07 billion and $19.07 billion last year.
"John Deere has completed a solidly profitable quarter in the face of persistent global economic pressure and made further progress advancing its competitive position throughout the world," said Samuel R. Allen, president and chief executive officer. "We have seen continued benefit from strength in the U.S. market for large farm machinery and from our efforts to keep a tight rein on costs and inventories. Deere's construction and forestry business, as an example, is successfully executing carefully designed plans to adjust expenses and asset levels in response to the severe decline in its markets," Allen said.
Summary of Operations
Net sales of the worldwide equipment operations decreased 25% for the quarter and 16% for 9 months. Equipment net sales in the U.S. and Canada declined 16% for the quarter and 9% year to date. Net sales outside the U.S. and Canada were down 37% for the quarter and 26% for 9 months, with an unfavorable currency-translation effect of 7 % for the quarter and 11 % year to date.
Deere's equipment operations reported operating profit of $452 million for the quarter and $1.387 billion for 9 months, compared with $818 million and $2.377 billion last year. The deterioration in both periods primarily was due to lower shipment and production volumes and the unfavorable effects of foreign exchange, partially offset by improved price realization and lower selling, administrative and general expenses. In addition, higher raw-material costs affected 9-month results.
Equipment operations reported net income of $319 million for the quarter and $879 million for 9 months, compared with $479 million and $1.408 billion last year.
Company Outlook & Summary
Company equipment sales are projected to be down about 21% for the full year and down about 34% for the fourth quarter, including a negative currency-translation impact of about 4% for the year and about 1% for the quarter. Deere's net income is anticipated to be approximately $1.1 billion for 2009, despite the largest expected single-year sales decline in at least 50 years.
Affecting fourth quarter results will be significant production cutbacks that are being made in line with retail demand. The quarter also will include costs for rationalizing operations, as previously announced.
In spite of present economic conditions, the company believes underlying trends remain quite promising for its businesses. "John Deere is well-positioned to respond to the world's growing need for food, shelter, infrastructure and energy with a wide range of advanced equipment and services," Allen said. "Further, we're confident our ability to adjust production in response to dynamic markets will help us come through today's challenging times in a strong condition, ready to seize future opportunities for growth."
Agricultural & Turf. Sales declined 21% for the quarter and 9% for 9 months largely due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by improved price realization. Operating profit was $480 million for the quarter and $1.472 billion year to date, compared with $725 million and $2.001 billion for the respective periods last year. Operating profit was lower in both periods primarily due to lower shipment and production volumes and unfavorable impacts of foreign exchange, partially offset by improved price realization and lower selling, administrative and general expenses. Higher raw-material costs also had an unfavorable impact on the 9-month results.
Construction & Forestry. Construction and forestry sales declined 47% for the quarter and 45% for 9 months, resulting in operating losses of $28 million for the quarter and $85 million year to date. Last year the division had operating profit of $93 million and $376 million for the same periods. The profit decreases for both periods were primarily due to significantly lower shipment and production volumes, partially offset by lower selling, administrative and general expenses and improved price realization. Higher raw-material costs also had an unfavorable impact on year-to-date results.
Market Conditions & Outlook
Agriculture & Turf. Full-year sales of the agriculture and turf division are forecast to decrease by about 15%, including a negative currency-translation impact of about 5%. At the beginning of the third quarter of 2009, the company combined the agricultural equipment and commercial and consumer equipment businesses. Voluntary employee separations related to the new organizational structure resulted in pretax charges of $16 million in the third quarter and will be approximately $85 million in the fourth quarter. Annual savings from the separation program are expected to be approximately $50 million to $60 million in 2010.
On an industry basis, farm machinery sales in the U.S. and Canada are forecast to be down slightly for the year, though sales of large tractors, combines, sprayers and seeding equipment are expected to be higher. In other parts of the world, industry farm-machinery sales in Western Europe are forecast to decline 10-15% for the year while markets in Central Europe and the Commonwealth of Independent States are expected to be sharply lower. In South America, industry sales are projected to decrease by 20-30% for the year. Industry sales of turf equipment and compact utility tractors in the United States and Canada are expected to be down about 20%.