Company Outlook & Summary
Deere & Co. expects equipment sales to be up 10 to 12% for fiscal 2011 and up about 34% for the first quarter compared with the same periods of the previous year. Included is an unfavorable currency-translation impact of about 1% for the year and about 2% for the quarter. Net income attributable to Deere & Company is anticipated to be approximately $2.1 billion for the full year.
2011 will be a year of record new-model introductions for the company, due in large part to the implementation of more rigorous global emissions standards. Deere's earnings forecast reflects the complexity of transitioning to these new equipment models as well as increased product costs to comply with the regulations. In addition, the company projects higher raw-material costs in 2011 and a less favorable sales mix in the Agriculture and Turf division.
With Deere's strong 2010 performance, the company remains well-positioned to capitalize on powerful global economic trends, Allen noted. "Thanks in large part to the dedication and hard work of our employees, dealers and suppliers worldwide, our plans for helping meet the world's growing need for food and infrastructure are well on track and moving ahead at an accelerated rate," he said. "We remain highly confident about the company's future prospects and our ability to deliver significant value to customers and investors."
Equipment Division Performance
Agriculture & Turf. Sales increased 33% for the quarter and 10% for the full year largely due to higher shipment volumes and improved price realization. In addition, sales for the year were affected favorably by currency translation.??Operating profit was $662 million for the quarter and $2.790 billion for the full year, compared with last year's quarterly operating loss of $24 million and annual operating profit of $1.448 billion. For the quarter, operating profit rose primarily due to higher shipment and production volumes and improved price realization, partially offset by higher incentive-compensation expenses and increased raw-material costs. Full-year results showed improvement largely due to higher shipment and production volumes, improved price realization, the favorable effects of foreign exchange and lower raw-material costs. These factors were partially offset by higher postretirement-benefit and incentive-compensation expenses. As cited, last year's results were affected by a goodwill-impairment charge and voluntary employee-separation expenses.
Construction & Forestry. Construction and forestry sales climbed 75% for the quarter and 41% for the full year, resulting in operating profit of $54 million for the quarter and $119 million for the year. Last year the division had operating profit of $2 million for the quarter and an operating loss of $83 million for the year. The quarter benefited from significantly higher shipment and production volumes, partially offset by higher incentive-compensation expenses, increased raw-material costs and higher postretirement-benefit expenses. Full-year results improved mainly due to higher shipment and production volumes, partially offset by an increase in postretirement-benefit and incentive-compensation expenses.
Market Conditions & Outlook
Agriculture & Turf. Worldwide sales of Deere's Agriculture and Turf division are forecast to increase by 7 to 9% for full-year 2011, benefiting from generally favorable global farm conditions. Farmers in most of the company's key markets are experiencing solid levels of income due to strong global demand for agricultural commodities, low grain stocks in relation to use, and high prices for crops such as corn, wheat, soybeans, sugar and cotton.??After increasing in 2010, industry farm-machinery sales in the United States and Canada are forecast to be about flat in 2011 as a result of production limits and transitional issues associated with the broad launch of Interim Tier 4-compliant equipment.??Industry sales in Western Europe are forecast to increase 5 to 10%, while sales in Central Europe and the Commonwealth of Independent States are expected to see moderate gains from the depressed level of 2010. Industry sales in Asia also are forecast to grow moderately.??In South America, industry sales are projected to be flat in 2011 relative to the strong levels of 2010, although Deere's sales in the region are expected to benefit from a broader lineup of recently introduced products.??Industry sales of turf and utility equipment in the United States and Canada are expected to be flat after experiencing some recovery in 2010.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to rise by 25 to 30% for full-year 2011. The increase reflects market conditions that are somewhat improved in relation to the relatively low level of the prior year. In addition, sales to independent rental companies are expected to see further growth. World forestry markets are expected to move significantly higher as a result of improved wood and pulp prices.
Credit. Full-year 2011 net income for Deere's credit operations is forecast to be approximately $360 million. The forecast increase from 2010 primarily is due to growth in the portfolio.
John Deere Capital Corporation
The following is disclosed on behalf of the company's credit subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.
Net income attributable to John Deere Capital Corporation was $96.7 million for the fourth quarter and $319.4 million for the year, compared with $21.2 million and $149.2 million for the respective periods last year. Results were better for the quarter primarily due to a lower provision for credit losses, improved financing spreads, growth in the portfolio and lower losses in construction-equipment operating lease residual values. Full-year results were higher mainly due to improved financing spreads and a lower provision for credit losses.
Net receivables and leases financed by JDCC were $20.854 billion at October 31, 2010, compared with $18.965 billion last year.
Source: Deere & Co.