In today’s newscast we look at John Deere’s second quarter and Cervus’ first quarter earnings reports, a significant merger between two specialty equipment dealerships, as well as several other “Dealers on the Move,” the impact of declining farmland values and, from the Technology Corner, recent strides in ISOBUS conformance testing.
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I’m assistant editor Jaime Elftman, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
The company reported worldwide net sales and revenues decreased 18%, to $8.2 billion, for the second quarter. Net sales of its equipment operations were down 20% to $7.4 billion. Overall profits fell by nearly 30% to $690 million vs. $981 million a year ago.
Worldwide sales of agricultural and turf equipment for the period declined by 25%, to $5.7 billion. Operating profit from ag equipment sales was down 48%.
Deere is projecting a decrease about 19% percent for its full fiscal year 2015 and 17% for the third quarter. The company’s worldwide sales of agriculture and turf equipment are forecast to decrease by 24% for fiscal year 2015. In the U.S. and Canada, ag equipment sales are expected to be down 25% for all of 2015.
AFN: $54.48 +4.21
Specialty equipment dealers Brokaw Supply and Riggins Ag Equipment have finalized a merger. The new company, Ag Solutions Group, will specialize in planting, sprayer and fertilizer application equipment as well as a number of other specialty equipment lines.
Dave Nelson, president of Brokaw Supply, says the two companies complement each other’s skillsets and expertise and are stronger together than they are independently.
Together, the new dealer group will have 6 locations in the 5-state region of Missouri, Iowa, Minnesota, Nebraska and Kansas, to form one of the largest, non-major ag equipment dealerships in the Midwest.
Each dealership will keep its name but they are introducing new logos that incorporate Ag Solutions Group. Nelson explains they did not want to lose the identity that customers recognize.
“If you think of our name, Ag Solutions Group. Ag does not mean just necessarily agriculture but it also means agronomic solutions. So when you think of agronomic solutions, you think of fertilizer or chemicals. We want to give new meaning to that, we’re going to be able to provide you with the tools, the equipment, the precision application equipment for your farming operation or your retail fertilizer operation. So you have Ag Solutions Group. It’s a group of us people. It’s Riggins, it’s Brokaw, they’ve got a store down in Concordia, Mo., called Concordia Implement that is more of a shortline farm equipment dealership. So we’re a group of people working together and because it’s a group some day there may be somebody else who wants to join us to come into our group. So we’re a group of people helping people with their agronomic and agriculture solutions.”
Other dealers on the move this week include JD Equipment, Moodie Implement, Frontline Ag, Mazergroup and Southeastern Farm Equipment.
John Deere dealer, JD Equipment opened a new location in Hilliard, Ohio, and closed its previous Hilliard location. Location and size were key factors in the decision to move, said the company. The new facility features a larger showroom and expanded displays.
Moodie Implement and Frontline Ag announced the merger of the two Montana John Deere dealerships. The combined dealerships will now be known as Frontline Ag Solutions. The integrated company will retain all 10 of the current locations of both dealerships.
Mazergroup has announced plans to purchase Southeastern Farm Equipment. The deal, expected to be finalized July 1, will mean that Mazergroup will operate all existing New Holland dealerships in Manitoba. It is now the largest New Holland dealership complex in North America with 14 locations.
Farmland values in the first quarter were down 2.5% from a year ago, according to the latest survey from the Federal Reserve Bank of St. Louis. This is the largest percentage decline in the survey’s history.
The Kansas City Federal Reserve Bank also reported that irrigated cropland values declined slightly below year-ago levels for the first time in 5 years. The value of non irrigated land was down as well. Survey respondents expect values to decline further over the next 3 months.
Low crop prices placed added stress on net farm incomes and contributed to weaker credit conditions in the first quarter, according to the Kansas City Fed. As farm income fell, cropland values moderated and more producers depended on financing to cover operating expenses, the branch says.
The Chicago Federal Reserve Bank reported there was no year-over-year change in land values for the region. However, there were some key differences among states. For example, Wisconsin values were up 8% while Iowa was down 6%.
The ISOBUS 11783 standard was created about 15 years ago so different brands of tractors, implements and terminals could work together seamlessly and automatically. As many dealers know, designating that path has been easier than walking it.
To iron out the wrinkles in these compatibility issues, the Agricultural Industry Electronics Foundation holds two annual testing events known as Plugfests, one in Europe and one in the U.S.
These international gatherings allow manufacturers to get an ISOBUS conformance test on newer equipment in hopes of gaining AEF certification.
At this year’s AEF Plugfest in Lincoln, Nebraska, manufacturers got a look at the compatibility database and ISOBUS check tool, designed by the Germany-based software developer, Sontheim. The check tool, which can eventually be used by dealers’ precision technicians, can confirm the level of functionality between two given pieces of equipment.
We caught up with Juan Aguilar, an application engineer with Sontheim, at this year’s Plugfest where he shared his outlook on how the database platform may lead to widespread ag equipment compatibility.
Available since February, the database has yet to see widespread use, but that is likely to change. Around 100 manufacturers and 100 dealers, mostly in Europe, are currently using the resource, but the AEF will be pushing for closer to 3,000 dealers by next year.
Cervus Equipment, John Deere’s largest Canadian dealer of ag equipment, reported its first quarter revenues increased $71.5 million, or 43%, compared to the same period of 2014. However, on a same-store basis, revenues were down $11 million or 7% vs. the first quarter of 2014. Gross profits were up by $11.2 million compared to the three months ended March 31, 2014.
For the agriculture segment, new equipment revenue was up 22%, but on a same-store basis, it was down 14%. Used equipment revenue for the quarter was up 69%, or 28% for same-store revenues vs. the same quarter of 2014.
In its earnings report, the company said, “Parts revenue increased 21% on targeted aftermarket account management, while total equipment revenues remained comparable although shifting in favor of used equipment. The strengthening of the U.S. dollar has increased the price of new equipment, contributing to the value proposition of used equipment and supporting used profit margin.”
As of March 31, 2015, Cervus’ inventories had increased by $40.2 million to $364.8 million when compared to $324.6 million on Dec. 31, 2014. Of the increased invemtory, $28 million was new equipment, $7.6 million in used and $3.7 million in parts. Overall inventory increased by $142 million when compared to March 31, 2014. $95.2 million of higher inventory resulted from acquisitions made in the last several months.
Hiram Moore and John Hascall built the first successful grain combined harvester-thresher in 1834. It took 12 horses to work the machine through the field. At the time, it was calculated that the combine cut the cost of operation per acre down from $3 to $0.82 per acre. In 1842, Moore constructed the second iteration of the machine, which required 16 horses to pull. It threshed, cleaned and bagged 25 acres of wheat per day.
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