John Deere Farm Equipment Sales Surge
November 29, 2010 By Dan Piller, DesMoinesRegister.com
Farm equipment sales increased 33 percent in the fourth quarter for Deere & Co., Iowa’s largest manufacturing employer, the company said.
But it will be pressed to achieve a similar gain next year as it retrofits its factories to produce more environmentally friendly engines, it reported.
U.S. sales of its tractors, combines, planters and other equipment will be flat because of production constraints, a Deere spokeswoman said Tuesday.
Deere has 11,862 workers in Iowa. Its farm equipment plants in Ankeny, Ottumwa and Waterloo will continue at full production, but construction equipment plants at Davenport and Dubuque will be closed for two weeks in April or May as the company converts the plants to produce the next-generation engines with emission controls required by new environmental regulations.
Deere laid off workers at those two plants, which employ a combined 2,834 workers, last year amid a slowdown in U.S. construction. But in 2010, construction equipment sales were up 75 percent in the fiscal fourth quarter.
A cash influx to farmers from higher grain prices boosted sales in the quarter. Deere reported a record fourth-quarter profit of $457.2 million, or $1.07 per share, compared with a net loss of $222.8 million, or 53 cents per share, for the 2009 period.
For the fiscal year, Deere earned $1.86 billion, or $4.35 per share, compared with $874 million, or $2.06 per share, last year.
Deere Chief Executive Samuel Allen said: "Although conditions continued to be positive in the U.S. farm sector, and included a highly favorable sales mix of larger equipment, European agricultural markets remained soft. Deere’s construction equipment sales benefited from somewhat stronger overall demand but remained far below normal levels."
Operating profit in the agriculture and turf division was $662 million for the quarter and $2.79 billion for the year, compared with last year’s quarterly operating loss of $24 million and annual operating profit of $1.45 billion.
Global agricultural sales are expected to be up 7 to 9 percent in 2011, while U.S. sales will be flat.
Deere said its credit operations, based in Johnston, earned $96.7 million in the fourth quarter, compared with $21.2 million in the 2009 period, and $319.4 million for the year, compared with $149.2 million for 2009.
The company said of the credit operations: "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."
Deere said it bases its strategy for next year on the assumption that corn will average $4.35 per bushel and soybeans $10.50 per bushel.
Corn and soybeans have risen sharply in the summer and fall, corn from $3.50 to more than $5 per bushel and soybeans from $9 to more than $12 per bushel, on reports of lower harvests, tighter supplies and greater exports.
Deere’s stock has risen from $48 per share earlier this year to $76.23 on Wednesday.
Reaction from Wall Street has been mixed. This week, Morgan Stanley downgraded shares of Deere from overweight to equal weight, saying with the stock price nearing $80, the firm sees less upside for shareholders at the moment.
UBS upgraded the stock to buy from neutral.
(Source: DesMoinesRegister.com)
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