Deere Sees Pandemic Pain Deepening -- WSJ
By Bob Tita
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 23, 2020).
Deere & Co. said the coronavirus pandemic will intensify a
yearslong slump in agricultural equipment sales, as farmers further
reduce spending amid lower demand for their crops and
Deere on Friday reset its profit forecast for this year at a
significantly lower range after tossing out its previous guidance
in March as the pandemic disrupted its farm-and-construction
"We are still operating in a very uncertain environment," Deere
finance chief Ryan Campbell said during a conference call.
The Moline, Ill.-based company reported better-than-expected
equipment sales and profit for the latest quarter. Its share
initially rose Friday, but finished the session down 1.5% at
Deere said it expects world-wide sales of its farm equipment to
contract by 10% to 15% this year. In February, it had forecast a
decline of 5% to 10%.
The company has been cutting expenses since last fall by
offering a voluntary employee layoff program and shrinking
inventories of equipment. The U.S. machinery market is stuck in a
six-year slump caused by lower grain prices and trade tensions.
Farmers are now facing increased pressure as the pandemic damps
demand for farm products and disrupts the meat industry. With
schools and restaurants in the U.S. closed for more than a month,
farmers have plowed under vegetables, dumped millions of gallons of
milk and euthanized livestock. Dozens of meat-processing plants
have been idled in recent weeks as the coronavirus hit their
workforces hard, forcing slaughtering operations to cease.
Deere's U.S. dealers and assembly plants, deemed essential for
food production, have remained open during state lockdowns. But the
company said its operations have endured interrupted deliveries
from suppliers, higher costs for shipping and temporary plant
closures to improve workers' safety.
Deere has kept busy filling orders for farm equipment that were
placed months ago. The company said it has nearly a full order book
for large tractors and harvesting combines for this year. Favorable
weather this spring allowed farmers to plant most of the corn crop
already and about half of the soybeans.
Deere said it expects rising exports of farm products later this
year to boost farmers' confidence. Under a new trade deal that the
U.S. and China negotiated last year, China agreed to lift its
tariffs on U.S. farm goods and pledged to purchase $36.5 billion
worth of U.S. farm products in 2020.
For Deere's fiscal second quarter, which ended May 3, sales of
its farm and landscaping equipment fell 18% from a year earlier and
operating income plunged 22%. Sales of Deere's construction
equipment fell 25%. Operating profit plunged 72% from lower
shipments and shrinking margins.
Income from Deere's financing business decreased by 56% during
the quarter as the company reported rising costs and losses on the
value of leased equipment returned to the company.
Deere reported net income of $665.8 million, or $2.11 a share,
compared with $1.13 billion, or $3.52 a share, in the year-earlier
quarter. Total equipment sales fell 20% to $8.22 billion. Deere
expects net income this year of $1.6 billion to $2 billion. The
company started the year with an income forecast of $2.7 billion to
Write to Bob Tita at firstname.lastname@example.org
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