DE Deere and Co

By Bob Tita 

Deere & Co. raised sales forecasts for its farm and construction equipment this year.

The machinery maker posted a fiscal first-quarter loss Friday from charges related to new federal tax legislation and lower-than-expected equipment sales caused by supply and delivery bottlenecks. But Deere said demand for farm and construction machinery is improving, and raised its forecasts for sales this year.

"Deere has continued to experience strong increases in demand for its products as conditions in key markets show further improvement," said Chief Executive Sam Allen.

Despite another bumper harvest last year that kept crop prices low and farmers' incomes under pressure, rising sales of high-horsepower equipment lately show that some farmers are buying again after a long slump.

Sales of Deere's green-and-yellow farm and landscaping machinery rose 18% during the first quarter to $4.2 billion, while profit from the business soared 78% to $387 million. Deere expects its world-wide farm-equipment sales to increase about 15% this year, up from a 9% increase anticipated in November.

Deere were near flat in early trading at $166.23.

The Moline, Ill.-based company anticipates overall sales of farm and construction equipment will rise 29% in the fiscal year through Oct. 2018, up from a 22% forecast in November. The sales growth is being aided by the addition of German road-paving equipment manufacturer Wirtgen Group, which Deere bought last year for $5 billion.

The Wirtgen acquisition is also expected to add 56% to sales in Deere's construction unit this year. Deere expects Wirtgen to expand the reach of its construction equipment business beyond North America and help offset sales in the cyclical farming business.

Deere's construction-machinery business continued to benefit from resurgent demand from the North American construction machinery market. The construction business reported a first-quarter operating profit of $217 million, up 30% from last year. Sales rose 57% to $1.7 billion.

Deere reported tax-related charges in the quarter of about $965 million. The company wrote-down the value of its net deferred tax assets as result of the new, lower federal tax rate for corporate income. The company also recorded a mandatory charge for the repatriation of $261.6 million of previously untaxed earnings held overseas.

Overall for the first quarter, Deere reported a loss of $535.1 million, or $1.66 a share, compared with $$193.8 million profit, or 61 cents a share, a year earlier. Excluding the tax charges, the company earned $1.31 a share. Analysts expected $1.20 a share.

Quarterly equipment sales rose 27% to $6 billion, but analysts were expecting $6.42 billion.

Write to Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

February 16, 2018 09:58 ET (14:58 GMT)

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