Deere Sees Strong Equipment Demand This Year -- Update
February 16 2018 - 12:56PM
Dow Jones News
By Bob Tita
Deere & Co. raised sales forecasts for its farm and
construction equipment this year, even as supply and delivery
bottlenecks crimped quarterly sales.
The machinery maker reported a fiscal first-quarter loss on
Friday from charges related to new federal tax legislation and
lower than expected equipment sales. 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.
Deere's stock rose 3.6% to $172.98 a share.
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. The company said it has encountered difficulties
accelerating production from the low volumes of recent years.
"We are working with our suppliers and logistics providers as
they adjust to the present conditions," said Chief Financial
Officer Rajesh Kalathur. "It takes time for them to actually put
the people in place and get them trained and have them
working."
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 15% this year, up from
a 9% increase anticipated in November.
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 also continued to
benefit from resurgent demand from the North American construction
machinery market.
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 a result of the lower federal tax rate for corporate
income. The company also recorded a charge of $261.6 million for
the repatriation 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.
Austen Hufford contributed to this article
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
February 16, 2018 12:41 ET (17:41 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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