Deere & Company announced February 20 that its net income was $386.8 million, or $1.12 per share, for the first quarter ended Jan. 31, 2015, compared with $681.1 million, or $1.81 per share, for the same period last year.
Worldwide net sales and revenues for the first quarter decreased 17 percent, to $6.383 billion, compared with $7.654 billion last year. Net sales of the equipment operations were $5.605 billion for the quarter compared with $6.949 billion a year ago.
“Deere’s first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income,” said Samuel R. Allen, chairman and chief executive officer, Deere & Company. “At the same time, our construction and forestry and financial services divisions had higher profits, showing the benefit of a well-rounded business lineup. Deere’s results also demonstrated the progress we’ve made creating a more flexible, responsive cost structure.”
Summary of Operations
Net sales of the worldwide equipment operations declined 19 percent for the quarter. Sales included price realization of 1 percent and an unfavorable currency-translation effect of 2 percent. Equipment net sales in the United States and Canada decreased 14 percent. Outside the U.S. and Canada, net sales were down 28 percent, with an unfavorable currency-translation effect of 5 percent.
Deere’s equipment operations reported operating profit of $414 million for the quarter, compared with $891 million last year. The decline for the quarter was due primarily to lower shipment volumes and the impact of a less favorable product mix, partially offset by lower selling, administrative and general expenses and price realization. Net income of the company’s equipment operations was $241 million for the quarter, compared with $543 million in 2014.
Financial services reported net income attributable to Deere & Company of $156.8 million for the quarter compared with $142.2 million last year. The improvement was primarily due to growth in the credit portfolio and higher insurance margins, partially offset by less favorable financing spreads. Last year’s results also benefited from a more favorable effective tax rate.
Company Outlook & Summary
Company equipment sales are projected to decrease about 17 percent for fiscal 2015 and be down about 19 percent for the second quarter compared with year-ago periods. Included in the forecast is a negative currency-translation effect of about 3 percent for the full year and 4 percent for the second quarter. For fiscal 2015, net income attributable to Deere & Company is anticipated to be about $1.8 billion.
“Even with a continued pullback in the agricultural sector, John Deere expects to remain solidly profitable in 2015,” Allen said. “Our forecast reflects a level of results much better than we’ve experienced in previous downturns. This illustrates our success establishing a wider range of revenue sources and a more durable business model.”
Longer term, the company’s future continues to hold great promise for customers and investors, Allen said. “Global population growth and rising living standards are powerful trends largely unaffected by periodic swings in the farm economy,” he said. “At the same time, Deere’s plans for reaching out to new markets and customer groups are making progress. For these reasons, we remain confident about the company’s ability to deliver solid returns throughout the business cycle and to benefit from the world’s need for productive equipment in the future.”
For further specifics about John Deere’s first-quarter earnings, visit www.deere.com.