Deere announces final earnings for fiscal 2016

On Nov. 23, 2016, Deere & Company reported the net income attributable to the Moline, Ill.-based company was $285.3 million, or $0.90 per share, for the fourth quarter ended Oct. 31, 2016, compared with $351.2 million, or $1.08 per share, for the same period of 2015. For fiscal 2016, net income attributable to Deere & Company was $1.524 billion, or $4.81 per share, compared with $1.940 billion, or $5.77 per share, in 2015.

Worldwide net sales and revenues decreased 3 percent, to $6.520 billion, for the fourth quarter and were down 8 percent, to $26.644 billion, for the full year. Net sales of the equipment operations were $5.650 billion for the quarter and $23.387 billion for the year, compared with respective totals of $5.932 billion and $25.775 billion in 2015.

“John Deere has completed another successful year in spite of continuing weakness in the global agricultural and construction equipment sectors,” said Samuel R. Allen, Deere & Company chairman and chief executive officer. “The company in 2016 had one of its 10-best years in both sales and earnings, a noteworthy achievement in light of the difficult business climate. Deere’s performance benefited from the adept execution of its operating plans and disciplined cost management, as well as the impact of a broad product portfolio. As a result, the company has remained well positioned to serve its customers while making continued investments in quality and innovation that we’re confident will be supportive of growth in the future.”

Summary of operations

Net sales of the worldwide equipment operations declined 5 percent for the quarter and 9 percent for the full year compared with the same periods in 2015. Sales included price realization of 3 percent for the quarter and 2 percent for the full year. Additionally, sales included a favorable currency-translation effect of 1 percent for the quarter and an unfavorable currency translation effect of 2 percent for the full year. Equipment net sales in the United States and Canada decreased 14 percent for the quarter and 13 percent for the full year. Outside the U.S. and Canada, net sales increased 11 percent for the quarter and were down 3 percent for the full year, with a favorable currency-translation effect of 3 percent for the quarter and an unfavorable currency-translation effect of 4 percent for the year.

Deere’s equipment operations reported operating profit of $354 million for the quarter and $1.880 billion for the full year, compared with $335 million and $2.177 billion in 2015. The improvement for the quarter was primarily driven by price realization, partially offset by lower shipment volumes, an impairment charge for international construction and forestry operations, and higher production costs. Results were down for the year primarily on account of reduced shipment volumes, the unfavorable effects of foreign-currency exchange and a less-favorable product mix, partially offset by price realization, lower production costs and lower selling, administrative and general expenses. Full-year results also benefited from a gain on the sale of a partial interest in the unconsolidated affiliate SiteOne Landscape Supply, Inc.

Net income of the company’s equipment operations was $185 million for the fourth quarter and $1.058 billion for the year, compared with $200 million and $1.308 billion for the corresponding periods in 2015. In addition to the aforementioned operating factors, a higher effective tax rate in 2016 reduced both quarterly and annual results.

Financial services reported net income attributable to Deere & Company of $109.8 million for the quarter and $467.6 million for the year compared with $153.0 million and $632.9 million in 2015. The decline for both periods was primarily due to less-favorable financing spreads, higher losses on lease residual values and a higher provision for credit losses. Additionally, full-year results in 2015 benefited from a gain on the sale of the crop insurance business.

Company outlook & summary

Company equipment sales are projected to decrease about 1 percent for fiscal 2017 and be down about 4 percent for the first quarter compared with the same periods of 2016. Included in the forecast is a positive foreign-currency translation effect of about 1 percent for the year and about 2 percent for the first quarter. Net sales and revenues are projected to decrease about 1 percent for fiscal 2017, while net income attributable to Deere & Company is anticipated to be about $1.4 billion.

During the fourth quarter of 2016, the company announced voluntary employee-separation programs as part of its effort to reduce operating costs. The expense of these programs is recorded in the period in which employees accept their separation offer. Total pretax expenses related to the programs are estimated to be $116 million, of which $11 million was recorded in the fourth quarter of 2016, and $105 million will be recorded in the first quarter of 2017. Savings from the separation programs are expected to be approximately $75 million in 2017.

“Our forecast continues to represent a standard of performance that is considerably higher than in earlier downturns,” Allen said. “This illustrates our ongoing success developing a more durable business model and a wider range of revenue sources. At the same time, we are driving further efficiency gains and have confidence we can deliver structural cost reductions of at least $500 million by the end of 2018.”

Allen reaffirmed his view that the future is quite promising for the company and its stakeholders. “John Deere remains in a strong position to carry out its growth plans and attract new customers throughout the world,” he said. “Thanks to the commitment of employees, dealers and suppliers, our plans for helping meet the world’s increasing need for food, shelter and infrastructure are making solid progress. We remain confident in the company’s present direction and believe Deere will provide significant value to its customers and investors in the future.”

For more details, visit www.deere.com.

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