Business & Policy
Deere’s second quarter profits drop 38 percent
By Associated Press/Yahoo Finance
The news from Deere & Company is not good as the company reported second quarter earnings were down 38 percent, a result of cuts in spending by farmers, consumers and construction companies.
May 20, 2009
by Daniel Lovering
Pittsburgh — Deere & Co. on Wednesday posted a 38 percent drop in second-quarter profit as farmers and other customers cut spending on tractors, mowers and construction equipment. The world's largest farm equipment maker slashed its profit forecast for the second time this year.
Despite the poor outlook, shares rose as investors seemed pleased with the company's cost cutting and hopes for increased farm spending.
Sales of Deere's green-and-yellow equipment slid 17 percent, sapped by a global slowdown that has dampened construction and dragged down crop prices. The sharpest sales declines occurred outside the United States and Canada, where Deere has expanded quickly in recent years. Deere said market conditions remain uncertain.
"Clearly, operations dependent on construction activity and consumer spending are feeling the full impact of the sharp downturn," Robert Lane, Deere's chairman and chief executive officer, said in a statement.
Farmers have grown cautious about buying new equipment as prices for corn, wheat and other crops have fallen from record levels last year. Costs of fertilizer and fuel, meanwhile, remain relatively high. And the global credit crunch has made it more difficult to get loans.
The problems in Deere's agriculture markets have compounded the pain of a construction slump and a U.S. recession that has stifled spending on products like lawn care equipment.
As a result, the Moline, Ill.-based company cut its 2009 net income forecast to $1.1 billion, down from $1.5 billion expected in February and almost $2 billion predicted late last year.
It expects a 19 percent drop in equipment sales to contribute to the decline, with farm machinery sales flat or slightly down in North America, down 10 to 15 percent in western Europe and sharply lower in central Europe. Farm machinery sales in South America, where farmers have struggled with a drought, are seen plunging 20 to 30 percent.
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