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SERVICE DEALER BUSINESS QUARTERLY Published April, June, September and December 2013
DEERE UP, BUT CAUTIOUS Performance increase but trims forecast
John Deere’s second-quarter earnings rose 2.7%, but the company trimmed its sales outlook for the year amid concerns that cool, wet weather in the U.S. will hamper this year's farm crop and hold down demand for farm machinery.
Deere beat expectations for the quarter, but analysts widely expected the company to raise its sales and profit forecasts for 2013. Instead, the company reduced its sales growth projection to 5% from 6% in February.
It said weather conditions, deteriorating demand for construction equipment and a sluggish global financial environment have caused it to become more cautious about the company's performance this year.
"Cool, wet weather in North America has delayed crop planting, slowed construction activity and hurt sales of turf-care equipment," Chairman and Chief Executive Samuel Allen said in a written statement on Wednesday.
High prices for farm commodities have fueled a prolonged stretch of elevated demand for farm equipment, as farmers channeled their rising incomes into equipment purchases. Retail sales volumes of tractors and combines in the U.S. and Canada rose 11% during the first four months of 2013, according to the Association of Equipment Manufacturers. Equipment sales volumes were up 7.8% in April alone.
Deere said it expects industrywide sales of farm equipment in the U.S. and Canada to be up about 5% this year from 2012, a slight improvement from its earlier forecast that sales would be flat to up 5%.
During Deere's second quarter, its global sales of farm machinery and turf equipment climbed 12% from the previous year to $8.69 billion. Operating profit from farm machinery grew 13% to $1.58 billion, driven by higher sales volumes and price increases. The company said it expects farm equipment sales this year to increase about 7% over 2012, up from a 6% increase forecast in February.
But tumbling sales of construction equipment are undermining the company's strong farm machinery business. Construction machinery sales sank 6% during the second quarter to $1.57 billion.
