Deere & Co., Moline, Ill., enjoyed its fourth successive year of record results, attributing it mainly to the growth in the global farm economy since results were all weaker in its construction, forestry, commercial, and consumer (C&C) sectors –
all due to the downturn in the U.S. housing market.
Deere reported net income of $1.82 billion ($8.01 per diluted share) on sales of $24.1 billion for the year ending Oct. 31, 2007, versus the prior year’s $1.7 billion ($7.18 per share) on sales of $22.1 billion. Fourth-quarter net income was $422 million ($1.88 per share) on sales of $6.1 billion, up from the year-ago $277 million ($1.20 per share) and $5.1 billion, respectively. Earnings per share figures do not reflect the recently approved two-for-one stock split. The split, in the form of a 100 percent stock dividend on Dec. 3 to holders of record Nov. 26, 2007, was approved by shareholders earlier in November.
Ag equipment sales were up 35 percent for the quarter and 18 percent for the year. Driven by continued strength in the farm sector, worldwide sales of Deere ag equipment is expected to increase 17 percent for 2008. Farm machinery sales to the U.S. and Canada are expected to be up 10-15 percent due to a substantial jump in farm income. Large tractors and combines are expected to pace the sales improvement, while cotton picker sales are expected to be off. Sales into Western Europe are expected to be flat, with greater demand expected from Eastern Europe and Russia. South American sales are expected to be up 10-15 percent, though Deere is concerned over uncertainties over the status of government-backed financing programs.
The commercial and consumer section, which includes Lesco, had an operating loss of $11 million for the fourth quarter, versus the year-ago loss of $3 million. For the year, C&C saw better results with operating profit of $304 million on sales of $4.33 billion, versus the year-ago $221 million and $3.9 billion. C&C sales were up 35 percent for the quarter and 12 percent for the year. Of this, Lesco accounted for 29 percentage points of the quarter’s increase and 9 for the full year. However, higher selling and general administrative costs associated with Lesco impacted profits.
Deere expects C&C equipment sales to be up 10 percent in 2008, including 8 percentage points from a full year of Lesco sales.
Sales in Deere’s forestry and construction sector was off 11 percent in the fourth quarter and 13 percent for the year. Deere expects these to remain under pressure in 2008 with a continuing slump in housing starts.