Equipment Division Performance
Agriculture & Turf. Sales increased 16 percent for the quarter largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. Operating profit was $766 million compared with $574 million for the quarter last year. The improvement was primarily due to higher shipment volumes and price realization. These factors were partially offset by increases in selling, administrative and general expenses, warranty costs, production costs and research and development expenses.
Construction & Forestry. Construction and forestry sales decreased 7 percent. Operating profit for the quarter was $71 million compared with $124 million a year ago. The reduced operating profit was primarily due to lower shipment volumes. In addition, higher production costs, an unfavorable product mix, as well as increases in research and development and selling, administrative and general expenses were offset by price realization.
Market Conditions & Outlook
Agriculture & Turf. Worldwide sales of agriculture and turf equipment are forecast to increase by about 6 percent for full-year 2013. Relatively high commodity prices and strong farm incomes are expected to continue supporting a favorable level of demand for farm machinery during the year. Deere's sales are expected to see further benefit from global expansion and a number of advanced new products.
Industry sales for agricultural machinery in the U.S. and Canada are forecast to be flat to up 5 percent in relation to last year's healthy levels. Caution in the U.S. livestock sector is expected to partly offset continued strength in demand for large equipment such as high-horsepower tractors and combines.
Full-year industry sales in the EU27 are forecast to be down about 5 percent due to weakness in the overall economy and last year's poor harvest in the U.K. In South America, industry sales are projected to be up 10 to 15 percent as a result of strong market conditions in Brazil. Industry sales in the Commonwealth of Independent States are expected to be down slightly from 2012, while Asian sales are projected to be slightly higher due to some strengthening in the Chinese economy.
In the U.S. and Canada, industry sales of turf and utility equipment are expected to be about flat for 2013, reflecting a continuation of cautious consumer sentiment. Deere's sales are expected to increase more than the industry due to the impact of new products.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 3 percent for 2013. The increase reflects a cautious outlook for U.S. economic growth, higher international sales of construction equipment, and flat sales in world forestry markets. In the forestry sector, further weakness in European markets is expected to offset higher U.S. demand.
Financial Services. Full-year 2013 net income attributable to Deere & Company for the financial services operations is expected to be approximately $540 million. The forecast improvement is primarily due to expected growth in the credit portfolio and lower crop insurance claims. These factors are projected to be partially offset by an increase in the provision for credit losses. Though higher than in 2012, the provision is anticipated to remain below its historical average.
John Deere Capital Corporation
The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.