For the first nine months of the year, Deere & Company's net income grew 12.5 percent to $2.7 billion, or $6.97 per share, compared with the first nine months of 2012. Worldwide net sales increased 4 percent to $10.0 billion for the third quarter, reflecting 4.5-percent growth in net sales from equipment operations to $9.3 billion.
Ag & Turf-division sales increased 8 percent for the quarter, fueling a 32-percent increase in the division's operating profit to $1.3 billion. Construction & Forestry-division sales decreased 11 percent, and the division's operating profit fell 5 percent to $107 million.
"John Deere is well on the road to another year of impressive performance after reporting record third-quarter results," said Samuel R. Allen, chairman and chief executive officer. Sales and income for the period were higher than in any prior third quarter, he pointed out. "Deere's success is a reflection of considerable strength in the farm sector, especially in North and South America. We also are making further progress executing our wide-ranging operating and marketing plans, which call for expanding our global market presence while keeping a close watch on costs and assets."
Deere equipment sales are projected to be up about 5 percent for fiscal 2013 despite a decrease of about 5 percent for the fourth quarter compared with the year-ago periods. For the full year, net income attributable to Deere & Company is anticipated to be about $3.45 billion, which is about 4.5 percent below the full-year forecast issued in the previous quarter.
"Last year's fourth-quarter sales were particularly strong, in part because our factories were running at a high rate to catch up with customer orders," said Allen. "Even with this difficult comparison, our financial guidance implies a healthy level of income for the coming quarter and a third consecutive year of record results.
"We continue to believe our investment in new products and capacity will allow Deere to be the provider of choice for a growing global customer base in the years ahead," Allen added. "In our view, broad trends based on a growing, more affluent, and increasingly mobile population have ample staying power and should help the company deliver substantial value to its customers, investors and other stakeholders in the future."
Equipment Division Performance
Agriculture & Turf. Sales increased 8 percent for the quarter and 12 percent for nine months largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation.
Operating profit was $1.3 billion for the quarter and $3.7 billion year to date, compared with $1.0 billion and $3.0 billion, respectively, last year. Improvement for the quarter was driven primarily by the impact of price realization and higher shipment volumes. Also affecting third-quarter results was an impairment charge for long-lived assets related to John Deere Water operations.
Year-to-date results improved due primarily to higher shipment volumes and price realization. These factors were partially offset by increases in production costs, selling, administrative and general expenses, warranty costs, and unfavorable effects of foreign exchange.
Construction & Forestry. Construction and forestry sales decreased 11 percent for the quarter and 8 percent for nine months mainly as a result of lower shipment volumes. Operating profit was $107 million for the quarter and $259 million for nine months, compared with $113 million and $356 million last year.
The quarterly operating-profit decline was primarily because of decreased shipment volumes, offset by price realization and lower research and development expenses. Nine-month results were lower mainly due to reduced shipment volumes, increases in production costs, an unfavorable product mix and higher selling, administrative and general expenses, partially offset by price realization.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to increase by about 7 percent for full-year 2013, including a negative currency translation impact of about 1 percent. Relatively high commodity prices and strong farm incomes are continuing to support a favorable level of demand for farm machinery in much of the world. Deere's sales are further benefiting from global expansion and advanced new products.
Industry sales for agricultural machinery in the U.S. and Canada are forecast to be up about 5 percent for the year, reflecting continued strength in demand for large equipment such as high-horsepower tractors and combines.
Full-year industry sales in the EU28 are forecast to be down about 5 percent due to weakness in the overall economy and soft conditions in the U.K. farm sector. In South America, industry sales are projected to be up about 20 percent as a result of strong market conditions and the impact of government-financing programs in Brazil. Industry sales in the Commonwealth of Independent States are expected to be moderately lower than in 2012, while Asian sales are projected to be little-changed.
In the U.S. and Canada, industry sales of turf and utility equipment are expected to be up about 5 percent for 2013, reflecting improved market conditions.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to decrease by about 8 percent for 2013. The decline mostly reflects a cautious outlook for U.S. economic growth. Global forestry sales are expected to be higher for the year as improved U.S. demand more than offsets weakness in European markets.
Financial Services. Full-year 2013 net income attributable to Deere & Company for the financial services operations is expected to be approximately $560 million. The forecast improvement over last year is due primarily to expected growth in the credit portfolio and lower crop insurance claims, partially offset by higher selling, administrative and general expenses.