John Deere Forecasts Construction Sales Declines Due to Weak North American Conditions

John Deere's construction and forestry sales decreased 16% for the second quarter and 20% for six months mainly as a result of lower shipment volumes and higher sales-incentive costs. Deere's worldwide sales of construction and forestry equipment are forecast to be down about 13% for 2016, including a negative currency-translation effect of about 1%. The forecast decline in sales largely reflects the impact of weak conditions in North America.

The company's worldwide net sales and revenues decreased 4% for the second quarter and declined 8% for six months. Net sales of the equipment operations were $7.107 billion for the quarter and $11.876 billion for the first six months, compared with $7.399 billion and $13.004 billion for the periods last year.

"John Deere's second-quarter performance reflected the continuing impact of the downturn in the global farm economy and further weakness in the construction equipment sector," said Samuel R. Allen, chairman and chief executive officer. "

The construction and forestry division's operating profit was $74 million for the quarter (nearly 40% less compared to $189 million from last year) and $143 million for six months (nearly 43% less than last year's $335 million). Operating profit decreased for the quarter mainly due to lower shipment volumes, higher sales-incentive costs and a less favorable product mix, partially offset by lower production costs and lower selling, administrative and general expenses. Six-month results decreased primarily due to lower shipment volumes and higher sales-incentive costs, partially offset by lower selling, administrative and general expenses and lower production costs.

(view John Deere's complete Q2 earnings report...)