John Deere's construction and forestry sales increased 19 percent for the third quarter and 8 percent for nine months mainly as a result of higher shipment volumes and price realization. Increased sales for both periods were partially offset by the unfavorable effects of currency translation.
Operating profit was $194 million for the quarter and $420 million for nine months, compared with $107 million and $259 million last year. Quarterly operating profit improved primarily due to higher shipment volumes and price realization, partially offset by a less favorable product mix. Year-to-date results increased mainly due to higher shipment volumes, lower production costs, and lower selling, administrative and general expenses.
Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 10 percent for full-year 2014. The gain reflects further economic recovery and higher housing starts in the U.S. as well as sales increases outside the U.S. and Canada. Global forestry sales are expected to be up for the year due to general economic growth and improved sales in European markets.
Net income attributable to Deere & Company was $850.7 million, or $2.33 per share, for the third quarter ended July 31, compared with $996.5 million, or $2.56 per share, for the same period of 2013. For the first nine months of the year, net income attributable to Deere & Company was $2.513 billion, or $6.79 per share, compared with $2.730 billion, or $6.97 per share, last year.
"Deere's third-quarter performance reflected moderating conditions in the global farm sector, which have negatively affected demand for farm machinery and contributed to lower sales and profits for our agricultural-equipment business," said Samuel R. Allen, chairman and chief executive officer. "At the same time, our construction and forestry and financial services divisions had higher profit, showing the benefit of a broad-based business lineup. Overall, it was a quarter of solid performance, with income exceeded only by last year's record for the corresponding period."
Summary of Operations
Deere's equipment operations reported operating profit of $1.135 billion for the quarter and $3.387 billion for nine months, compared with $1.443 billion and $3.943 billion last year. The decline for the quarter was due primarily to the impact of lower shipment volumes, higher production costs primarily related to engine-emission requirements, and the unfavorable effects of foreign currency exchange. The year-to-date decline was largely due to the impact of lower shipment volumes, unfavorable foreign-exchange effects, higher production costs, and a less favorable product mix. Declines for both periods were partially offset by price realization.
Net income of the company's equipment operations was $680 million for the third quarter and $2.061 billion for the first nine months, compared with $846 million and $2.324 billion in 2013. In addition to the operating factors mentioned above, a lower effective tax rate benefited both quarterly and year-to-date results.
Company equipment sales are projected to decrease about 6 percent for fiscal 2014 and to be down about 8 percent for the fourth quarter compared with the year-ago periods. Included is an unfavorable currency-translation effect of about 1 percent for the year. For 2014, net income attributable to Deere & Company is anticipated to be about $3.1 billion.
Although Deere's full-year earnings are forecast to be somewhat lower than in 2013, Allen said the company is looking forward to completing another successful year and continues to believe the longer-term outlook for its businesses holds considerable promise. "For the balance of the year, the company will be scaling back production in line with demand for our agricultural products," he stated. "These actions illustrate our commitment to responding with speed and decisiveness to changes in market conditions."
Allen pointed out the company's plans to expand its market presence throughout the world are on track and continuing to move ahead. "We remain confident the company is well-positioned to earn solid returns throughout the business cycle and to realize substantial benefits from the world's growing need for food, shelter and infrastructure well into the future," he said.
(Read the entire release on John Deere's 2014 Q3 earnings...)