Farm machine maker Deere & Co. (DE) reported Wednesday a loss for the fourth quarter compared to a profit last year, hurt by by dwindling equipment sales and a big writedown.
However, excluding the unusual items, the bellwether of the US agricultural sector would have been profitable in the fourth quarter.
The global economic crisis has led to a decline in demand for Deere's products, especially in farming and construction.
Equipment net sales fell 30%, yet beat the market projections. Further, the company projected a 10% decline in first-quarter net sales, and a 1% decrease in net sales for the full year 2010.
In a statement, president and chief executive officer, Samuel Allen said, "In the face of intense global economic pressure, John Deere has completed a solidly profitable year and maintained its strong financial condition. All our businesses are benefiting from the consistent execution of plans to keep a tight rein on costs and inventories. In addition, Deere has made further progress extending its competitive position through a relentless focus on customers and a steady investment in new projects, products and geographies."
Fourth Quarter Results
The Moline, Illinois-based company reported a net loss of $222.8 million or $0.53 per share, compared to net income of $345.0 million or $0.81 per share in the prior-year quarter.
The results for the latest quarter include after-tax charges of $321.8 million or $0.76 per share related to goodwill impairment and voluntary and voluntary employee-separation expenses. Excluding the charge, net income for the latest quarter was $99.0 million or $0.23 per share.
On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.03 per share for the fourth quarter. Analysts' estimates typically exclude special items.
While announcing the third-quarter results back in August, Deere said its fourth-quarter results would be affected by significant production cutbacks that are being made in line with retail demand. Voluntary employee separations related to the new organizational structure are expected to result in pretax charges of about $85 million in the fourth quarter, the company had noted. Deere further projected equipment net sales to be down about 34% for the fourth quarter.
A month later, Deere said it would take a $300 million impairment charge in the fourth quarter related to reduction in the value of the John Deere Landscapes reporting unit due to weak economic conditions.
Deere's worldwide net sales and revenues for the fourth quarter dropped 28% to $5.33 billion from $7.40 billion in the same quarter last year. Net sales of the equipment operations totaled $4.73 billion, down 30% from prior year's net sales of $6.73 billion, but topped thirteen Wall Street analysts' consensus estimate of $4.44 billion.
Net sales for the latest quarter include a favorable currency-translation effect of 1%, and a price realization of 3%.
Peer Performance
Among Deere's peers, Peoria, Illinois-based Caterpillar Inc. (CAT) reported a 53% drop in profit for the third quarter, hurt by lower machinery and engine sales. Net income was $404 million or $0.64 per share, a sharp decline from $868 million or $1.39 per share in the year-ago quarter. Total quarterly sales and revenues dropped 44% to $7.30 billion from $12.98 billion last year.
Segmental Details
Equipment sales outside the United States and Canada were down 35% to $1.82 billion from $2.79 billion in the prior-year quarter, The latest quarter includes a favorable currency-translation effect of 1%. Operating loss was $9 million, compared to operating profit of $170 million in the year-ago quarter. Equipment net sales in the U.S. and Canada declined 26%.
Equipment sales operations reported an operating loss of $22 million for the quarter, compared to operating profit of $549 million in the year-ago quarter. Equipment operations reported a net loss of $201 million for the quarter, compared to net income of $268 million in the prior-year quarter.
Under the equipment division, agriculture and turf net sales dropped 26% year-over-year to $4.07 billion, largely due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by improved price realization. Agriculture and turf operating loss was $24 million, compared to operating profit of $460 million in the year-ago quarter.
Also, construction and forestry net sales dropped 47% from last year to $661 million. Construction and forestry recorded an operating income of $2 million, down 98% from $89 million in the prior-year quarter.
Financial services reported a net loss of $15.3 million for the quarter, compared to net income of $69.9 million in the comparable quarter a year ago, primarily due to the reversal and deferral of wind energy tax credits eligible for cash grants and a higher provision for credit losses.
Credit revenues for the quarter declined 11% to $497 million from $557 million in the same quarter last year. Credit operating income plunged 83% year-over-year to $17 million from $102 million.
Other revenues totaled $111 million, up 1% from $110 in the prior-year quarter.
John Deere Capital Corp., the credit subsidiary of Deere, reported fourth-quarter net income of $21.2 million, lower than $57.7 million in the year-ago quarter, primarily reflecting higher provision for credit losses, higher losses on residual values for construction-equipment operating leases, and lower commissions from crop insurance, partially offset by a lower effective tax rate.
Other Metrics
Total quarterly operating profit for the fourth quarter plunged to to $6 million from the prior-year quarter's $655 million. Interest, corporate expenses and income taxes for the quarter totaled $229 million, down 26% from $310 million in the year-ago quarter.
Trade receivables and inventories reduced by more than $1 billion for year, reflecting commitment to disciplined asset management.
In early October, Deere said the United Auto Workers-represented employees at 15 Deere locations have ratified a new six-year master agreement. The new agreement is in effect from October 5, until the first day of October 2015. The agreement covers about 9,500 employees and 17,000 retirees.
The company said in late October that it is recalling 452 workers, which is a majority of the manufacturing workers laid off at the John Deere Ottumwa Works factory in Iowa earlier this year, in order to begin production at its new 2010 line of equipments. However, Deere added that 78 workers would remain on layoff until market conditions improve enough to require the additional workforce. It was on June 2 that the company said it would lay off majority of its production employees at the John Deere Ottumwa Works until later this year, citing economic conditions and slumping demand for its products.
In early September, Deere decided to indefinitely layoff 367 manufacturing employees of the John Deere Harvester Works in East Moline, effective September 21, due to reduced market demand for the factory's products.
Full Year Highlights
For fiscal 2009, Deere reported net income of $873.5 million or $2.06 per share, sharply down from $2.05 billion or $4.70 per share posted in fiscal 2008. Analysts expected the company to report full year 2009 earnings of $2.61 per share.
Worldwide net sales and revenues for the full year declined 19% to $23.11 billion from $28.44 billion last year. Total net sales of the equipment operations were $20.76 billion, down 20% from $25.80 billion in the previous year. The Street was looking for revenues of $20.40 billion for fiscal 2009.
Outlook
Looking ahead to the first quarter of fiscal 2010, Deere projects equipment net sales to be down about 10%, including a favorable currency-translation impact of about 3% for the quarter. Analysts estimate first-quarter net sales to be $4.03 billion.
For fiscal 2010, the company expects net income of about $900 million as lower discount rates would see post-retirement benefit costs at about $400 million higher than last year. The company projects equipment sales to be down about 1%, including a favorable currency-translation impact of about 1%. The Street is looking for full year 2010 net sales of $20.25 billion.
Worldwide sales of the agriculture and turf division are forecast to decrease by about 4%, including a favorable currency-translation impact of about 2%, while worldwide sales of construction and forestry equipment are forecast to increase by about 18%.
for the full-year 2010, net income for Deere's credit operations is projected to be about $240 million, an increase from 2009 primarily is due to higher commissions from crop insurance and increased revenue from wind energy projects.
Stock Quote
In Wednesday's regular trading session, DE is currently trading at $51.75, down $0.54 or 1.03% on a volume of 0.27 million shares. In the past 52-week period, the stock has been trading in a broad range of $24.51 to $53.59.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.