Deere Sees Boom in U.S., Canadian Equipment Sales in First-Quarter 2013, Holds CapEx for Year at $1.3 Billion

Researched by Industrial Info Resources (Sugar Land, Texas)--Deere & Company (NYSE:DE) (Moline, Illinois), a leading agricultural, construction and forestry equipment manufacturer, saw strong overall gains in the first quarter of the company's 2013 fiscal year, as higher shipment volumes and price realization in the company's Agriculture and Turf segment offset declines in the Construction and Forestry segment. Net income was reported to be $649.7 million for the quarter, a 21.92% increase from first-quarter 2012.

Total sales and revenues stood at $7.42 billion, a 9.68% increase from the same period last year. The U.S. and Canada saw the strongest gains in net sales for equipment during the fourth quarter, increasing 18%. Globally, the company benefited from 3% sales price increases. The Financial Services segment was helped in part by higher crop insurance margins. However, the Construction and Forestry segment was negatively affected by lower shipment volumes, higher production costs and an unfavorable product mix.

Industrial Info is tracking $306 million in active projects involving Deere, including $58 million in additions to Deere-Hitachi's excavator manufacturing plant in Kernersville, North Carolina. The project involves constructing a 250,000-square-foot plant and installing production and supporting equipment to manufacture additional excavators for the mining and construction industries. Completion is projected to be in December 2013.

"Income and sales both reached new records for the first quarter of the year, and this is our 11th consecutive quarter of record earnings," said Susan Karlix, the manager of investor communications for Deere, in a conference call. "Our results benefited from healthy farm conditions and the strong sales of agricultural equipment. Deere's performance also reflected success executing our ambitious marketing and operating plans. Such execution is especially important right now, as we are adding new products and global capacity at unprecedented rates."

Gains in the Agriculture and Turf segment more than offset declines in the Construction and Forestry segment:

• The Agriculture and Turf segment reported $5.49 billion in sales for the quarter, a 16.24% increase from first-quarter 2012, and $766 million in operating profits, a 33.45% increase.
• The Construction and Forestry segment reported $1.3 billion in sales for the quarter, a 6.67% decrease from the same period last year, and $71 million in operating profits, a 42.74% decrease.
• The Financial Services segment reported $527 million in sales for the quarter, a 3.83% decrease from first-quarter 2012, and $197 million in operating profits, a 12.57% increase.
• All other revenues totaled $101 million, a 1% increase from the same period last year.

Deere executives expect the company to see about $3.3 billion of net income in full-year 2013. Capital expenditures are expected to be about $1.3 billion, an estimate unchanged from last quarter. Equipment sales are expected to increase about 6% for the year and 4% for the second quarter when compared with 2012.

Global sales for Agriculture and Turf equipment are expected to increase about 6% for the full year, with strong commodity prices boosting demand, but sales in the U.S. and Canada are expected to see lower gains, weighed down by caution in the livestock sector. Sales in the 27 European Union member states are expected to be down about 5%, given the region's economic turmoil. Global sales in the Construction and Forestry segment are expected to increase 3%, although the weak European markets are likely to have a negative effect on forestry products.

"Driven by strong crop prices, 2012's forecast cash receipts are at a record $389 billion," Karlix said in the conference call. "In 2013, strong crop prices, higher yields, and increased livestock receipts put 2013 cash receipts even higher. In our modeling, current- and prior-year cash receipts are the primary driver of equipment purchases in the U.S. market. With cash receipts at record levels, this bodes well for future farm prospects."

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.