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Researched by Industrial Info Resources (Sugar Land, Texas)--Deere & Company (NYSE:DE) (Moline, Illinois), a leading agricultural, construction and forestry equipment manufacturer, saw solid gains in the third quarter of the company's fiscal year 2012, as strong demand for U.S. and Canadian farm equipment, as well as a recovering construction market, resulted in record sales and profits for a Deere third quarter. Net income for the quarter was reported to be $788 million, a 10.67% increase from third-quarter 2011.
Total net sales and revenues stood at $9.59 billion, a 14.55% increase from the same period last year. In particular, demand has been strong for Deere products that have been introduced in the past year. Both of Deere's leading segments benefited from improved shipment volumes and higher price realization. Still, weak international markets and manufacturing glitches with some of the new products caused sales to fall short of expectations. Production costs also were higher than in past quarters, largely due to the new products and engine-emission requirements.
Industrial Info is tracking $209 million in active projects involving Deere, including two major projects in Iowa: the $85 million expansion of a grain drill manufacturing plant in Ankeny, and the $70 million modernization of the Waterloo Works East Donald assembly plant in Waterloo. The Ankeny project involves the construction of a 300,000-square-foot assembly building and the installation of new equipment to add production capacity for self-propelled sprayers. The Waterloo project involves installing and upgrading equipment to increase the production capacity for high-horsepower tractors by 10%.
"Half of the [sales forecast] shortfall is due to softening market conditions outside the U.S.; of note, China, India, and the European Union 27 [member countries]," said Jim Field, the chief financial officer of Deere, in a conference call. "Additionally, sales were negatively impacted as the granting of import licenses in Argentina continues at a slow pace."
About the lower-than-expected sales, Field later added: "The other half of the shortfall is manufacturing execution. The good news is that we expect to make up the bulk of the sales mix related to execution during the fourth quarter. In the third quarter, we had very aggressive production levels as we continued to ramp up our schedules, and we experienced some hiccups. The all-new North American combine line... was the most challenged and accounts for the bulk of the shortfall. The issue is not quality--in fact, we were receiving positive customer reviews on the machines already in the field. We just had trouble ramping up production to meet the aggressive build schedules in the quarter. As a result, we experienced production delays of up to 14 calendar days."
All of the major Deere sectors saw improvements in revenues when compared to third-quarter 2011, and only the Financial Services segment saw a drop in profits:
Deere executives expect net income for the full year to total about $3.1 billion, a company record, and expect equipment sales to increase about 13% for both the fourth quarter and the full year. Samuel Allen, chairman and chief executive officer, noted that the drought that has affected much of the U.S. in the past few months could strengthen demand for Deere's agricultural products. In the Agriculture and Turf segment, strong sales in the U.S., Canada and former Soviet nations are expected to offset the flat outlook for Europe and declines in India, China and South America. Similarly, the Construction and Forestry segment is expected to continue seeing growth in the U.S. and Canada, but flat sales elsewhere.
"The drought had minimal impact on our third-quarter results, and the same holds true for the full-year impact," said Susan Karlix, the manager for investor communications for Deere, in a conference call. "However, as a result of dry weather, global grain supplies are expected to further tighten. This supports higher commodity prices, and should result in robust field activity in the 2013 crop year in markets throughout the world."
For more information, visit Industrial Info's North American Industrial Manufacturing Project Database.
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.
Total net sales and revenues stood at $9.59 billion, a 14.55% increase from the same period last year. In particular, demand has been strong for Deere products that have been introduced in the past year. Both of Deere's leading segments benefited from improved shipment volumes and higher price realization. Still, weak international markets and manufacturing glitches with some of the new products caused sales to fall short of expectations. Production costs also were higher than in past quarters, largely due to the new products and engine-emission requirements.
Industrial Info is tracking $209 million in active projects involving Deere, including two major projects in Iowa: the $85 million expansion of a grain drill manufacturing plant in Ankeny, and the $70 million modernization of the Waterloo Works East Donald assembly plant in Waterloo. The Ankeny project involves the construction of a 300,000-square-foot assembly building and the installation of new equipment to add production capacity for self-propelled sprayers. The Waterloo project involves installing and upgrading equipment to increase the production capacity for high-horsepower tractors by 10%.
"Half of the [sales forecast] shortfall is due to softening market conditions outside the U.S.; of note, China, India, and the European Union 27 [member countries]," said Jim Field, the chief financial officer of Deere, in a conference call. "Additionally, sales were negatively impacted as the granting of import licenses in Argentina continues at a slow pace."
About the lower-than-expected sales, Field later added: "The other half of the shortfall is manufacturing execution. The good news is that we expect to make up the bulk of the sales mix related to execution during the fourth quarter. In the third quarter, we had very aggressive production levels as we continued to ramp up our schedules, and we experienced some hiccups. The all-new North American combine line... was the most challenged and accounts for the bulk of the shortfall. The issue is not quality--in fact, we were receiving positive customer reviews on the machines already in the field. We just had trouble ramping up production to meet the aggressive build schedules in the quarter. As a result, we experienced production delays of up to 14 calendar days."
All of the major Deere sectors saw improvements in revenues when compared to third-quarter 2011, and only the Financial Services segment saw a drop in profits:
- The Agriculture and Turf segment reported $7.27 billion in sales for the quarter, an 14.13% increase from third-quarter 2011, and $1.01 billion in operating profits, an 18.04% increase.
- The Construction and Forestry segment reported $1.66 billion in sales for the quarter, a 22.8% increase from the same period last year, and $113 million in operating profits, a 2.73% increase.
- The Financial Services segment reported $565 million in sales for the quarter, a 2.73% increase from third-quarter 2011, and $170 million in operating profits, a 12.37% decrease.
Deere executives expect net income for the full year to total about $3.1 billion, a company record, and expect equipment sales to increase about 13% for both the fourth quarter and the full year. Samuel Allen, chairman and chief executive officer, noted that the drought that has affected much of the U.S. in the past few months could strengthen demand for Deere's agricultural products. In the Agriculture and Turf segment, strong sales in the U.S., Canada and former Soviet nations are expected to offset the flat outlook for Europe and declines in India, China and South America. Similarly, the Construction and Forestry segment is expected to continue seeing growth in the U.S. and Canada, but flat sales elsewhere.
"The drought had minimal impact on our third-quarter results, and the same holds true for the full-year impact," said Susan Karlix, the manager for investor communications for Deere, in a conference call. "However, as a result of dry weather, global grain supplies are expected to further tighten. This supports higher commodity prices, and should result in robust field activity in the 2013 crop year in markets throughout the world."
For more information, visit Industrial Info's North American Industrial Manufacturing Project Database.
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.
