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Deere Q3 income rises, sees lower international sales ahead

Published: 22:33 15 Aug 2012 AEST

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Deere & Co. (NYSE:DE) Wednesday recorded an 11 per cent jump in fiscal third-quarter earnings, helped by higher sales of construction equipment and agriculture machines.

For the quarter ended July 31, the world's largest producer of agricultural equipment posted net income of $788 million, or $1.98 per share, compared with $712.3 million, or $1.69 per share, in the year-ago period.

Total sales and revenues rose 15 per cent to $9.59 billion.

Analysts were looking for earnings of $2.31 per share on revenue of $9.61 billion.

"John Deere delivered record third quarter performance in both sales and income," Deere's chairman and CEO Samuel R. Allen said.

"Although a strong quarter, we are not satisfied that sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products."

Sales at the company's agriculture & turf division increased 14 per cent for the quarter due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation.

The construction and forestry division's sales increased 23 per cent for the quarter mainly due to higher shipment volumes and price realization.

Corn futures in Chicago have risen to a record in the last month because of a drought in the U.S. Midwest. The country’s net farm income will drop to $91.7 billion this year, the second- highest total, the U.S. Department of Agriculture said earlier this year.

Deere said it expected agricultural sales to be "down moderately" this year in India and China, and down 5 per cent to 10 per cent in South America due to a drought in Argentina.

"Global economic conditions and dryness in several key markets warrant some caution in coming months," Allan added.

"However, this year's drought could positively influence our outlook as it spotlights the need for John Deere's highly productive agricultural equipment. Our new John Deere products have been well received by customers around the world.

"This, combined with our increased focus on improved execution, gives us confidence that Deere is well-positioned to capitalize on favorable global agricultural trends over the long term."

The company projects net income of $3.1 billion for the year, compared with analyst expectations of about $3.3 billion.

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