Deere equipment sales offset slowing farm machinery market

John Deere, the agricultural equipment maker, saw first- quarter earnings rise a stronger-than-expected 5 per cent as a rise in equipment sales, cost control and prices increases helped it combat a slowing farm machinery market.

"Even in the face of moderating demand for agricultural equipment, Deere is well positioned to deliver solid performance," Sam Allen, John Deere chief executive, said yesterday. "In addition we are seeing further benefit from efforts to hold the line on costs."

The Illinois-based company reported net income of $681 million, or $1.82 a share, in the three months to January, compared to $650 million, or $1.65 a diluted share, in the same period a year before.

Sales rose 3 per cent, from $7.42 billion to $7.65 billion. Analysts had expected earnings of $1.52 a share on $6.6 billion in sales. Shares rose 3.5 per cent in premarket trading in New York.The company reaffirmed its bullish forecast of about $3.3 billion in net income for the fiscal year ending in October 2014, with total equipment sales expected to fall 3 per cent from $35 billion.

Corn prices fell about 40 per cent in 2013, as the US harvest rebounded from a devastating 2012 drought to a record crop last year.

Lower prices generally hit farmers’ incomes, making them less likely to buy new equipment, although Deere responded by increasing prices 2 per cent during the quarter. Deere has previously forecast that US farm income would fall to $378 billion in 2014, from a record $402 billion in 2012 and $389 billion last year.

Deere's total equipment sales in the US and Canada rose 3 per cent in the quarter, while outside of that region, sales rose 2 per cent.

Deere expects a buoyant housing market to drive a roughly 10 per cent rise in construction and forestry equipment sales, partially offsetting a 6 per cent drop in sales for its much larger agricultural equipment business. – (c) 2014 The Financial Times Ltd