Deere one of many suffering through the worst U.S. machinery slump in 15 years.

Deere’s 1050K 350 horsepower crawler dozer



Deere & Company, the world’s largest seller of tractors and harvesting equipment, reported its net sales data for the three months ending January 31 today. Q1 sales came in at  $5.525 billion, a 13 percent decrease compare with last year’s $6.383. First quarter earnings were $254.4 million, down from 2015’s first quarter earnings of $387.0 million.

Deere breaks their data into three sectors – Construction & Forestry, Ag & Turf, and Financial Services.

Construction & Forestry.

Construction and forestry sales decreased 23 percent for the quarter, reporting $1.169 billion for this year compared to last year’s $1.524 billion. Deere predicts its worldwide sales of construction and forestry equipment to be down about 11 percent for 2016, including a negative currency-translation effect of about 2 percent. The forecasted decline in sales reflects the impact of weak conditions in the North American energy sector as well as lower sales outside the U.S. and Canada. In forestry, global sales are expected to be down 5 to 10 percent from last year’s strong levels, primarily as a result of weaker demand in the U.S. and Canada.

Agriculture & Turf

Sales decreased 12 percent for the quarter, with $3.600 billion in sales this year compared to last year’s sales of $4.081 billion thanks to lower shipment volumes. The company also pointed to the strong U.S. dollar, which makes its equipment more expensive abroad and is a headwind for global companies. The company’s full year forecast in the US and Canada expects to be down 15 to 20 percent for 2016. Deere says the impact of low commodity prices and stagnant farm incomes is expected to be felt in the sales of higher horsepower machines. On the other hand, Deere expects sales of turf and utility equipment in North American to rise 5 percent in 2016, benefiting from new products and general economic growth.

Financial Services

Reporting $636 million for Q1 2016, Deere’s financial services sector showed only a slight decline of 2 percent compared to last year’s $648 million. Fiscal year 2016 net income attributable to Deere & Company for their financial services operations is expected to be approximately $525 million. The outlook reflects less favorable financing spreads, an increased provision for credit losses and the unfavorable effects of foreign-currency exchange translation. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.

“John Deere’s first quarter results reflect the continuing impact of the downturn in the global farm economy as well as weakness in the construction equipment markets,” said Samuel R Allen, Deere’s chairman and CEO.

Unlike some of the other heavy machinery manufacturers, Deere’s construction and forestry sector provides only one third of their overall market and 65 percent of Deere’s sales are made in the U.S. and Canada.

Source: Deere

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