--Deere fiscal fourth-quarter revenue rose 14% from year
earlier
--Fourth-quarter profit missed analysts' expectations
--Deere sees U.S. farm machinery sales in 2013 about flat with
2012
(Updates comments from conference call, more details throughout
about markets and business conditions.)
By Bob Tita
Deere & Co. (DE) said Wednesday that orders for its farm
machinery next year are off to a strong start, dispelling
assumptions that weak economic conditions and this summer's U.S.
drought would damp machinery demand.
The company also reported a 14% increase in fiscal
fourth-quarter sales, but higher costs and a write-down on a
sideline business held its profit increase to 2.7%.
Its shares were recently down 4% at $82.58.
Deere said harvesting combines are sold out for the company's
first and second quarters and dealers are already placing orders
for third-quarter production slots. Crop sprayers also are nearly
sold out for the year and production of high-horsepower tractors
are booked into the spring, even with the addition of more
production capacity.
"The world faces some big economic challenges today, ranging
from the U.S. fiscal cliff possibilities to the euro debt crisis,"
said Rajesh Kalathur, chief financial officer, during a conference
call with analysts Wednesday. "We don't see these issues having a
lasting impact on the powerful tailwinds that will drive demand for
agriculture and construction equipment."
Deere, the world's largest seller of farm machinery, predicted
that its 2013 farm equipment sales will rise about 4% above the
$27.1 billion reported for the fiscal year ended Sept. 30.
Deere anticipates that industry-wide farm machinery sales in the
U.S. and Canada during 2013 will be about flat with 2012, as high
prices for grain hold down equipment demand from livestock and
dairy producers, offsetting continued strength in demand from
row-crop farmers.
Deere expects industry sales from Western Europe to be flat to
down 5% in 2013, while sales from South America rise about 10%
because of higher commodity prices and an increase in acres
planted.
Deere forecast fiscal 2013 income rising about 3.2% to $3.2
billion, or about $8.12 a share without additional buybacks. The
company expects sales to rise about 5% to $35.2 billion. Analysts
have been expecting profit of $3.3 billion, or $8.30 a share, from
sales of $34.6 billion.
Deere's fourth-quarter income was pressured by rising costs for
overhead, plant expansions, taxes and research and development.
Profit was further squeezed by a $33.4 million write-down in the
company's crop-irrigation equipment business.
Fourth-quarter sales of farm machinery rose 16% from a year
earlier to $7.39 billion, while operating income from farm
equipment rose 7% to $931 million. The operating margin on the farm
business slipped to 12.6% from 13.7% a year ago.
Deere's construction and forestry equipment business reported a
7% increase in sales to $1.65 billion, as income from the business
increased 38% to $120 million. The operating margin from
construction improved to 7.3% from 5.6% a year earlier.
Sales of farm and construction machinery in the U.S. and Canada
rose 26% from a year ago, while sales fell 2% elsewhere in the
world.
Overall for the quarter, Deere reported a profit of $687.6
million, or $1.75 a share, compared with a year-earlier profit of
$669.6 million, or $1.62 a share. Analysts polled by Thomson
Reuters had expected earnings of $1.88 a share.
Total revenue, which includes Deere's finance unit, increased
14% to $9.79 billion.
Deere also said it expects fiscal first-quarter equipment sales
to rise by 10%, well above analysts' expectations of a 3%
increase.
--Saabira Chaudhuri contributed to this article.
-Write to Bob Tita at robert.tita@dowjones.com
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