Deere Q3 Profit Down; Cautions On Q4 Net Sales; Backs FY09 Profit View - Update
8/19/2009 10:10 AM ET
(RTTNews) - Wednesday, agricultural equipment maker Deere & Co. (DE: News ) reported a 27% decline in profit for the third quarter, mainly hurt by lower shipment and production volumes, and the unfavorable effects of foreign exchange. Equipment net sales fell 25%, yet beat the market projections. Further, the Moline, Illinois-based company projected a sharp decline in fourth-quarter net sales, citing significant production cutbacks, while backing its fiscal 2009 net income view.
Third-quarter net income was $420.0 million or $0.99 per share, lower than net income of $575.2 million or $1.32 per share reported in the corresponding quarter last year. The company noted that voluntary employee separations related to the new organizational structure resulted in pretax charges of $16 million in the third quarter.
On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share. Analysts' estimates typically exclude special items.
Deere, the maker of farm equipments, attributed the fall in profit primarily to "lower shipment and production volumes and the unfavorable effects of foreign exchange, partially offset by improved price realization and lower selling, administrative and general expenses."
Equipment operations reported net income of $319 million for the quarter, lower than last year's $479 million. However, Financial services' net income grew to $102.1 million from $83.4 million a year ago, largely due to benefits from investment tax credits for wind energy projects, foreign exchange gains and lower expenses, partially offset by higher provision for credit losses and narrower financing spreads.
John Deere Capital Corp., the credit subsidiary of Deere, reported third-quarter net income of $59.1 million, compared with net income of $70.1 million last year, mainly reflecting a higher provision for credit losses and narrower financing spreads, partially offset by foreign exchange gains and lower selling, administrative and general expenses.
Deere's total net sales and revenues in the quarter dropped 24% to $5.89 billion from $7.74 billion a year ago. Net sales of the equipment operations totaled $5.28 billion, down 25% from prior year's net sales of $7.07 billion, yet beat ten Wall Street analysts' consensus estimate of $5.25 billion. The company noted that sales included an unfavorable currency-translation effect of 4% and price increases of 6%.
Deere was projecting equipment sales to be down about 26%, including a negative currency-translation impact of about 6%.
