BUSINESS

A cold spring and weak construction hurt Deere's 2013 sales prediction; 2Q profit up 3 per cent

05/15/2013 07:44 EDT | Updated 07/15/2013 05:12 EDT
MOLINE, Ill. - Deere & Co. said on Wednesday that bad weather and weak economies will hinder sales growth this year for lawnmowers and construction equipment.

The company reported better-than-expected second-quarter earnings and maintained its full-year profit prediction. Sales of farm gear such as its big green John Deere tractors and combines are still strong and growing, the company said.

But the lower overall sales outlook sent its shares skidding over 4 per cent lower, down $4.13 to close at $89.64 Wednesday. They had been trading near their 52-week high of $95.60.

Deere said sales of farm and construction equipment would rise 5 per cent during the current fiscal year, which is now half over. It had previously predicted growth of 6 per cent.

The reduced sales expectation came after a long, cold winter in North America delayed the planting of this year's seeds. It also slowed construction work and reduced demand for turf-care equipment such as lawnmowers, the company said.

CEO Samuel R. Allen also said Deere's "near-term forecast is being tempered by lingering economic concerns in many parts of the world, which are restraining business confidence and growth."

Deere's second-quarter net income rose 3 per cent to $1.08 billion, or $2.76 per share. That was up from $1.06 billion, or $2.61 per share, during the same period last year.

That topped analysts' average estimates for earnings of $2.71 per share.

Revenue from equipment sales rose 9 per cent to $10.27 billion from $9.41 billion a year earlier. Analysts had expected equipment revenue of $9.82 billion. Including financial services, Deere revenue rose 9 per cent to $10.91 billion.

Deere raised prices 3 per cent and shipped more gear during the quarter.

The company predicted that sales of construction and forestry gear would fall 5 per cent for the full year. Those sales were down 6 per cent in the most recent quarter as shipments declined.

Sales of farm and turf equipment grew 12 per cent for the quarter, and Deere predicted an increase of 7 per cent for the full year. Commodity prices are still relatively high and farm incomes are continuing to support demand for farm equipment. It predicted full-year sales gains of 5 per cent in the U.S. and Canada, but said sales in Europe will decline 5 per cent after a poor harvest in the U.K. last year. Sales in South America are expected to rise 15 to 20 per cent because of strong market conditions in Brazil.

Deere's full-year profit prediction of $3.3 billion is unchanged.

For the first half of fiscal 2013, net income rose 9 per cent to $1.73 billion, or $4.41 per share, up from $1.59 billion, or $3.91 per share during the first half of 2012. Total revenue rose 9 per cent to $18.34 billion, with equipment sales rising 10 per cent to $17.06 billion.