Deere 2012 Q2 earnings $1.056B
According to Allen, promising fundamentals are lending strong support to the company’s plans for increased sales and profitability. “Our extensive investments in new products and additional global capacity are moving ahead at an accelerated rate,” he said, pointing out there are more than a dozen major projects under way throughout the world, including seven new factories. “These investments are essential to the success of our longer-term growth objectives, which we believe are firmly on track. They also put Deere in a sound position to respond to a rising global need for food, shelter, and infrastructure in the years ahead. In our view, these powerful trends have considerable staying power and should prove highly rewarding to our customers and investors.”
Equipment Division Performance
Agriculture & Turf. Sales increased 11 percent for the quarter and 10 percent for six months largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation.
Operating profit was $1.403 billion for the quarter and $1.977 billion year to date, compared with $1.163 billion and $1.720 billion, respectively, last year. The improvement in both periods was primarily driven by the impact of higher shipment volumes and price realization. These factors were partially offset by increased production costs related to new products and engine-emission requirements, as well as higher raw-material costs and research and development expenses.
Construction & Forestry. Construction and forestry sales increased 26 percent for the quarter and 24 percent for six months mainly due to higher shipment volumes and price realization. Operating profit was $119 million for the quarter and $243 million for six months, compared with $105 million and $194 million last year. Results improved in both periods primarily due to price realization and higher shipment volumes, partially offset by increased raw-material costs and an unfavorable product mix. Also affecting the performance of both periods were higher research and development and selling, administrative and general expenses, as well as increased costs related to engine emissions requirements.
Market Conditions & Outlook
Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to increase by about 15 percent for full-year 2012, including a negative currency-translation impact of about 3 percent.
Farmers in the world’s major markets are experiencing favorable incomes due to strong demand for agricultural commodities. In addition, John Deere’s sales are benefiting from advanced new products being launched throughout the world and from major expansions.
Industry farm-machinery sales in the U.S. and Canada are forecast to rise by more than 10 percent in 2012. Overall conditions remain positive and demand continues to be strong, especially for high-horsepower equipment.
Full-year industry sales in the EU 27 nations of Western and Central Europe are forecast to be flat to up 5 percent as favorable conditions in the grain, livestock and dairy sectors outweigh general economic concerns. Sales in the Commonwealth of Independent States are expected to be considerably higher in 2012. Sales in Asia, while slowing, are forecast to be up moderately. In South America, industry sales are projected to be down 5 to 10 percent from last year’s attractive levels due to uncertainty in Argentina and drought conditions in parts of the region.
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