Deere cuts profit forecast as farm equipment sales decline
Farm equipment maker Deere posted a 43 percent fall in first-quarter profit and cut its full-year profit forecast as lower corn prices and weak farm income weighed on demand for agricultural machinery.
Deere's shares were down 1.9 percent at $90.00 in premarket trading on Friday.
The company, which gets nearly two-thirds of its revenue from farm and turf machinery, cut its 2015 net profit forecast to $1.8 billion from $1.9 billion.
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Sales of Moline, Illinois-based Deere's farm and turf machinery are expected to fall 23 percent globally this year, it said. This includes a 4 percent negative impact of a strong dollar. The company earlier forecast a sales fall of 20 percent.
The company also has operations in Canada, Brazil, China, France, Germany, India, Russia and South Africa among others. The United States and Canada accounted for 62 percent of total revenue in 2014.
Deere's overall equipment sales are expected to fall about 19 percent in the current quarter ending April 30.
The company's sales have been hit as bumper corn harvests drive down prices, leaving farmers with less cash to spend on equipment. Corn prices fell about 15 percent in 2014, on top of a decline of nearly 40 percent in 2013.
The U.S. Department of Agriculture said last week that net farm income is expected to fall 32 percent to $73.6 billion in 2015, the lowest since 2009 and a drop of nearly 43 percent from the record high of $129 billion in 2013.
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Net income attributable to Deere fell to $387 million, or $1.12 per share, in the first quarter ended Jan. 31, from $681 million, or $1.81 per share, a year earlier.
Sales fell 16.6 percent to $6.38 billion.
Analysts on average had expected earnings of 83 cents per share on revenue $5.53 billion, according to Thomson Reuters I/B/E/S.
Up to Thursday's close, the company's stock had risen about 8 percent in the past 12 months, compared with an about 11 percent rise in the Dow Jones US Industrial Goods & Services index.