Deere works through pandemic challenges in third quarter, raises yearly net income forecast
While financial challenges from the global pandemic continue to weigh on corporate earnings, Deere & Company announced that after a third quarter that was relatively solid in terms of performance despite losses it will increase its yearly net income forecast to approximately $2.25 billion.
Deere reported a net income of $811 million in its fiscal third quarter, ending August 2, compared to the previous third quarter 2019 which saw income of $899 million. Net sales and revenues declined 11 percent to $8.925 billion in Q3 of 2020, and the company reports a 12 percent drop through the first nine months of the year to $25.809 billion. Equipment operations net sales were $7.859 billion for the quarter and $22.612 billion through nine months, compared to $8.969 billion and $26.182 billion last year.
"With outstanding support from our dedicated global workforce and dealer organization, John Deere delivered a strong performance in the third quarter in the face of a serious global pandemic and uncertain market conditions," said John C. May, chairman and chief executive officer. "As we manage through the pandemic, Deere's number-one priority continues to be safeguarding the health and well-being of its employees. Thanks to aggressive measures taken early in the crisis, we have had success keeping our employees safe, our factories and parts centers functioning, and our customers served."
The Construction & Forestry segment of Deere's business saw a significant decline in net sales through the third quarter, at $2.187 billion for the three month period; that was a drop of 28 percent from 2019. The company said that lower shipment volumes and unfavorable effects of currency translation were key reasons for the decline. Operating profit declined as well in the quarter, due to lower shipment volumes and sales, among other issues.
Deere expects Construction & Forestry sales to be down about 25 percent for the year, citing market uncertainty due to COVID-19 and efforts to reduce inventory levels. North American sales are expected to be down about 20 percent for the year.
Deere & Company is forecasting a net income around $2.25 billion for the year, but notes that uncertainties remain due to the pandemic and negative changes could still occur. The company has also announced broad employee-separation programs that will be completed during the fourth quarter in support of its strategy to create a leaner, more agile organization. The programs' total pretax expense included in the forecast is about $175 million with estimated annual savings of $175 million.
"Although unsettled market conditions and related customer uncertainty are expected to have a moderating effect on key markets in the near term, we believe Deere is well-positioned to help make our customers more profitable and sustainable," May said. "In addition, we are encouraged by the early benefits we are experiencing from the company's recently launched smart-industrial operating model. We're confident it will help accelerate our ability to deliver differentiated solutions to our customers, while contributing to improved efficiencies across the company."