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Cautious Farmers Dim Deere’s Outlook for 2020
The world’s largest farm equipment maker, Deere and Co., expects sales of its agricultural equipment to decline by 5% to 10% globally in the year ahead due to lower demand for big machinery. “Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment,” said Chief Executive John May.
Deere said net sales of agricultural and turf equipment grew 2% but operating profits fell 11%, to $2.5 billion, during the year ending November 3. Profits were down due to higher production costs and other expenses, including research and development, and a less-favorable sales mix of products. Looking to its 2020 sales year, Deere said agricultural equipment sales in the U.S. and Canada were forecast to fall 5%, “driven by lower demand for large equipment.” Worldwide sales would fall by as much as 10%.
Agricultural and turf equipment accounted for nearly 90% of Deere’s sales and revenues in the past year. Overall, revenues were up 5%, mostly due to record sales of construction and forestry equipment. Deere had net income of $3.25 billion for the year. It forecasts income of $2.7 billion to $3.1 billion in the new year, “reflecting uncertainties in our equipment operations.”
“Despite present challenges, the longer-term outlook for our businesses remains healthy and points to a promising future for Deere,” said May. “We are particularly encouraged by the adoption of precision technologies and believe we are well positioned to be a leader in smarter, more efficient, and sustainable solutions to our customers.”