John Deere profit misses on weak international sales

Aug 15, 2012, 8:16 AM EDT

* Quarterly earnings $1.98 per share vs. Wall St view $2.31

* Revenue up 15 percent to $9.59 billion

* Shares fall 5.5 percent

By Ernest Scheyder

Aug 15 (Reuters) - Deere & Co, the world's largestagricultural equipment maker, reported lower-than-expectedquarterly profit on Wednesday, citing weak sales in China, Indiaand other emerging markets.

Its shares slid 5.5 percent to $75.75 in premarket tradingafter the report.

Deere said it expected agricultural sales to be "downmoderately" this year in India and China, and off 5 percent to10 percent in South America due to a drought in Argentina.

European sales are expected to be flat.

"Although a strong quarter, we are not satisfied that salesfell short of our expectations due to weakening in certaininternational markets and short-term manufacturinginefficiencies resulting from the introduction of a recordnumber of new products," Chief Executive Samuel Allen said in astatement.

Deere expects business in the United States and Canada --roughly 60 percent of sales -- to be up 10 percent this year.The jump is expected to come as a result of the drought that isdestroying much of the U.S. corn and soy crops.

For the third quarter ended July 31, the company posted netincome of $788 million, or $1.98 per share, compared with $712.3million, or $1.69 per share, a year earlier.

By that measure, analysts, on average, expected earnings of$2.31 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 15 percent to $9.59 billion.

 

DROUGHT ADVANTAGE

Broiling heat has blanketed much of the U.S. Midwest thissummer, causing the worst drought in more than 50 years anddecimating corn and soy crops.

Parts of Asia and South America are also suffering fromdrought, harming harvests of wheat, soy, sugarcane and othercrops.

Worry has grown that sales of tractors and combines fromDeere, as well as rivals AGCO Corp and CNH Global NV, could slip in 2013 as farmers conserve cash after thefall harvest.

Farmer income should fall at least 10 percent this year,though large-scale farmers probably will insure at least 85percent of their revenue and income, according to a study byLangenberg & Co released this week.

Smaller farmers are expected to hold back purchases of largemachinery over the winter, but large farmers -- helped byinsurance -- probably will keep buying land and machines,Langenberg said.

Deere said Wednesday it was not too concerned about thedrought and expects equipment sales to jump 13 percent overyear-ago period during its fourth fiscal quarter, which ends inOctober.

"Global economic conditions and dryness in several keymarkets warrant some caution in coming months," said CEO Allen."However, this year's drought could positively influence ouroutlook as it spotlights the need for John Deere's highlyproductive agricultural equipment."

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