Deere & Co forecast a continuing slide in sales in 2010, warning of "cautious purchasing" by farmers, as it unveiled its lowest annual earnings in six years.

However, a robust underlying performance helped the group's shares hit their highest for more than a year.

The maker of John Deere tractors forecast that farm machinery sales would slide by 4% next year, led by a fall of up to 15% in Western Europe, with North American takings set to drop 10%.

"Farmers are expected to be cautious in their purchasing decisions as a result of sluggish overall economic conditions, and near-term profitably issues in the livestock and dairy sectors," Deere said.

The decline would be in part offset by a jump of 10-15% in South American trade, thanks to the end of a drought in many regions, and "good incomes" for sugar cane and soybean growers.

'Difficult environment'

Group revenues would fall by 10% in the current, November-to-January quarter, the group added, noting the "difficult environment".

"[Construction] sales are expected to be helped by aggressive inventory reductions in the previous year that position the company to align production with retail demand," the group said.

Earnings would come in at about $900m, including a $400m pension charge, an improvement nonetheless on the $873m for the year just finished.

One-off hits 

Results in the latest year were depressed by an after-tax loss of $223m in the August-to-October period – the group's first quarterly loss since 2002 – as it swallowed $321.8m in charges relating to a company restructuring earlier in the year.

A 28% slide to $5.33bn in sales also contributed to the deterioration in the quarter, with the group's financial services unit dragged lower by higher provisions against bad loans.

However, stripping out one-off charges the group would have managed earnings of $99.0m, a "strong" performance analysts at  Sterne Agee said.

"Deere has reported a relatively solid fourth quarter, despite the macro headwinds," the US broker said, adding that the group's performance forecasts had "set the bar relatively low".

"Should crop prices remain reasonably high (where they area now), we can envision upside to Deere's guidance," Sterne Agee said.

With Deere explaining away the potential for an "outright collapse" in the North American farm market, "ultimately 2011 could be a good year".