Shares in Deere & Co made a weak start after the world's
largest farm equipment group unveiled lower-than-expected profits and forecast
dents to growth prospects from US dairy weakness to UK downpours.
The maker of John Deere machinery reported a rise of 13.7%
to $9.79bn in sales for the August-to-October period, the fourth quarter of its
Despite "continuing global economic pressure", Deere enjoyed
"positive customer response" to a record period for new products, Samuel Allen,
the group's chairman and chief executive, said.
However, the boost to profits from higher revenues was eroded
by higher production and administration and research costs, leaving earnings up
a more modest 2.7% at $687.6m.
Short of expectations
At the equivalent of $1.75 a share, this fell short of the
$1.88 a share that Wall Street had expected.
And Deere, while saying it had "great confidence" in its
prospects, forecast slower growth ahead, forecasting a rise of 4% in sales at
its core agriculture business in the year to next October, down from 13% in the
For construction equipment, sales growth will slow to 8%
Full-year earnings were forecast at "about" $3.2bn, representing
annual growth of 4.4%, less than half that in the latest year.
It was also below the expectations of many analysts, who
have on average forecast 2013 earnings at $3.25bn.
The immediate impact in New York was to send Deere shares
down 4.3% to $82.25, wiping some $1.5bn from the group's stockmarket value.
"Expectations were high coming into this report," JPMorgan
analyst Ann Duignan said.
The weaker forecast reflected expectations of a "flat"
agricultural machinery market in 2013, dragged below this year's "healthy
levels" by "caution around the US livestock and dairy sectors".
Industry sales in Asia will be flat, Deere said, flagging a "soft"
tractor market in India, where the late monsoon is expected to depress grains
output, and uncertainty in China over the next farm subsidy framework.
In the European Union, industry sales were forecast at best
staying stable, and potentially declining 5%, "due to continuing deterioration
in the economy and a poor harvest in the UK," where persistent rains, having
dogged the grains harvest, have hampered autumn root crop lifting and wheat
Indeed, the continent is split between countries such as France,
Germany and Poland, "benefitting from favourable weather conditions", and the UK,
south and south east EU countries which are proving "heavily impacted by unfavourable
The most promising market is that of South America, where
farm equipment groups are expected to lift sales by 10% over the year, "as a
result of favourable commodity prices and higher planting intentions".
Former Soviet Union market takings are seen "modestly higher"
than last year, boosted by "positive" farmer sentiment.