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Deere & Co raises profit hopes, citing growing South American demand

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Deere & Co is the latest tractor seller to predict a sharp uptick in South American equipment demand this year, as it raised its profit forecast.

The tractor-making giant forecasts sales in its agriculture segment to rise by some 3% in the 12 months from November 2016.

This will be driven by booming sales in South America, which are projected to rise some 15 to 20%, ascribed to "improving economic and political conditions in Brazil and Argentina".

This follows similarly positive forecasts from rivals Agco and CNH for South American equipment prospects.

Poor US outlook

But the outlook for tractor sales elsewhere looks downbeat, Deere said.

Sales for agricultural equipment in the US and Canada are were forecast down 5 to 10%.

"The decline, reflecting weakness in the livestock sector as well as the continuing impact of low crop prices, is expected to affect both large and small equipment," Deere said.

Sales in the EU are forecast to fall by 5%, thanks to "low commodity prices and farm incomes".

Tractor sales in Asia are seen flat year-on-year.

Deere was upbeat on prospects for its other segments, forecasting total equipment sales, including in its construction and forestry group, up 4% year-on-year.

Rising profit hopes

Deere raised its full-year forecast for net income attributable to the company to $1.5bn, from a previous estimate of $1.4bn.

"John Deere has started out the year on a positive note in the continued face of soft market conditions," said Samuel R. Allen, Deere chairman and chief executive officer, noting "solid" profits despite lower sales.

"Deere continues to perform far better than in agricultural downturns of the past," Mr Allen said.

Agricultural equipment sales were flat year-on-year in the three months to January 29, "with lower shipment volumes and higher warranty costs being offset by price realization and the favourable effects of currency translation".

Sales beat expectations

Deere reported net income at $193.8m, or $0.61 per share, for the three months to January 29.

This was down 24% year-on-year, and beat analyst forecasts of $0.55 a share.

Net earnings were down 1.5% year, at $4.70bn, ahead of forecasts of $4.69bn.

By William Clarke

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