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Deere shares soar, on comparatively upbeat sales forecast

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Shares in tractor maker Deere & Company soared, as the company issued a relatively upbeat forecast for the coming financial year, at least compared to expectations.

And results for the most recent period also comfortably beat expectations.

Deere saw sales falling only slightly, and said the company was well placed to survive the current downturn thanks to cost saving measures.

Tractor sales in South America are expected to rally in the coming year, thanks to the recovering economic situation there.

Smaller-than-expected sales drop

Deere forecast company equipment sales, and overall net sales and revenues, to fall by about 1% in the year from November 1, where a Reuter's survey of analysts saw revenues dropping by 2.9% for the full year.

Equipment sales were seen down around 4% over the first three months of the fiscal year.

Net income was seen at around $1.4bn over the fiscal year.

Rising South American sales

For 2017, sales in the company's agriculture and turf division are expected to fall by some 5 to 10%.

Deere saw the drop coming due to "the continuing impact of low commodity prices and weak farm incomes".

In Europe, sales are expected to fall by some 5%, but in South America, tractors sales are expected to rise some 15%, thanks to "improving economic and political conditions in Brazil and Argentina".

Cost cutting

"Our forecast continues to represent a standard of performance that is considerably higher than in earlier downturns," Deere Chairman Samuel Allen said.

"Global farm recession, weak construction-equipment markets lead to lower sales and earnings for fourth quarter and full year," Deere said.

But Mr Allen said the company hoped for some $500m of cost reductions by the end of 2018.

Deere said off workers over the August to October period this year, for a total pre-tax expense of $116m.

"Savings from the separation programs are expected to be approximately $75 million in 2017," Deere said.

Shares rally

Results for the August to October period also beat expectations.

Net sales over the period were down 4.7% year-on-year, at $5.65bn, but beating analyst expectations of $5.36bn.

And although net profits were down 16.7%, at $0.90 a share, this was well ahead of analyst expectations of $0.39 a share.

Deere shares were up some 8.3% in morning deals in New York, at $99.35.

By William Clarke

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