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South American farm recovery drives John Deere growth

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Tractor and farm and construction equipment manufacturer Deere and Company has reported rising profitability and sales from its financial year to date, and anticipates a further increase in the final quarter. South America is outperforming its other world markets as farming fortunes recover there.

The business reports an 11% increase in equipment sales in the US and Canada for the latest quarter, but a 1% decline over the nine month period. Sales for the rest of the world markets were 25% higher for the latest three months and up 17% for the first three quarters.

While Deere expects full year Agriculture & Turf division sales to rise by about 9% across the whole financial year, it forecasts a 5% fall in farm equipment sales across the US and Canada markets "reflecting weakness in the livestock sector and the continuing impact of low crop prices". This will affect both large and small equipment volumes.

Agricultural sales across the EU-28 countries are predicted to be in the unchanged to 5% lower range, again attributed to low commodity prices and farm incomes. In Asia, full year sales are projected between flat and down slightly.

South America sales up 20%

It is South American that is most buoyant, with the company projecting a 20% rise in industry sales of tractors and combines in line with "improving economic and political conditions in Brazil and Argentina".

Net income for the company's third quarter ending July 30th 2017 was $641.8 million, up 31% from the $488.8 million in Q3 2016. Global revenues rose by 16% to $7.81 billion.

For the first nine months of fiscal 2017, net income was $1.65bn, up 33% from the $1.24bn in the same period of 2016, while revenues grew by 8% to $21.72bn.

Deere is predicting a 10% full year sales increase and a net income of $2.08bn.

Higher overall demand

"John Deere reported another quarter of strong performance as the company continued to benefit from improving market conditions throughout the world," commented chairman and chief executive Samuel R Allen. "We are seeing higher overall demand for our products with farm machinery sales in South America experiencing strong gains and construction equipment sales rising sharply.

"Deere's performance also is being assisted by an advanced product portfolio and the continuing impact of a flexible cost structure and lean asset base. We're confident Deere is well-positioned to continue its strong performance and to fully capitalize on the world's increasing need for advanced machinery and services in the future."

Company shares are unchanged at $123.98.

By Agrimoney.com

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