MOLINE, Ill. -- Deere & Company today announced worldwide net income of $203.9 million, or $0.48 per share, for the first quarter ended Jan. 31, compared with $369.1 million, or $0.83 per share, for the same period last year.



Worldwide net sales and revenues decreased 1 percent, to $5.146 billion, for the first quarter compared with $5.201 billion a year ago. Net sales of the equipment operations were $4.560 billion for the period compared with $4.531 billion last year.



"During a period of considerable economic uncertainty, John Deere has completed another profitable quarter and sees further opportunities to advance its global competitive position," said Robert W. Lane, chairman and CEO. "At the same time, ongoing higher material costs, the deepening global recession, and volatile foreign exchange rates have put downward pressure on our financial results."



Demand for large productive agricultural machinery has held up well, Lane noted, due in substantial part to the sound financial health of the U.S. farm sector. Also of benefit has been the company's access to global capital markets, which is helping ensure that ample financing remains available for many customers. During the quarter, Deere's credit operations obtained funding that exceeded all maturing medium-term notes and asset-backed securities for the entire fiscal year.



Summary of Operations



Net sales of the worldwide equipment operations increased 1 percent for the quarter. Included were price changes of 6 percent offset by an unfavorable currency-translation effect of 6 percent. Equipment net sales in the United States and Canada increased 1 percent for the quarter. Net sales outside the United States and Canada were unchanged for the quarter, including an unfavorable currency-translation effect of 14 percent.



Deere's equipment operations reported operating profit of $307 million for the quarter compared with $457 million last year. The deterioration was due largely to increased raw material costs and unfavorable effects of volatile foreign-currency exchange, partially offset by improved price realization.



The company's focus on rigorous asset management continued to produce improved results. Trade receivables and inventories at the end of the quarter were $7.312 billion, or 28 percent of previous 12-month sales, compared with $6.488 billion, or 29 percent of sales, a year ago.
Financial services reported net income of $46.8 million for the quarter compared with $97.7 million last year. Results were lower primarily due to narrower financing spreads, lower commissions from crop insurance and a higher provision for credit losses.



Company Outlook & Summary



The outlook for the coming year remains unusually uncertain, especially with respect to foreign exchange, and the outlook's impact on the company's sales and earnings difficult to assess.



Company equipment sales are projected to be down about 8 percent for the full year and down about 9 percent for the second quarter. Included is a negative currency-translation impact of about 6 percent for both the year and second quarter. Deere's net income is expected to be about $1.5 billion for 2009, with more risk on the downside at this time. The company is suspending its practice of providing a quarterly net income forecast in light of highly uncertain conditions in the global economy, including volatility in foreign exchange rates.



"Deere's investment in advanced technology and its emphasis on disciplined asset management should help the company meet present economic challenges while extending its strong global position," Lane said. "Though restrained by the current recession, positive trends that support our businesses, such as global demand for food and infrastructure, remain intact in our view and continue to hold great promise."



Equipment Division Performance



Agricultural. Agricultural equipment sales were up 18 percent for the quarter, largely due to higher shipment volumes and improved price realization, partially offset by the unfavorable effects of currency translation. Operating profit was $348 million for the quarter, compared with $332 million last year. Contributing to operating profit was improved price realization and the favorable impact of higher shipment and production volumes, partially offset by higher raw material costs. Also having a negative impact on operating profit was sharp volatility in foreign-currency exchange.



Market Conditions & Outlook



As previously cited, the outlook for the coming year remains unusually uncertain, particularly with respect to foreign exchange. The outlook's impact on the company's three equipment businesses and on the net income of the credit operation is difficult to assess.



Agricultural. Worldwide sales of the company's agricultural equipment are forecast to decrease by about 2 percent for full-year 2009. This includes a negative currency-translation impact of about 7 percent.



Farm-machinery industry sales in the United States and Canada are forecast to be flat to up 5 percent for the year, led by an increase in large tractors and combines. The company expects agricultural commodity prices to remain healthy in 2009 and for fuel and fertilizer costs to moderate. Sales of certain types of equipment are expected to be down significantly for the year. These include small tractors, cotton equipment, and machinery used by livestock producers.



In other parts of the world, industry sales are expected to be generally lower as a result of deteriorating economic conditions, credit cost and availability, and changes in currency values. In addition, sales in parts of Australia and South America are expected to be hurt by drought. On this basis, industry sales in Western Europe are forecast to be down 10 to 15 percent for the year, while sales are expected to decline significantly in Central Europe and the CIS (Commonwealth of Independent States) countries, including Russia. In South America, industry sales are projected to be lower by 15 to 25 percent.



SOURCE: Deere & Company via PR Newswire.