The one advantage farm machinery makers have over most segments is a buyer group that treats COVID-19 with disdain and keeps inventory purchases moving forward
With an expected supply shortage still to materialise, Deere & Co blazed through its first quarter ended 31 January with burgeoning demand worldwide adding to a thumping 23% net sales gain.
This gain was not by accident, Deere commanders executed several operating strategies to get into this strong growth position.
At the beginning of their fiscal year 2021, Deere management put into place a more seamless operating model and reporting structure that enabled quick action should a division show signs of faltering.
A structure where the company’s agriculture and turf operations could be more easily managed as they were divided into two divisions and could now get immediate attention to any deficiencies in trading that showed up.
There is now a Deere production and precision agriculture division that takes full responsivity for developing and delivering global equipment and technology solutions for large-scale farmers worldwide.
This division is tasked with unlocking value for large production-scale growers of large grains, small grains, cotton and sugar.
The main product ranges the precision agriculture division will oversee include large and utility mid-size tractors, harvesters, soil preparation and seeding application, crop care equipment, and farm loaders.
Meanwhile the second division set-up, small agriculture and turf, will deal with the much more robust model numbers sold to medium-size and small growers and livestock producers globally as well as turf customers.
This will be an important division for Deere as it is tasked with developing and delivering market-driven models to support a highly competitive market segment.
The Deere small agriculture and turf will offer support for production systems for dairy and livestock, high-value crops and turf and utility operators.
Primary the product range will include specialist models for farmers including mid-size and small tractors, as well as hay and forage equipment.
With the added responsibility for marketing riding and commercial lawn equipment, golf course equipment and utility vehicles.
During this shake-up the Deere construction and forestry and financial services segments appear to have remained under their current reporting structure.
As a result, Deere now has four reportable divisions in precision and Ag sales.
Deere management is expecting a year full of strong performances with much improved conditions in agriculture and the construction sectors setting the stage for a full-year earnings forecast increased to US$4.6 to 5 billion.
Getting off to a good start, Deere & Company reported net income of US$1.224 billion for its first quarter ending 31 January 2021. This compares with net income of $517 million for the same quarter last year.
Worldwide net sales and revenues increased 19% in the first quarter of 2021 to US$9.112 billion. Equipment operations net sales were US$8.051 billion for the quarter, compared with US$6.53 billion in 2020.
John C. May, chairman and chief executive officer had this to say, “John Deere started 2021 on a strongly positive note. Our results were aided by outstanding performance across our business lineup and improving conditions in the farm and construction sectors.
“In addition, our smart industrial operating strategy is making a significant impact on the company’s results while it also helps our customers be more profitable and sustainable.”
“We are proud of our success executing the strategy and creating a more focused organization that can operate with greater speed and agility.”
“As our recent performance shows, these steps are leading to improved efficiencies and helping the company target its resources and investments on areas that have the greatest impact.
“At the same time, even as we ramp up factory production and intensify our efforts to serve customers, we are mindful of the continuing challenges associated with the global pandemic.
“We remain committed, above all else, to safeguarding the health and well-being of our employees.” John C. May concluded.
For Fiscal year 2021 Deere & Co is predicting Production and Precision Ag net sales between US$15.5 to 16.5 billion.
Small Ag and Turf is expected to realise net sales of US$10.5 to 11.5 billion, while Construction and Forestry is slated with a US$10.5 to 11.0 billion net sales result.