John Deere leads the market into more subdued sales results

Local market leader John Deere has posted more sobering results that confirm the overall market has reached current growth limits

While many agricultural manufacturers are running for cover the quarterly results from John Deere underscore sound execution in the face of challenging market conditions with global agricultural and turf demand softening

Deere & Company accountants have been busy tallying the second quarter results for the company worldwide and while there was a healthy net income of US$2.37 billion for the 3 months ending on 28 April 2024 it was a slip in revenue when compared with net income of US$2.86 billion for the same quarter in 2023.

And confirming what many in the industry already know, demand for agricultural tractors and equipment is slipping as the first six months of the year results from Deere & Company reveal net income of US$4.121 billion, compared with US$4.819 billion for the same period in 2023.

Net sales by Deere & Company worldwide were US$13.610 billion for the most recent quarter and US$24.097 billion for six months, compared with US$16.079 billion and US$27.481 billion during the same period in 2023.

What this means for Deere & Company is a worldwide net sales and revenues decrease of 12% to US$15.235 billion, for the second quarter of 2024 and when extrapolated out to six months the decrease shows up at 9%, to US$27.420 billion.

A softening of the record sales levels achieved over the past three years for farm fleet inventory should come as no surprise as world markets soften in the face of higher inflation

However, chairman and chief executive officer of Deere & Company, John C. May, saw the positive aspects to these latest results, “John Deere’s second-quarter results were noteworthy in light of continued changes across the global agricultural sector.

“Thanks to the dedication and hard work of our team, we continue to demonstrate structurally higher performance levels across business cycles and are benefitting from stability in construction end markets amid declining agricultural and turf demand,” John C. May concluded.

Company Outlook

Net income attributable to Deere & Company for fiscal 2024 is forecasted to be approximately US$7.0 billion.

“We are proactively managing our production and inventory levels to adapt to demand changes and position the business for the future,” John C. May explains further, “Despite market conditions, we are committed to our strategy and are actively investing in and deploying innovative technologies, products, and solutions to ensure our customers’ success.” 

What the divisions contributed

Production and precision agriculture sales decreased for the quarter as a result of lower shipment volumes, partially offset by price realisation. Operating profit decreased due to lower shipment volumes and higher production costs, partially offset by price realisation.

Small agriculture and turf sales decreased for the quarter as a result of lower shipment volumes, partially offset by price realisation. Operating profit decreased due to lower shipment volumes, partially offset by price realisation. 

Construction and forestry sales decreased for the quarter due to lower shipment volumes. Operating profit decreased due to lower shipment volumes and higher SA&G and R&D expenses.

Financial services net income for the quarter increased due to income earned on higher average portfolio balances, partially offset by a higher provision for credit losses and less favourable financing spreads.

The results of the prior period were also affected by a correction of the accounting treatment for financing incentives offered to John Deere dealers. The cumulative effect of this correction, US$173 million pre-tax (US$135 million after-tax), was recorded in the second quarter of 2023. 

Outlook for the full year

Shareholders of Deere & Company stock have had a good run over the past three years, and they will need to reflect on that as the company predicts net sales for the Production and Precision Ag division to be down by 20 to 25% for Fiscal 2024. With sales from Small Ag and Turf in the same predicament, expected to be down by 20 to 25% for Fiscal 2024. While, Construction and Forestry will get a breather with sales taking only a 5 to 10% dip for Fiscal 2024.