Deere & Co. reduces its production in some of its core plants in North America, with increased trade pressures and severe weather conditions damaging farmers' incomes and declining demand for equipment. profit forecast. The farm equipment manufacturer reported $ 1.13 billion in revenue for the second quarter, or $ 3.52 per share. This is less than $ 1.21 billion, or $ 3.67 per share, reported in the same quarter last year.
The revised forecast is another indicator that farmers, and especially those from the Midwest, suffer from the trade battles of the Trump administration. On Friday, the president tried to ease the fears of escalating trade confrontations by canceling industrial metal tariffs with Mexico and Canada and pledging another package of aid to farmers affected by tariffs.
Deere said it lowered its forecasts because farmers do not buy as much equipment. Farmers are worried about the fall in harvest prices, international trade disputes and extreme weather events that have slowed down planting, including here in Iowa. Dery's earnings were lower than Wall Street's expectations, which led to a stock decline of more than 7% in afternoon trading.
"Continued concerns about access to export markets, short-term demand for commodities such as soybean and a slow-growing planting season in most of North America cause farmers to become much more cautious when making large purchases," he said. Chairman and Chief Executive Officer Samuel Allen said in the report.
Friday's interview with analysts, Josh Jepsen, director of investor relations, said in response to market dynamics, Deere cut production in its agricultural business to levels below retail sales. Production will be lower in some of its major plants in North America for the rest of the year
He said the changes mainly concern the production of large agricultural equipment, with its main plants supplying about 20% less than the previous year.
Locally, Deere produces great agricultural equipment such as harvesters and tractors at its East Moline and Waterloo plants. Deere spokesman Ken Gallon said the company does not specify where production cuts are being made, but only plans to cut demand in the second half of the year.
"Changes in production can be done without changing the size of the workforce," said Golden. "We have not announced any change in the workforce."
Deer cut his earnings forecast to $ 3.3 billion a year, compared to a previous estimate of about $ 3.6 billion. He also lowered his revenue expectations by 7%, which is now expecting a 5% growth.
Jepsen said when reporting the lower forecast and decision to cut production, Deere does not accept a trade agreement to be reached in the second half of the year.
"As a result, we are declining production in an attempt to calibrate our terrain where we want to end the year by 2020," he said. "20% … this is just an example of our big factories, which is not a large division, but a production unit, which is the size we see in some of our larger facilities."
The redundancies come when the US and China are imposing billions of dollars of escalating tariffs on imports, affecting to a large extent soybean farmers as about 60% of soy beans in the US are shipped to China.
Soybean prices dropped to a 10-year low this week.
Deere is not the only big farmer affected by the war. Caterpillar shares also traded lower this year
Jepsen said production cuts are the first step in responding to the uncertain market. In the second quarter, worldwide revenue grew by 6 percent to $ 11.34 billion, from $ 10.72 billion in the same period last year.
In the second quarter, Deere achieved better sales in construction and forestry. Sales rose 11% to 2.99 billion dollars due to higher volumes and prices of shipments. Despite the lower forecast for the year, Ryan Campbell, Chief Financial Officer, said the company expects a "full, gradual recovery" as the challenges – including trade strain, harsh weather conditions and lower demand for equipment – are reduced.
"Although we have cut the forecast for the net profit for the year, the $ 3.3bn forecast for the year will continue to be the second largest in our history." "Our second-quarter sales and earnings represent the largest second quarter the company's history, "Gold said in an e-mail." We believe that agricultural machinery customers are interrupting their purchase due to short-term uncertainties. We continue to believe that long-term factors remain intact to drive higher sales. "