Deere & Company reported that net sales and revenues increased 5 percent in both the fourth quarter and fiscal full-year 2019. Net equipment sales were $8.703 billion for the quarter and $34.886 billion for the year, compared to fiscal 2018’s $8.343 billion and $33.351 billion, respectively.
Continuing negatives for Deere include agricultural sector uncertainties, lingering trade tensions and operating-lease losses in its financial services segment. But CEO John C. May says general economic conditions have remained favorable. “This has supported demand for smaller equipment and led to solid results for Deere’s construction and forestry business, which had a record year for sales and operating profit,” he says.
Deere is putting yellow caution tape around 2020, however, saying net sales for its Construction & Forestry division are expected to be down 10 to 15 percent and its Agricultural & Turf division net sales will be down 5 to 10 percent.
“The outlook reflects slowing construction activity as well as the company’s efforts to manage dealer inventory levels,” Deere says. “In forestry, global industry sales are expected to be in line with the previous year.”
Construction & Forestry results
As May indicated, Deere’s Construction & Forestry division was a bright spot in both 4Q and fiscal 2019, primarily due to higher shipment volumes and price realization. Deere says the inclusion of Wirtgen’s sales for two additional months in 2019 accounted for about 4 percent of the year’s net sales increase.
Wirtgen’s operating profit was $67 million for the quarter and $343 million for the full year, compared with $79 million and $116 million for the corresponding periods of 2018, Deere says.
“Excluding Wirtgen, the decline in Construction & Forestry results for the quarter was primarily due to higher production costs, increased selling, administrative, and general expenses, and a less-favorable sales mix, partially offset by higher shipment volumes and price realization. Full-year 2019 results, excluding Wirtgen, moved higher as a result of price realization and higher shipment volumes, partially offset by higher production costs and a less-favorable sales mix,” Deere says.