John Deere feels impact of energy slowdown in 3Q as construction equipment sales fall 13%

Updated Aug 24, 2015

John Deere 310L backhoe

After a third quarter that brought more severe decreases in sales and profit, John Deere has cut its forecast for the rest of the year as the company now faces slowed demand for construction equipment alongside an existing farming slump.

Deere sales fell 20 percent during the quarter to $7.6 billion while profit dropped 40 percent to $512 million. For the first nine months of the year, Deere sales have fallen 18 percent to $22 billion while profit has fallen 37 percent to $1.6 billion.

The company’s agriculture and turf equipment sales continue to be impacted by the global farming slowdown. Sales for the segment fell 24 percent during the quarter and are down 25 percent for the first nine months. The company forecasts ag sales to drop 25 percent in 2015.

Despite suffering its first fiscal year profit drop since 2009 last year due to the farming slowdown, construction equipment had been a bit of a bright spot for the company. During the second quarter, construction and forestry equipment sales rose 2 percent and the company was anticipating a 2-percent gain in annual revenues from the segment.

During the third quarter however, any gains from the segment were wiped out as the company met the similar effects from the energy sector slowdown as competitor Caterpillar. Construction and forestry sales fell 13 percent and are now flat for the first nine months of the year.

The company now expects construction and forestry sales to fall 5 percent on the year. Deere attributes the drop to lower demand from the energy sector and expected lower sales outside the U.S. and Canada.

Deere has also downgraded its net income forecast for the year, from the $1.9 billion forecasted in May to $1.8 billion. Total equipment sales are expected to drop 21 percent.