Total equipment sales rose to $6.941 billion during the quarter, ending January 27, and brought in an operating profit of $577 million, an increase of 38 percent over the same period one year ago.
Deere’s net sales and revenue, which includes equipment sales and its financial services division earnings, also saw a healthy increase for the quarter, rising 15 percent to $7.984 billion. Net income for the quarter was $498 billion—a major turnaround from the $535 million the company lost during 1Q 2018.
Construction and forestry sales soared 31 percent over 1Q 2018, reaching $2.3 billion. The division brought in $229 million in operating profit, an increase of 616%.
Deere says the construction division’s sales were up primarily due to the inclusion of Wirtgen for the full year, versus the one month in the first quarter of 2018. Deere completed its $5.2 billion acquisition of Wirtgen in December 2017. Deere says Wirtgen brought in a profit of $14 million for the first quarter of 2019.
Construction and forestry sales also increased due to higher shipment volumes. The company notes that its construction gains were partially offset by higher production costs and a less favorable product mix.
Agriculture and turf sales rose 10 percent to $4.7 billion, with operating profit falling 10 percent to $348 million.
Deere chairman and CEO Samuel Allen says that the quarter represents “solid progress” for the company—particularly the strong performance of the construction and forestry division—but notes that higher costs for “raw materials and logistics” as well as “customer concern over tariffs and trade policies” hurt the company’s results.
“These latter issues have weighed on market sentiment and caused farmers to become more cautious about making major purchases,” he says. “We believe cost pressures should abate as the year progresses and are hopeful we will soon have more clarity around trade issues. As a result, we remain cautiously optimistic about our prospects for the year ahead.”
Deere expects net sales and revenues to increase by 7 percent in 2019 to just below $40 billion.
“Despite unsettled conditions in some of our key markets, Deere expects to achieve strong financial results in 2019,” adds Allen. “This is a testament to the success of our actions to create a more flexible cost structure, expand our global customer base, and develop leadership in the latest precision technologies. Customers are responding with great enthusiasm to the advanced features and technology in our new products. We are confident Deere is well-positioned to achieve its financial goals and firmly believe the company remains on track for delivering solid operating performance and significant value to customers and investors in the future.”