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Deere sales drop amid tough conditions in construction, forestry equipment markets

August 25, 2016

By: Daily Commercial News

Illinois-based equipment manufacturer Deere and Company, which sells John Deere construction equipment among other products, announced a drop-off in sales for its third quarter worldwide in its third-quarter earnings summary.

Construction and forestry sales decreased 24 per cent for the quarter and 21 per cent for nine months mainly as a result of lower shipment volumes for the quarter ending July 31, according to a statement.

Operating profit in this sector was $54 million for the quarter and $197 million for nine months (prices in U.S. dollars), compared with $129 million and $464 million for the corresponding periods last year.

Operating profit fell for the quarter mainly due to reduced shipment volumes and a less favourable product mix, partially offset by lower production costs, a decrease in selling, administrative and general expenses and price realization.

Looking ahead in the construction and forestry sector, Deere’s worldwide sales of construction and forestry equipment are forecast to be down about 18 per cent for 2016, including a negative currency-translation effect of about one per cent.

The forecast decline in sales largely reflects the impact of weak conditions in North America. Deere says.

Consumer spending patterns, real estate and housing prices, the number of housing starts and interest rates are especially important to sales of the company’s construction and forestry equipment, the report indicates.

The levels of public and non-residential construction also impact the results of the company’s construction and forestry segment.

Overall for Deere, for the first nine months of the year, net income was $1.239 billion, compared with $1.589 billion last year.

Net income for the third quarter was $488.8 million, down from $511.6 million in the same quarter last year.

“John Deere’s performance in the third quarter reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets,” said Samuel R. Allen, chairman and chief executive officer.

By: Daily Commercial News

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