Reuters — Farm equipment maker Deere and Co. posted a 43 per cent fall in first-quarter profit and cut its full-year profit forecast as lower corn prices and weak farm income weighed on demand for agricultural machinery.
The company, which gets nearly two-thirds of its revenue from farm and turf machinery, cut its 2015 net profit forecast to $1.8 billion from $1.9 billion (all figures US$).
Sales of Illinois-based Deere’s farm and turf machinery are expected to fall 23 per cent globally this year, it said. This includes a four per cent negative impact of a strong dollar. The company earlier forecast a sales fall of 20 per cent.
The company also has operations in Canada, Brazil, China, France, Germany, India, Russia and South Africa among others. The U.S. and Canada accounted for 62 percent of total revenue in 2014.
Deere’s overall equipment sales are expected to fall about 19 per cent in the current quarter ending April 30.
The company’s sales have been hit as bumper corn harvests drive down prices, leaving farmers with less cash to spend on equipment. Corn prices fell about 15 per cent in 2014, on top of a decline of nearly 40 per cent in 2013.
The U.S. Department of Agriculture said last week that net farm income is expected to fall 32 per cent to $73.6 billion in 2015, the lowest since 2009 and a drop of nearly 43 percent from the record high of $129 billion in 2013.
Net income attributable to Deere fell to $387 million, or $1.12 per share, in the first quarter ended Jan. 31, from $681 million, or $1.81 per share, a year earlier.
Sales fell 16.6 per cent to $6.38 billion.
Analysts on average had expected earnings of 83 cents per share on revenue $5.53 billion, according to Thomson Reuters I/B/E/S.
Up to Thursday’s close, the company’s stock had risen about eight per cent in the past 12 months, compared with an about 11 per cent rise in the Dow Jones U.S. Industrial Goods & Services index.
— Reporting for Reuters by Ankit Ajmera in Bangalore.