Industryweek 35700 Tractor In Field
Industryweek 35700 Tractor In Field
Industryweek 35700 Tractor In Field
Industryweek 35700 Tractor In Field
Industryweek 35700 Tractor In Field

Deere Turns to Costs After Agriculture Operating Profits Slammed

Aug. 16, 2019
Deere & Co. said Friday it’s conducting a thorough assessment of its cost structure and taking actions to be more structurally profitable and efficient.

Deere & Co. isn’t selling as many tractors these days, with trade wars raging and crop prices near multi-year lows. Since many of its farmer customers aren’t buying, it’s looking for ways to save.

The Moline, Illinois-based company said Friday it’s conducting a thorough assessment of its cost structure and taking actions to be more structurally profitable and efficient. What measures those are exactly will be a focus for investors in a call to discuss financial results at 10 a.m. New York time.

Operating profit in the company’s biggest money-making segment, agriculture machinery, fell 24% from a year ago. Higher production costs was one of the culprits, along with lower shipment volumes. Deere is also forecasting slightly higher costs as a percentage of net sales for its equipment operations -- about 77% compared with 76% previously.

That’s in contrast with smaller peer, AGCO Corp., which last month said it secured lower steel costs that widened margins and helped it beat earnings estimates.

There isn’t much in Deere’s near-term outlooks to cheer about. North American agriculture machinery sales for the industry was revised to flat, from flat to up 5% last quarter. Its expectation for fiscal 2019 U.S. economic growth -- an indicator for its construction and forestry segment -- was revised to flat, while just last quarter, it expected an acceleration.

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