Iowa’s largest manufacturing employer is reporting first quarter earnings today that reflect a significant drop from a year ago. Quad Cities-based Deere and Company shows net income for the quarter at nearly $387 million, compared to $681 million in the first quarter last year. That’s a slide of $294 million.
Deere spokesman Ken Golden says the news is not a surprise. “We had projected the global farm economy was going to be sluggish this year, but we’re also coming off of some really high, record years, so you have to put that in perspective,” Golden says. “The report we put out today is all about the sluggish farm economy but also our diverse lineup, because construction and forestry and financial services had higher profits.” Worldwide net sales and revenues for the first quarter fell 17 percent, to around $6.4 billion, down from $7.6 billion last year.
The report also shows net sales of the equipment operations were down $1.3 million. “Yes, we’re down from a year ago but this is about where we thought we would be,” Golden says. “We had projected going into the year that it was going to be a soft year, especially in large agricultural machinery which is really sort of a sweet spot for John Deere.”
Last month, Deere announced indefinite layoffs at five locations that build ag equipment. That includes roughly 565 workers at three locations in Waterloo, 300 at the Des Moines Works in Ankeny and 45 at the Harvester Works in East Moline, Illinois. About 500 employees at Deere’s Seeding and Cylinder facility in Moline, Illinois, also will go on an extended shutdown to adjust inventory.
Golden was asked if more job cuts loom. “We have taken the action that we needed to take based on what we knew,” Golden says. “We knew that industry sales were going to be softer, especially in agriculture. We have taken those job actions and we are hopeful that more are not going to be needed.” Besides Iowa and the Midwest, farmers in many parts of the world have struggled with drought and other severe weather issues in recent years, while last year, prices for many key U.S. commodities took a nose-dive.
Golden says it was expected that the sale of ag equipment, like big tractors and combines, would take a hit. “If you compare large ag sales from just two years ago, we’re down 50%,” Golden says. “The good news is, we’re a much better company and net income is higher than it would have been in those types of decreases in the past.” Looking ahead, Deere equipment sales are projected to drop 17-percent for fiscal 2015 and be down about 19-percent for the second quarter compared with year-ago periods.
A Deere news release says, “…even with a continued pullback in the agricultural sector, John Deere expects to remain solidly profitable in 2015. Our forecast reflects a level of results much better than we’ve experienced in previous downturns. This illustrates our success establishing a wider range of revenue sources and a more durable business model.”