Deere & Company reported net income of $757 million for the fourth quarter ended Nov. 1, 2020, compared with net income of $722 million for the quarter ended Nov. 3, 2019. For fiscal 2020, net income attributable to Deere & Company was $2.8 billion, compared with $3.3 billion in 2019.
Worldwide net sales and revenues decreased 2%, to $9.7 billion, for the fourth quarter of 2020 and declined 9%, to $35.5 billion, for the full year. Equipment operations net sales were $8.7 billion for the quarter and $31.3 billion for the year, compared with corresponding totals of $8.7 billion and $34.9 billion in 2019. “John Deere delivered another quarter of strong performance and a solid year despite the challenges associated with https://www.aga-parts.com/hitachi-construction/ managing the pandemic,” said John C. May, chairman and chief executive officer. “In this regard, I would like to pay tribute to the thousands of John Deere employees, dealers and suppliers throughout the world who have helped us safely maintain our operations and serve customers. Because of their contributions, Deere was able to complete a successful year and is positioned to continue providing differentiated solutions and unlocking even greater value for customers.”
Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $3.6 billion to $4 billion. In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to May. “Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment,” he said. “At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers’ operations.”
Net income in the fourth quarter and full-year 2020 was negatively affected by impairment charges and employee-separation costs of $211 million and $458 million after-tax, respectively. For the same periods in 2019, the similar charges were $74 million and $82 million. In addition, net income was unfavorably affected by discrete adjustments to the provision for income taxes in both periods of 2020 and favorably impacted in both periods of 2019.
Agriculture & Turf sales increased for the quarter due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit rose primarily due to price realization, lower research and development expenses, reduced selling, administrative and general expenses, improved shipment volumes/mix and lower warranty expenses. These items were partially offset by employee-separation expenses and impairments.
Construction & Forestry sales moved lower for the quarter primarily due to lower shipment volumes, partially offset by price realization. Operating profit declined mainly due to lower sales volume/mix, impairments and employee-separation expenses. The decrease in profit was partially offset by price realization, lower research and development expenses, reduced selling, administrative, and general expenses, lower warranty expenses, and improved production costs.
Market Conditions & Outlook
Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to increase by 10-15% for fiscal-year 2021, including a positive currency-translation effect of 1%. Industry sales of agricultural equipment in the U.S. and Canada are forecast to rise 5-10% driven by gains in larger models. Full-year industry sales in the EU28 member nations are forecast to be flat to up 5%. In South America, industry sales of tractors and combines are forecast to be up about 5% while Asian sales are expected to be slightly lower. Industry sales of turf and utility equipment in the U.S. and Canada are forecast to be flat to up 5%.
Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are anticipated to be up 5-10% for 2021 with foreign-currency rates having a favorable translation effect of 1%. The outlook reflects some degree of recovery from the pandemic in construction equipment, continued strength in compact construction due to residential building activity, and expected growth in the roadbuilding sector. On an industry basis, North American construction equipment sales are expected to be down about 5% with sales of compact equipment up about 5%. Global forestry industry sales are forecast to be flat to up 5% for the year.
Financial Services. Fiscal-year 2021 net income attributable to Deere & Company for the financial services operations is forecast to be approximately $630 million. Results are expected to benefit from favorable financing spreads, lower losses on operating-lease residual values, and income earned on a higher average portfolio, partially offset by a higher provision for credit losses.