REUTERS — Deere & Co. has beat analysts’ expectations for third-quarter profit as stronger pricing and cost control measures protected its margins from sluggish demand for its farm equipment.
U.S. machinery makers have succeeded in maintaining the price increases they implemented two years ago, a move that was prompted by supply chain complications and a surge in demand for industrial and agricultural equipment.
The higher prices have helped farm equipment makers to shield their profits from a slowdown in demand for new machines amid a decline in crop prices and high borrowing costs, which have also forced dealers to limit inventory restocking.
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Deere maintained its 2024 net income at about US$7 billion, even as farm incomes are forecast to plunge in 2024 due to a sharp decline in commodity crop prices, heightened production costs and shrinking government support.
For the third quarter, Deere reported a net income of $6.29 per share, compared with trade estimates of $5.63, while net sales and revenue decreased 17 per cent to $13.15 billion.
“Deere’s pricing power was reflected well in Q3 as price helped to dampen impacts from contracting volumes,” CFRA Research analyst Jonathan Sakraida said.
Though sales in one of its agriculture segments, which includes larger farm equipment, fell 25 per cent to $5.1 billion due to lower shipment volumes, the impact was partially offset by better pricing.
Deere said it expects an improved favourable price realization in its agriculture segments in 2024 compared to its previous targets.
“In response to weak market conditions, we have taken steps to reduce costs and strategically align our production with customer needs,” chief executive officer John C. May said.
Deere said in June it would cut production jobs and reduce salaried employees to keep a tight lid on costs.
