Deere & Co DE. third quarter profits plunged as the company's sales were hurt by the stronger dollar and tepid demand for agricultural equipment due to weak crop prices.
Reuters reported that Deere's third quarter net income dropped to $511.6 million from $850.7 million a year earlier. Total revenues dropped by a fifth to $7.6 billion, weighed down by the 24 percent decline in sales of farm and turf equipment, which account for more than two-third of revenue, to $5.31 billion and the 13 percent decrease in construction and forestry equipment sales to $1.53 billion. Citing a company statement on Friday, the report said Deere's performance was affected by the low demand for agricultural machinery caused by falling farm incomes and low commodity prices.
The Wall Street Journal that Deere, the world's largest seller of tractors and harvesting combines, had benefited from the previous decade's agriculture commodity boom that saw farmers invest in new equipment. However, with the decline of crop prices, the agriculture sector has scaled back equipment purchases leading to a glut in late-model used equipment inventories of dealers.
The report added that Deere said used equipment are a challenge and it has been coordinating with dealers to hasten sales of those. The Journal said Deere has been offering free warranty coverage and performance monitoring software to U.S. and Canadian buyers of certified used tractors and combines.
Reuters said that with the Illinois-based Deere's weak third quarter, the company also cut its outlook for fiscal 2015 net income to $1.8 billion from $1.9 billion as sales projections were further lowered to a 24 percent decline from 17 percent previously. With the announcement of its performance, the company's shares dropped by 8.1 percent to $83.32 on Friday.
The company expects sales in U.S., Canada, European Union and South America to fall due to the challenging environment faced by the agriculture industry. International sales have also been affected by the stronger dollar, which makes Deere's machines more expensive.
