CHICAGO Deere & Co.s outlook remains upbeat despite an anticipated fall in equipment sales during its fiscal fourth quarter and full year.
The Moline, Ill.-based company expects equipment sales to drop 6 percent year on year for the three months ending April 30, with full-year sales seen falling about 3 percent.
Deere is facing slowing demand for agricultural equipment, offset somewhat by increased demand for construction and forestry equipment, while transitioning equipment production to Tier IV emissions standards mandated by the U.S. Environmental Protection Agency.
"Even in the face of moderating demand for agricultural equipment, Deere is well-positioned to deliver solid performance. ... Our extensive investments in new products and new markets will provide strong support to our results and keep our strategic plans moving ahead," chairman and chief executive officer Samuel R. Allen said in a statement accompanying Deeres earnings results.
"We are building markets worldwide, launching new products, and getting new capacity up and running," manager of investor communications Susan Karlix said in Deeres Feb. 12 earnings call.
However, the "changeover of engine technologies affects normal seasonal patterns. (There will be) product transitions in combines and tractors," she said, adding that the sales mix will be a factor in revenue and income.
"We continue to have a strong order book on tractorsout into early September," Tony Huegel, director of investor relations, said.
But the company is completing its final transition to meet emissions regulations in April, which could affect shipping patterns. Its early order pattern on combines for the U.S. and Canadian markets logged double-digit declines in the first quarter, but that was expected, he said.
"Our outlook for large equipment, year over year, are roughly in line (with earlier forecasts)," Huegel said, noting that production from May forward will be for Tier IV equipment.
Now that Congress has passed "a long-term farm bill, (it) supports our customers and removes a level of uncertainty," he said, but added that it is still premature to determine any other resulting effects.
The farm bill, which was signed into law Feb. 7, projects spending at $956 billion through 2023, according a Congressional Budget Office estimate.