Deere signals turnaround amid surge in demand

Industry-wide demand for large machinery will grow as much as 10 per cent in fiscal 2018, Deere said. North America is expected to be the strongest region, while Deere forecasts the sector’s sales will increase five per cent in Europe due to improving dairy and livestock markets. South American tractor and combine sales could rise as much as five per cent, particularly on favourable conditions in Argentina. Sales in Asia will be flat, it said.

Deere also makes construction and forestry equipment. It said fiscal 2018 sales in that segment will surge 69 per cent, mostly due to the pending acquisition of German road-construction equipment maker Wirtgen Group. The market for construction machines is booming on the back of strength in the U.S. housing market, Ubelhart said.

A sustained recovery in agricultural equipment is far from assured. Stubborn crop surpluses have crushed commodity prices and incomes in recent years, spurring some farmers to defer bigticket purchases, or buy used machinery instead. Some farmers may still try to squeeze more life out of their tractors and combines as the corn, soybean and wheat markets are widely expected to be dogged by excess supply into 2018, keeping a lid on prices.

Net income rose to US$1.57 a share in Deere’s fiscal fourth quarter from 90 cents a year earlier. That beat the US$1.47 average of 18 estimates compiled by Bloomberg. Deere forecast net income for fiscal 2018 of US$2.6 billion, exceeding the US$2.3 billion average estimate. Fourth-quarter equipment revenue rose to US$7.09 billion from US$5.65 billion a year earlier, beating the US$6.9 billion average estimate.