Deere to slash costs after trade war hits earnings
Deere & Co announced a review of costs after a combination of the US-China trade war and bad weather dented its quarterly profits, forcing the company to trim its fullyear earnings forecast for a second time in the past three months.
Investors cheered the decision to control costs, sending its shares up 3.1% at $148.07.
The Moline, Illinois-based company said it is assessing its manufacturing footprint as part of the cost structure review.
It will reduce production by 20% at its facilities in Illinois and Iowa in the second of half of the year. The cuts will impact the production of large tractors.
The cost control measures are estimated to result in $25 million in savings this year and will be a centerpiece of its strategy over the next three years, the company told analysts on an earning call.
The comments came after Deere’s production costs in the third-quarter shot up by 2 percentage points from a quarter ago. Yet despite its efforts, full-year production costs are projected to be above its previous estimates.
Deere now expects full-year net income of $3.2 billion on annual sales growth of 4%, lower than the income of $3.3 billion on sales increases of about 5% projected earlier.
“Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases,” said Chief Executive Officer Samuel Allen. (RTRS)