Deere lowers profit outlook, plans cost cuts

Tractor maker Deere & Co., recalibrating as anxious farmers put off equipment purchases, said Friday it is cutting costs by at least $25 million while trimming its profit expectations for the second time this year.

The cuts, which will continue into the fourth quarter, will make Moline-based Deere “a more efficient and nimble organization,” said Chief Financial Officer Ryan Campbell. He said the company will report additional details when it releases fourth quarter earnings Nov. 27.

Campbell told analysts in a conference call that the moves will involve “a footprint assessment and an increased focus on investments with the most opportunity for differentiation.” The goal, he said, is to bring Deere to 15 percent operating profits by 2022 versus its current rate of about 12 percent.

Deere now projects its 2019 profit at $3.2 billion versus a prior forecast of $3.3 billion. A decline in sales for its agricultural equipment was partially offset by improved results in its smaller construction and forestry operation. Executives said that overall economic trends are positive, but that the agricultural sector is weighed down by the trade war with China and weather that delayed spring planting.

”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,” Chairman and CEO Samuel Allen said in a prepared statement.

Deere said its profit for the third quarter ended July 28 was $899 million, or $2.81 a share, down 1 percent from the same period a year ago. Revenue was off 3 percent to $10.4 billion. The results were short of analysts’ expectations, but investors registered relief that they weren’t worse. Deere shares rose 3.8 percent in Friday’s trading to close at $149.23.

Widespread and heavy flooding severely delayed planting this year for thousands of farmers. In the 18 states that grow most of the nation’s corn, government reports showed that only 58% of the crop had been planted by the last week of May, far from the 90% in a typical year. Less than half of the normal soybean crop had been planted in that same period, leaving many farmers to decide whether to plant at all.

Rising trade tensions have exacerbated the situation. China this month abruptly cut off purchases of U.S. farm products in protest of tariffs and tariff threats from the Trump administration.

China bought $6 billion in U.S. farm exports last year, according to the Census Bureau. It’s the world’s biggest soybean buyer and it purchased about 60 percent of U.S. soybean exports in 2018.

Soybean prices have been deteriorating since the trade war began.

In May, Deere lowered its profit expectations from $3.6 billion, and lowered revenue expectations as well.

Contributing: Associated Press