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Deere Reports Second Quarter Net Income of $2.098 Billion

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  • Quarterly earnings rise 17% on increase in net sales of 9%.

  • Market conditions and industry fundamentals support continuation of robust environment.

  • Full-year earnings forecast increased to $7.0 to $7.4 billion, including special items.

MOLINE, Ill., May 20, 2022 /CNW/ -- Deere & Company (NYSE: DE) reported net income of $2.098 billion for the second quarter ended May 1, 2022, or $6.81 per share, compared with net income of $1.790 billion, or $5.68 per share, for the quarter ended May 2, 2021. For the first six months of the year, net income attributable to Deere & Company was $3.001 billion, or $9.72 per share, compared with $3.013 billion, or $9.55 per share, for the same period last year.

Net sales and revenues increased 11 percent, to $13.370 billion, for the second quarter of 2022 and rose 8 percent, to $22.939 billion, for six months. Net sales were $12.034 billion for the quarter and $20.565 billion for six months, compared with $10.998 billion and $19.049 billion last year.

"Deere's second-quarter performance reflected a continuation of strong demand even as we face supply-chain pressures affecting production levels and delivery schedules," said John C. May, chairman and chief executive officer. "Deere employees, suppliers, and dealers are working hard to address these challenges. We are proud of their extraordinary efforts to get products to our customers as soon as possible under the challenging circumstances."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2022 is forecast to be in a range of $7.0 billion to $7.4 billion, which includes a net $220 million gain from special items in the second quarter of 2022. For further details on special items, see Note 1 of the press release financial statements.

"Looking ahead, we believe demand for farm equipment will continue benefiting from positive fundamentals in spite of availability concerns and inflationary pressures affecting our customers' input costs," May said. "The company's smart industrial strategy and recently announced Leap Ambitions are focused on helping customers manage higher costs and increasingly scarce inputs, while improving their yields, through the use of our integrated technologies."



















Deere & Company


Second Quarter


Year to Date


$ in millions, except per share amounts


2022


2021


% Change


2022


2021


% Change


Net sales and revenues


$

13,370


$

12,058


11%


$

22,939


$

21,170


8%


Net income


$

2,098


$

1,790


17%


$

3,001


$

3,013




Fully diluted EPS


$

6.81


$

5.68




$

9.72


$

9.55




Results for the second quarter of 2022 and year-to-date periods of 2022 and 2021 were impacted by special items. For further details, see Note 1 of the press release financial statements.











Production & Precision Agriculture


Second Quarter


$ in millions


2022


2021


% Change


Net sales


$

5,117


$

4,529


13%


Operating profit


$

1,057


$

1,007


5%


Operating margin



20.7%



22.2%




Production and precision agriculture sales increased for the quarter due to price realization and higher shipment volumes. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production costs, higher research and development and selling, administrative, and general expenses, and impairments related to events in Russia / Ukraine.











Small Agriculture & Turf


Second Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,570


$

3,390


5%


Operating profit


$

520


$

648


-20%


Operating margin



14.6%



19.1%




Small agriculture and turf sales for the quarter increased due to price realization partially offset by the unfavorable impact of currency translation. Operating profit decreased primarily due to higher production costs, a less-favorable sales mix, and higher selling, administrative, and general and research and development expenses. These items were partially offset by price realization.











Construction & Forestry


Second Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,347


$

3,079


9%


Operating profit


$

814


$

489


66%


Operating margin



24.3%



15.9%




Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes, partially offset by the unfavorable impact of currency translation. Operating profit increased due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture and price realization. These items were partially offset by higher production costs, impairments related to the events in Russia / Ukraine, and a less-favorable product mix.











Financial Services


Second Quarter


$ in millions


2022


2021


% Change


Net income


$

208


$

222


-6%


The decrease in financial services net income for the quarter was mainly due to higher reserves for credit losses related to the events in Russia / Ukraine, partially offset by income earned on a higher average portfolio. The prior year also benefited from a favorable adjustment to the provision for credit losses.









Industry Outlook for Fiscal 2022








Agriculture & Turf








U.S. & Canada:








Large Ag






Up ~ 20%


Small Ag & Turf






~ Flat


Europe






Up ~ 5%


South America (Tractors & Combines)






Up ~ 10%


Asia






Down moderately










Construction & Forestry








U.S. & Canada:








Construction Equipment






Up ~ 10%


Compact Construction Equipment






Flat to Up 5%


Global Forestry






Flat to Up 5%


Global Roadbuilding






Flat to Up 5%










Deere Segment Outlook for Fiscal 2022




Currency


Price


$ in millions


Net Sales


Translation


Realization


Production & Precision Ag


Up 25 to 30%


-1%


+13%


Small Ag & Turf


Up ~ 15%


-3%


+8%


Construction & Forestry


Up 10 to 15%


-2%


+9%










Financial Services


Net Income


$ 870




Financial Services. Full-year 2022 results are expected to be slightly lower than fiscal 2021 due to a higher provision for credit losses and higher selling, administrative, and general expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.

John Deere Capital Corporation

The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.





















Second Quarter


Year to Date


$ in millions


2022


2021


% Change


2022


2021


% Change


Revenue


$

651


$

675


-4%


$

1,294


$

1,332


-3%


Net income


$

159


$

177


-10%


$

348


$

344


1%


Ending portfolio balance










$

42,543


$

40,613


5%


Results in the quarter decreased due to a higher provision for credit losses and less-favorable financing spreads, partially offset by income earned on a higher average portfolio. For the year-to-date period, net income rose mainly due to income earned on a higher average portfolio and improvement on operating-lease residual values, partially offset by a higher provision for credit losses and less-favorable financing spreads. The prior year also benefited from a favorable adjustment to the provision for credit losses.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, including in the sections entitled "Company Outlook & Summary," "Industry Outlook," and "Deere Segment Outlook," relating to future events, expectations, and trends constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect all lines of the company's operations, generally, while others could more heavily affect a particular line of business.

Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events. Except as required by law, the company undertakes no obligation to update or revise its forward-looking statements. Further information concerning the company and its businesses, including factors that could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. "Risk Factors" of the company's most recent Annual Report on Form 10-K and the company's subsequent Quarterly Reports on Form 10-Q).

Factors Affecting All Lines of Business

All of the company's businesses and their results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; changing interest rates; inflation and deflation rates; changes in weather and climate patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts, including the current military conflict between Russia and Ukraine; natural disasters; and the spread of major epidemics or pandemics (including the COVID-19 pandemic).

Significant changes in market liquidity conditions, changes in the company's credit ratings, and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and purchase decisions, financing and repayment practices, and the number and size of customer delinquencies and defaults. A debt crisis in Europe, Latin America, or elsewhere could negatively impact currencies, global financial markets, funding sources and costs, asset and obligation values, customers, suppliers, and demand for equipment. The company's investment management activities could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings.

Additional factors that could materially affect the company's operations, access to capital, expenses, and results include changes in, uncertainty surrounding, and the impact of governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, governmental programs, policies, and tariffs for the benefit of certain industries or sectors; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health, and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws, and regulations and company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations; and compliance with U.S. and foreign laws when expanding to new markets and otherwise.

Other factors that could materially affect the company's results and operations include security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the company and its suppliers and dealers; security breaches with respect to the company's products; production, design, and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights, whether through theft, infringement, counterfeiting, or otherwise; the availability and prices of strategically sourced materials, components, and whole goods; delays or disruptions in the company's supply chain, including work stoppages or disputes by suppliers with their unionized labor; the failure of customers, dealers, suppliers, or the company to comply with laws, regulations, and company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection, and other ethical business practices; introduction of legislation that could affect the company's business model and intellectual property, such as right to repair or right to modify; events that damage the company's reputation or brand; significant investigations, claims, lawsuits, or other legal proceedings; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions; oil and energy prices, supplies, and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices, especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater-than-anticipated transaction costs; the integration of acquired businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures, or divestitures; the inability to deliver precision technology and agricultural solutions to customers; and the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts.

COVID-19

Uncertainties related to the continued effects of the COVID-19 pandemic have adversely affected and may continue to affect the company's business and outlook. These uncertainties include, among other things: the duration and impact of any resurgence in COVID-19; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and continued disruptions in the operations of one or more key suppliers, or the failure of any key suppliers; an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID-19 pandemic; the sustainability of the economic recovery from the pandemic remains unclear and significant volatility could continue for a prolonged period.

Agricultural Equipment Operations

The company's agricultural equipment operations are subject to a number of uncertainties, including certain factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products; world grain stocks; soil conditions; harvest yields; prices for commodities and livestock; crop and livestock production expenses; availability of fertilizer; availability of transport for crops; trade restrictions and tariffs; global trade agreements; the level of farm product exports; the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production); real estate values; available acreage for farming; changes in government farm programs and policies; international reaction to such programs; changes in and effects of crop insurance programs; changes in environmental regulations and their impact on farming practices; animal diseases and their effects on poultry, beef, and pork consumption and prices on livestock feed demand; and crop pests and diseases.

Production and Precision Agriculture Operations

The production and precision agriculture operations rely in part on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence. Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability and/or sustainability outcomes; the rate of adoption and use by customers; availability of technological innovations; speed of research and development; effectiveness of partnerships with third parties; and the dealer channel's ability to support and service precision technology solutions.

Small Agriculture and Turf Equipment

Factors affecting the company's small agriculture and turf equipment operations include customer profitability; labor supply; consumer borrowing patterns; consumer purchasing preferences; housing starts and supply; infrastructure investment; spending by municipalities and golf courses; and consumable input costs.

Construction and Forestry

Factors affecting the company's construction and forestry equipment operations include consumer spending patterns; real estate and housing prices; the number of housing starts; interest rates; commodity prices such as oil and gas; the levels of public and non-residential construction; and investment in infrastructure. Prices for pulp, paper, lumber, and structural panels affect sales of forestry equipment.

John Deere Financial

The liquidity and ongoing profitability of John Deere Capital Corporation and the company's other financial services subsidiaries depend on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.

DEERE & COMPANY
SECOND QUARTER 2022 PRESS RELEASE
(In millions of dollars) Unaudited






















Three Months Ended


Six Months Ended




May 1


May 2


%


May 1


May 2


%




2022


2021


Change


2022


2021


Change


Net sales and revenues:


















Production & precision ag net sales


$

5,117


$

4,529


+13


$

8,473


$

7,599


+12


Small ag & turf net sales



3,570



3,390


+5



6,201



5,904


+5


Construction & forestry net sales



3,347



3,079


+9



5,891



5,546


+6


Financial services revenues



864



892


-3



1,734



1,776


-2


Other revenues



472



168


+181



640



345


+86


Total net sales and revenues


$

13,370


$

12,058


+11


$

22,939


$

21,170


+8




















Operating profit: *


















Production & precision ag


$

1,057


$

1,007


+5


$

1,353


$

1,651


-18


Small ag & turf



520



648


-20



891



1,117


-20


Construction & forestry



814



489


+66



1,085



756


+44


Financial services



279



295


-5



577



553


+4


Total operating profit



2,670



2,439


+9



3,906



4,077


-4


Reconciling items **



(111)



(119)


-7



(195)



(226)


-14


Income taxes



(461)



(530)


-13



(710)



(838)


-15


Net income attributable to Deere & Company


$

2,098


$

1,790


...

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