• Global farm recession, weak construction-equipment markets lead to lower sales and earnings for quarter and six months.
• All company businesses remain profitable for both periods, aided by sound execution and disciplined cost management.
• Full-year forecast calls for 9% sales decline and earnings of $1.2 billion.

MOLINE, Ill. — Net income attributable to Deere & Company was $495.4 million, or $1.56 per share, for the second quarter ended April 30, compared with $690.5 million, or $2.03 per share, for the same period last year.

For the first six months of the year, net income attributable to Deere & Company was $749.8 million, or $2.36 per share, compared with $1.077 billion, or $3.14 per share, last year.

Worldwide net sales and revenues decreased 4%, to $7.875 billion, for the second quarter and declined 8%, to $13.400 billion, for six months. Net sales of the equipment operations were $7.107 billion for the quarter and $11.876 billion for the first six months, compared with $7.399 billion and $13.004 billion for the periods last year.

“John Deere’s second-quarter performance reflected the continuing impact of the downturn in the global farm economy and further weakness in the construction equipment sector,” said Samuel R. Allen, chairman and chief executive officer. “In the face of challenging market conditions, Deere’s businesses benefited from the sound execution of operating plans, the strength of a broad product portfolio and our success creating a more flexible cost structure.”

Summary of Operations Net sales of the worldwide equipment operations declined 4% for the quarter and 9% for the first six months compared with the same periods a year ago. Sales included price realization of 1% for both periods and an unfavorable currency translation effect of 2% for the quarter and 3% for six months. Equipment net sales in the United States and Canada decreased 6% for the quarter and 11% year to date. Outside the U.S. and Canada, net sales decreased 1% for the quarter and 4% for the first six months, with unfavorable currency-translation effects of 4% and 7% for the periods.

Deere’s equipment operations reported operating profit of $688 million for the quarter and $902 million for six months, compared with $828 million and $1.242 billion last year. The declines for both periods were primarily due to lower shipment volumes, the unfavorable effects of foreign-currency exchange and the impact of a less favorable product mix. These factors were partially offset by price realization, lower production costs and lower selling, administrative and general expenses.

Net income of the company’s equipment operations was $393 million for the second quarter and $520 million for the first six months, compared with $524 million and $764 million for the corresponding periods of 2015.

Financial services reported net income attributable to Deere & Company of $102.6 million for the quarter and $232.0 million for six months compared with $169.8 million and $326.6 million last year. Lower results for both periods were primarily due to higher losses on lease residual values, less-favorable financing spreads and a higher provision for credit losses. Results for the first six months were also affected by the unfavorable effects of foreign currency exchange translation. Prior-year results benefited from a gain on the sale of the crop insurance business.

Company Outlook & Summary

Company equipment sales are projected to decrease about 9% for fiscal 2016 and to be about 12% lower for the third quarter compared with year-ago periods. Included in the forecast is a negative foreign-currency translation effect of about 2% for the full year and 1% in the third quarter. For fiscal 2016, net income attributable to Deere & Company is anticipated to be about $1.2 billion.

“Although our forecast calls for lower results this year in light of ongoing market pressures, Deere is continuing to perform at a much higher level than in previous downturns,” Allen said. “Deere’s financial condition remains strong and we believe the company is well-positioned to capitalize on attractive growth opportunities that will deliver value to our customers and investors in the future. At the same time, we are continuing to focus on ways to streamline our operations and make them more efficient and profitable.”

Equipment Division Performance

Agriculture & Turf. Sales were approximately the same for the quarter and down 5% for six months. The decline year-to-date was due largely to lower shipment volumes. Results for both periods were impacted by the unfavorable effects of foreign currency translation, partially offset by price realization.

Operating profit was $614 million for the quarter and $759 million year to date, compared with $639 million and $907 million, respectively, last year. Lower results for both periods were driven primarily by the unfavorable effects of foreign-currency exchange, lower shipment volumes and a less favorable product mix, partially offset by price realization, lower production costs and lower selling, administrative and general expenses.

Construction & Forestry. Construction and forestry sales decreased 16% for the quarter and 20% for six months mainly as a result of lower shipment volumes and higher sales-incentive costs. Operating profit was $74 million for the quarter and $143 million for six months, compared with $189 million and $335 million for the periods last year.

Operating profit decreased for the quarter mainly due to lower shipment volumes, higher sales-incentive costs and a less favorable product mix, partially offset by lower production costs and lower selling, administrative and general expenses. Six-month results decreased primarily due to lower shipment volumes and higher sales-incentive costs, partially offset by lower selling, administrative and general expenses and lower production costs.

Market Conditions & Outlook

Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to decrease by about 8% for fiscal-year 2016, including a negative currency translation effect of about 2%.

Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15-20% for 2016. The decline, reflecting the impact of low commodity prices and stagnant farm incomes, is expected to be most pronounced in the sale of higher horsepower models.

Full-year 2016 industry sales in the EU28 are forecast to be flat to down 5%, with the decline attributable to low commodity prices and farm incomes, including continued pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 15-20 % mainly as a result of economic and political concerns in Brazil. Asian sales are projected to be flat to down slightly, due in part to weakness in China.

Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2016. Deere sales are expected to benefit from new products and general economic growth.

Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are forecast to be down about 13% for 2016, including a negative currency-translation effect of about 1%. The forecast decline in sales largely reflects the impact of weak conditions in North America. In forestry, global industry sales are expected to be down 5-10% from last year’s strong levels.

Financial Services. Fiscal-year 2016 net income attributable to Deere & Company for the financial services operations is expected to be approximately $480 million. The outlook reflects less-favorable financing spreads, higher losses on lease residual values and an increased provision for credit losses. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.