Citing declining sales globally, Deere and Co. reported a drop in its net income for its first three fiscal quarters — from $2.5 billion in 2019 to $1.99 billion for the same period this year.
The Moline, Ill.-based ag and construction equipment manufacturer reported a net income of $811 million for the fiscal quarter that ended Aug. 2. That’s $2.57 per share, compared to net income of $899 million, or $2.81 per share, for the quarter that ended July 28, 2019.
In May, the company had released a projected forecast that projected net income between $1.6 billion and $2 billion for the year, a revision from February’s pre-coronavirus projection of $2.7 billion and $3.1 billion.
As of Friday, Deere is projecting its yearly net income to fall between the two previous projections and reach about $2.25 billion, which could be affected by the continuing COVID-19 pandemic.
Worldwide net sales and revenues decreased 11 percent, to $8.925 billion, for the third quarter and declined 12 percent, to $25.809 billion, for the nine fiscal quarters.
Net sales of the equipment operations were $7.859 billion for the quarter and $22.612 billion for nine months, compared with $8.969 billion and $26.182 billion last year.
Company officials provided specifics on some of the steps taken this fiscal year as it embarks on a corporate reorganization, or what Deere has called its Smart Industrial Redesign.
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Deere plans to spend $435 million this fiscal year on one-time moves, such as $138 million earlier this year for salaried-employee buyouts and $175 million on salaried-employee reductions.
Other cost-saving measures include shutting down a small tractor manufacturing facility in China, a $37 million cost for the current fiscal year and selling a lawn-mowing business in Europe.
Those moves are projected to save about $260 million on an annual basis moving going forward. Officials have said they would be evaluating operations for months.
“We’ve taken some layers out of the organization. We’ve been able to respond much quicker in this very, very dynamic environment and that’s given us a lot of confidence on the path we’re going on,” said Ryan Campbell, Deere’s chief financial officer.
The other aspect of the smart industrial redesign is a focused approach on its precision ag, or the use of technology by operators in their fields. In other words, Deere is moving to position itself as the Apple of Ag.
But that use of technology, such as having a sprayer turn off between plants instead of running the entire time, cuts overhead expenses for farmers.
Cory Reed, president of Deere’s agriculture and turf division for production and precision ag, said nearly all the company’s advanced precision features saw higher take rates by customers than previous years.
That demonstrates “customers’ willingness for sustained investment in technology in the face of uncertain market conditions, specifically we see the significant levels of investment in solutions that have the highest demonstrable impact on customer economics,” he said.