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Soft market, market uncertainties, and tight supply may mean $$$ Higher Prices?
{from the Web}
DEERE SCALING BACK EQUIPMENT PRODUCTION March 21, 2001
Production cuts affecting construction and commercial and consumer equipment, as well as large tractors
Second-quarter results likely to be lower than last year
Company targeting higher earnings for year, though attainment may prove challenging
Rigorous asset management remains a top priority
MOLINE, IL (March 21, 2001) Deere & Company today announced it was moving to scale back production in its major equipment operations and that, partly as a result, earnings for the second quarter ending April 30 were likely to fall below year-earlier levels. "Continued caution on the part of customers has prompted our decision to reduce production schedules," said Robert W. Lane, chairman and chief executive officer.
"Such steps this early in the season affirm our continuing commitment to rigorous asset management." Products primarily affected include construction and grounds-care equipment, but also include large farm tractors, he said. As a result, the company's forecast for physical volume of sales has been reduced for both the quarter and full year.
In construction equipment, the retail-sales slowdown has extended through mid-March. Deere's production levels have responded quickly to the retail environment due to its estimate to cash order-fulfillment process, which adjusts construction-equipment production directly in line with order activity. "While this puts Deere in an industry-leading position with respect to inventory management, it also means that any change in retail order patterns has a more immediate impact on earnings," Lane commented.
Production schedules are also being reduced in the company's commercial and consumer equipment unit, where adverse weather is having a negative effect on income at this time. "Weather plays a major role in the timing of ground-care product sales, and this year's cold and wet conditions have delayed retail sales for many products," Lane said. In addition, under a new-order fulfillment process being adopted for certain commercial products, changes in retail orders have a more immediate impact on the division's production volumes and earnings.
In another development, a recent fire, at a storage facility near Davenport, Iowa, destroyed certain attachments and commercial grounds-care products. Although contents and business interruption are covered by insurance, any related loss of sales could have an adverse short-term impact on the division's financial results. The fire's effect should be largely offset in future quarters, however. In the company's North American agricultural-equipment operations, retail sales of John Deere combines and cotton-pickers as well as hay, seeding and tillage equipment have been higher than last year though mid-March.
However, sales of row-crop tractors have been relatively flat over the same period. As a result, the company has announced a shutdown of its Waterloo, Iowa, tractor-manufacturing facility for a week in April. "Though it's early in the season, modest adjustments of this sort show our commitment to balancing production with retail sales," Lane said.
Deere is closely monitoring the foot-and-mouth disease situation in Europe and other parts of the world, whose near-term impact on farm-machinery sales is uncertain, Lane said. Key issues affecting this uncertainty include the ultimate extent and severity of the disease, in addition to the amount of government payments that farmers are likely to receive for the loss of affected livestock.
Overall, Deere now expects its physical volume of sales without acquisitions to be flat for the quarter and up 4 percent for the year. Previously, the company had forecast increases of 5 percent and 6 percent for the respective periods. Including the effect of acquisitions, physical volume is expected to be up 5 percent for the quarter and 7 percent for the year. These factors are expected to cost about 3 percentage points of operating margin in the second quarter.
"While we continue to set our sights on higher earnings for the year, the current market environment is making this goal more challenging to reach," Lane said. "Our decision to cut back production schedules in advance of the important spring selling season is a difficult one. However, through actions to maintain low asset levels, we're confident the stage is being set for improved returns to shareholders and a further enhancement in our competitive position across the John Deere business lineup."
{from the Web}
DEERE SCALING BACK EQUIPMENT PRODUCTION March 21, 2001
Production cuts affecting construction and commercial and consumer equipment, as well as large tractors
Second-quarter results likely to be lower than last year
Company targeting higher earnings for year, though attainment may prove challenging
Rigorous asset management remains a top priority
MOLINE, IL (March 21, 2001) Deere & Company today announced it was moving to scale back production in its major equipment operations and that, partly as a result, earnings for the second quarter ending April 30 were likely to fall below year-earlier levels. "Continued caution on the part of customers has prompted our decision to reduce production schedules," said Robert W. Lane, chairman and chief executive officer.
"Such steps this early in the season affirm our continuing commitment to rigorous asset management." Products primarily affected include construction and grounds-care equipment, but also include large farm tractors, he said. As a result, the company's forecast for physical volume of sales has been reduced for both the quarter and full year.
In construction equipment, the retail-sales slowdown has extended through mid-March. Deere's production levels have responded quickly to the retail environment due to its estimate to cash order-fulfillment process, which adjusts construction-equipment production directly in line with order activity. "While this puts Deere in an industry-leading position with respect to inventory management, it also means that any change in retail order patterns has a more immediate impact on earnings," Lane commented.
Production schedules are also being reduced in the company's commercial and consumer equipment unit, where adverse weather is having a negative effect on income at this time. "Weather plays a major role in the timing of ground-care product sales, and this year's cold and wet conditions have delayed retail sales for many products," Lane said. In addition, under a new-order fulfillment process being adopted for certain commercial products, changes in retail orders have a more immediate impact on the division's production volumes and earnings.
In another development, a recent fire, at a storage facility near Davenport, Iowa, destroyed certain attachments and commercial grounds-care products. Although contents and business interruption are covered by insurance, any related loss of sales could have an adverse short-term impact on the division's financial results. The fire's effect should be largely offset in future quarters, however. In the company's North American agricultural-equipment operations, retail sales of John Deere combines and cotton-pickers as well as hay, seeding and tillage equipment have been higher than last year though mid-March.
However, sales of row-crop tractors have been relatively flat over the same period. As a result, the company has announced a shutdown of its Waterloo, Iowa, tractor-manufacturing facility for a week in April. "Though it's early in the season, modest adjustments of this sort show our commitment to balancing production with retail sales," Lane said.
Deere is closely monitoring the foot-and-mouth disease situation in Europe and other parts of the world, whose near-term impact on farm-machinery sales is uncertain, Lane said. Key issues affecting this uncertainty include the ultimate extent and severity of the disease, in addition to the amount of government payments that farmers are likely to receive for the loss of affected livestock.
Overall, Deere now expects its physical volume of sales without acquisitions to be flat for the quarter and up 4 percent for the year. Previously, the company had forecast increases of 5 percent and 6 percent for the respective periods. Including the effect of acquisitions, physical volume is expected to be up 5 percent for the quarter and 7 percent for the year. These factors are expected to cost about 3 percentage points of operating margin in the second quarter.
"While we continue to set our sights on higher earnings for the year, the current market environment is making this goal more challenging to reach," Lane said. "Our decision to cut back production schedules in advance of the important spring selling season is a difficult one. However, through actions to maintain low asset levels, we're confident the stage is being set for improved returns to shareholders and a further enhancement in our competitive position across the John Deere business lineup."