Deere & Co. (DE) Q3 Earnings call transcript Aug 15, 2024
In the third quarter of fiscal 2024, Deere & Company faced a challenging macroeconomic environment, with ag fundamentals remaining muted and construction and forestry markets showing signs of tempered demand. Despite these difficulties, the company executed its plan with discipline, focusing on proactive inventory and cost management to position itself for future growth.
Financial Results and Market Conditions
Deere & Company's net sales and revenues for the third quarter were down 17%, primarily driven by lower shipment volumes in both the equipment and production and precision ag segments. Net income attributable to the company was $1.734 billion, with a 18.5% margin for the equipment operations. The company's net sales for the equipment operations were down 20%, and the production and precision ag segment saw a 25% decrease in net sales.
Ag and Turf Segments
In the ag and turf segments, net sales were down 18%, with lower shipment volumes partially offset by price realization. The company's operating profit for the small ag and turf segment declined due to lower shipment volumes and higher warranty expenses. Despite these challenges, Deere & Company remains optimistic about the long-term outlook for the ag and turf industries, with a focus on developing precision solutions and leveraging its extensive product portfolio, tech stack, and unparalleled service and support to help customers address their unique challenges.
Construction & Forestry Segment
The construction and forestry segment faced a downshift in demand and an uptick in used inventories, resulting in a 13% decrease in net sales for the quarter. Operating profit for this segment was down due to lower shipment volumes, unfavorable sales mix, and negative price realization. Looking ahead, Deere & Company expects industry sales for earthmoving equipment in the U.S. and Canada to be down 5% to 10%, while compact construction equipment is forecasted to be flat to down 5%.
Future Outlook and Strategic Priorities
Despite the challenging market conditions, Deere & Company remains focused on its strategic priorities, including proactive inventory management, disciplined cost control, and investment in future growth. The company is positioning itself to respond effectively to changes in retail demand and is committed to delivering high-quality equipment and innovative solutions to its customers.
Early Order Programs and Inventory Management
Deere & Company's early order programs for model year '25 are showing promising signs, with orders tracking slightly above pre-2022 levels. The company is also working to manage inventory levels, focusing on reducing used inventory and maintaining balance in the market. This strategic approach is aimed at positioning the company for success in the face of evolving market dynamics.
Conclusion
Deere & Company's third quarter earnings call highlighted the company's resilience in the face of challenging market conditions, with a focus on disciplined execution, proactive inventory management, and cost control. Looking ahead, the company is optimistic about its future prospects and is committed to delivering value for its customers through innovative solutions and unparalleled support.