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Deere’s profit falls after 28 percent drop in sales

Earns Deere
In its earnings release, Deere said it expects farmers to remain cautious about new equipment purchases because of the economy. Seth Perlman / AP
/ Source: The Associated Press

Deere and Co. lost $223 million in the fourth quarter, reflecting big charges and a 28 percent slump in sales as demand for tractors, combines and construction equipment sagged amid the global economic downturn.

Deere is the biggest U.S. maker of farm equipment, and sluggish economic conditions in the United States and much of the rest of the world continue to drive down demand for its agricultural mainstays. Prices of major crops such as corn and soybeans show no sign of rebounding to anything like the highs of the past couple of years, when many farmers bought new equipment.

Deere's construction equipment business has also been hurt by the sluggish global economy and slowdown in home and commercial construction.

Nonetheless, the company based in Moline, Illinois, said Wednesday it would have been profitable without the unusual items in the latest quarter.

Deere said it expects its equipment sales to drop another 1 percent next year, including a 10 percent slide in the first quarter. The company forecasts a $900 million profit next year.

The company lost 53 cents a share in the three months ended Oct. 31 in contrast to a profit of $345 million, or 81 cents a share, a year earlier.

The loss included charges of $321.8 million for a write-down in the value of assets and restructuring expenses, including the cost of laying off hundreds of workers earlier this year. Otherwise, Deere said it would have earned 23 cents per share.

Analysts were looking for earnings of 3 cents a share before items.

Worldwide revenue dropped to $5.334 billion from $7.4 billion a year ago.

Sales of farm and construction equipment dropped 26 percent in the U.S. and Canada and 35 percent in the rest of the world. Deere's equipment operations reported an operating loss of $22 million for the quarter, down from a profit of $549 million a year earlier.

The company noted, however, that its costs for raw materials dropped during the quarter, helping its results. High raw materials costs have been a drag on the results of many heavy equipment makers through the economic downturn.

In its earnings release, Deere said it expects farmers to remain cautious about new equipment purchases because of the economy.

For the year, Deere reported a profit of $873.5 million, or $2.06 per share, down from $2.05 billion, or $4.70 per share, a year earlier.

"In the face of intense global economic pressure, John Deere has completed a solidly profitable year and maintained its strong financial condition," said Samuel R. Allen, president and chief executive officer. He took over at the beginning of the quarter for Robert W. Lane.