Deere & Co, the world’s largest farm equipment maker, reported a weaker-than-expected quarterly profit as higher manufacturing costs and other expenses cut into earnings and a strong dollar reduced the value of international sales.
Deere forecast higher sales and earnings for its new fiscal year.
Overhead costs and spending on research and development rose by about $100-million (U.S.) from the previous quarter, JPMorgan analyst Ann Duignan said in a note to clients.
“Expectations were high coming into this report,” she added.
Net income rose to $687.6-million, or $1.75 per share, in the fourth quarter ended on Oct. 31 from $669.6-million, or $1.62 per share, a year earlier.
The results missed the analysts’ average estimate by 13 cents a share, according to Thomson Reuters I/B/E/S.
R&D expenses were up about 14 per cent year-over-year, Deere said, while selling, administrative and other costs rose 9 percent, partly because of increased incentive compensation, according to presentation materials ahead of the company’s earnings conference call.
Sales rose 14 per cent to $9.79-billion, with equipment operations contributing $9.05-billion. Analysts were expecting sales of $8.85-billion.
Stronger machinery sales in North America and higher prices offset weaker international demand and the negative impact from currency fluctuations.
Moline, Illinois-based Deere said it expected flat North American demand for farm equipment in fiscal 2013 after a strong 2012. Industry sales in euro zone countries will be flat to down slightly, while soft Indian and Chinese economies will keep demand flat there as well.
The company said it expected South America to show the strongest demand in 2013, reflecting a commodities boom.
Overall, Deere equipment sales will rise around 5 per cent in fiscal 2013, with earnings increasing to about $3.2-billion from $3.07-billion in 2012, the company said.