Deere & Co. is returning to production in some of the main American American plants, with increased trade tensions and harsh weather that hurt farmers' income and reduced demand for equipment.
profit forecast. The producer of agricultural equipment reported revenue in the second quarter of $ 1.13 billion, or $ 3.52 per share. It is lower than $ 1.21 billion, or $ 3.67 per share, reported in the same quarter last year.
The revised forecast is another indicator that farmers, and those in the Midwest especially, suffer from the battle of Trump's trading bargain. On Friday, the president sought to ease the fear of aggravating trade negotiations by raising tariffs on industrial metals in Mexico and Canada, and he pledged another package of assistance for farmers who were hurt by the tariffs.
Deere said lowering its forecasts because farmers did not buy a lot of equipment. Farmers are concerned about removing crop prices, international trade disputes and extreme weather events that delay planting, including in Iowa.
Deere's profits are lower than Wall Street's expectations, which resulted in shares dropping more than 7 percent in afternoon trading.
"Continued concern about access to market exports, the near-demand for commodities such as soybeans and a delayed planting period in most North America causes farmers to be more careful about making major purchases, "Chairman and CEO Samuel Allen said in the report.
On a Friday morning calls on analysts, Josh Jepsen, director of investor relations, said in response to Deere's market dynamics is reducing production to its agricultural business at levels below retail sales. Production is lower than some of the major North American plantations for the rest of the year.
He said changes often affect the production of large agricultural equipment, with major plants carrying around 20% less than last year.
Local, Deere produces major agricultural equipment, such as combinations and tractors, in its factories in East Moline and Waterloo.
Deere spokesman Ken Golden said that the company does not specify where production cuts are being made, it only plans to avoid market demand in the second half of the year.
"Production changes can be made without changing the size of the workforce," Golden says in an email. "We have not announced any change in the workforce."
Deere downs its view of $ 3.3 billion for the year, from the previous forecast of about $ 3.6 billion. It also lowered expectations for profits up 7%, which now stands at 5% growth.
Jepsen said in reporting lower forecast and decision on cut production, Deere did not assume that a trade agreement was reached in the second half of the year.
"As a result, we are eliminating production in the effort to calibrate the field inventory where we want to finish the year for 2020," he said. "20% … that's an example of our large factories, not broad across the division, but on a production-unit basis. That's the magnitude we see in some of our larger facilities. "
The decrease came during the U.S. and China imposes increased tariffs on billions of dollars in imports, most of which take pork to soy farmers, while 60% of U.S. soybeans was sent to China.
Prices of soybeans have dropped to a 10-year low this week.
Deere is not the only major producer of agriculture being hit by a trade war. The stocks of Caterpillar are still lower this year.
Jepsen said production backbacks were the first step in responding to uncertain markets.
In the second part, worldwide revenues reached 6% to $ 11.34 billion, from $ 10.72 billion in the same period last year.
Deere sees improved sales in the construction and forest division in the second quarter. The sales climbed 11% to $ 2.99 billion, driven by higher volumes and freight prices.
Despite lower forecasts for the year, Ryan Campbell, chief financial officer, said the company relied on a "full, slow recovery" as challenges – including trade tensions, harsh weather conditions and lower demand equipment – has been replaced. "Even though we reduce our net profit forecast for the year, the $ 3.3 billion we expect now for the year will be second largest in our history. Our second quarter sales and revenues represent the second-largest quarter in history company, "said Golden in an email. "We believe that many consumer farming facilities pause the purchase because of a short period of uncertainty. We continue to believe that long-term factors remain intact to increase higher sales."
The Associated Press contributed to the report.