Deere 1Q Profit Falls 45 Percent, Outlook Weak

Deere & Co.'s quarterly profit tumbled 45 percent as the global economic slowdown and stronger dollar hurt demand for its mowers and construction equipment.

In this Nov. 25, 2008 file photo, a John Deere logo is seen on a tractor at Harvest Equipment in...

In this Nov. 25, 2008 file photo, a John Deere logo is seen on a tractor at Harvest Equipment in Montpelier, Vt., Tuesday, Nov. 25, 2008. Agricultural equipment maker Deere & Co. said Wednesday, Feb. 18, 2009, its fiscal first-quarter earnings slid 45 percent, as the global economic slowdown, higher raw material costs and currency fluctuations hurt results. (AP Photo/Toby Talbot, file)

(AP)

The world's largest maker of farm machinery also slashed its 2009 earnings outlook by 21 percent and suspended quarterly profit forecasts, citing limited visibility amid the deteriorating economy.

Deere had been weathering the housing slump by offsetting a drop in construction equipment sales with strong sales of farming machinery. Indeed, worldwide agricultural equipment sales — Deere's biggest operation — jumped 18 percent during the quarter. But the global credit crunch is making it difficult to obtain the financing needed for such purchases, and with farmers getting ever-lower prices for wheat, soybeans and corn amid ethanol's demise, its unlikely they will have as much money to buy tractors and other equipment.

Meanwhile, Moline, Ill.-based Deere faces record-low levels of housing construction.

Deere, which also makes lawn movers and forestry equipment, on Wednesday posted net income of $203.9 million, or 48 cents per share, for its fiscal first quarter ended Jan. 31. That was down sharply from $369.1 million, or 83 cents per share, a year earlier. Revenue slipped 1 percent to $5.15 billion.

Analysts surveyed by Thomson Reuters had expected higher profit of 63 cents per share, on average, on revenue of $4.64 billion. Those estimates typically exclude one-time items.

High steel costs continued to drag down company results. Prices for the metal soared to historic highs last year, and orders from companies like Deere may be based on those prices.

The agricultural equipment division "did incur higher-than-forecast material costs in the quarter, approximately $80 million more than projected in August," Susan Karlix, manager of investor communications, said in a conference call. "This simply reinforces the fact that the underlying commodity markets are volatile and extremely hard to predict."