Deere & Company releases first quarter 2022 results
By Julian Buckley21 February 2022
Deere & Company has reported net income of $903 million for the first quarter ending January 30, 2022 This compares with net income of $1.224 billion for the quarter ending January 31, 2021.
Worldwide net sales and revenues increased 5% in the first quarter of 2022 to $9.569 billion. Equipment operations net sales were $8.531 billion for the quarter, compared with $8.051 billion in 2021.
“Deere’s performance in the first quarter was impressive given production issues surrounding the delayed ratification of our UAW contract in late November as well as persistent challenges posed by the supply chain and pandemic,” said John C. May, chairman and chief executive officer.
“These factors led to higher production costs in the quarter. We continue to work closely with key suppliers to manage the situation, enabling our customers to deliver food production and critical infrastructure. We are proud of the extraordinary efforts being taken by our dealers and employees to get products to our customers as soon possible in today’s challenging environment.”
Net income attributable to Deere & Company for fiscal 2022 is forecast to be in a range of $6.7 billion to $7.1 billion.
“Looking ahead, we expect demand for farm and construction equipment to continue benefiting from strong fundamentals,” May said. “At the same time, we are excited about the opportunities to create value for our customers and other stakeholders as outlined in our goals. Because of the hard work that has been done executing the Smart Industrial operating model, we are leveraging technology that delivers improved customer profitability, productivity, and sustainability.”
With the release of these results, the company further announced new goals known as the Leap Ambitions. These are linked to the Smart Industrial strategy and operating model introduced in 2020. The goals are designed to boost economic value and sustainability for Deere’s customers, employees, investors and other stakeholders. Deere is committed to achieving these goals over the remainder of the decade.
In the first quarter 2022, the company incurred UAW contract ratification bonus costs of $90 million. Additionally, the UAW work stoppage contributed to inefficiencies in certain factories and higher production costs. In the first quarter of 2021, the company recorded impairments totaling $50 million pretax to certain long-lived assets. These impairments were offset by a favorable indirect-tax ruling in Brazil of $58 million pretax.
Production and precision ag sales for the quarter increased due to price realization and higher shipment volumes. Operating profit declined, primarily due to higher production costs and an unfavorable sales mix. These items were partially offset by price realization and higher shipment volumes. Affecting the most recent quarter was the UAW contract-ratification bonus, while the prior period was affected by a favorable indirect-tax ruling in Brazil.
Small ag and turf sales for the quarter improved as price realization more than offset lower shipment volumes. Operating profit decreased primarily due to higher production costs and lower sales / unfavorable sales mix. These items were partially offset by price realization.
Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes. Last year Wirtgen’s one-month reporting lag was eliminated resulting in four months of Wirtgen activity in the first quarter of 2021, which increased “Net sales” by $270 million. Operating profit was higher mainly due to price realization, partially offset by higher production costs and lower sales / unfavorable sales mix. The current period was impacted by the UAW contract-ratification bonus. Results last year included impairments of long-lived assets.
The increase in financial services net income for the quarter was mainly due to income earned on higher average portfolio balances and improvement on operating-lease residual values.
Looking at financial services, full-year 2022 results are expected to be slightly lower than fiscal year 2021 due to a higher provision for credit losses, lower gains on operating-lease residual values, and higher selling, general, and administrative expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.