Rock to Road

Deere gloomy on 2010 U.S. Construction

November 29, 2009  By  Andy Bateman

November 29,2009 – Nobody could accuse Deere
and company of painting a rosy picture in reporting its full year earnings last

Commentary accompanying the
earnings report included a review of equipment
division performance and outlook for the company’s construction & forestry equipment

Division Performance

Construction & Forestry. Construction and
forestry sales declined 47 percent for the quarter and 45 percent for the full year,
resulting in operating profit of $2 million for the quarter and an operating
loss of $83 million for the year. Last year the division had operating profit
of $89 million and $466 million for the same periods. The profit decrease for
the quarter primarily was due to significantly lower shipment and production
volumes, partially offset by improved price realization, lower raw-material
costs and lower selling, administrative and general expenses. The decline in
annual operating results was largely due to lower shipment and production
volumes and lower equity in income from unconsolidated affiliates, partially
offset by improved price realization and lower selling, administrative and
general expenses.


Conditions & Outlook

Construction & Forestry. Deere's worldwide sales
of construction and forestry equipment are forecast to increase by about 18
percent for full-year 2010. Sales are expected to be helped by aggressive
inventory reductions in the previous year that position the company to align
production with retail demand. Despite an increase in housing starts from
historically low levels, U.S.
construction-equipment markets are forecast to be down for the year resulting
from a decline in non-residential construction activity and lower
used-equipment values. Global forestry markets are expected to experience some
recovery based on higher demand for pulp and paper, driven by higher worldwide
economic output, as well as the increase in U.S. housing starts.

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