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Deere & Company Earnings Fall On Lower Sales

Lower revenues and volatility in foreign exchange rates also contributed to the 38% drop in second quarter earnings.

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On May 20, 2009,

Deere & Company

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reported that its Q2 FY09 earnings declined 38.1%, hurt by a fall in worldwide net sales and revenues, as well as volatility in foreign exchange rates. Net income slumped to $472.30 million or $1.11 per share from $763.50 million or $1.74 per share during Q2 FY08. Meanwhile, the latest quarterly earnings surpassed the most recent consensus estimate of $1.07 per share.

Total net sales and revenue declined 16.7% to $6.75 billion from $8.10 billion due to a slump in commercial and forestry equipment sales. Sales for the quarter and H1 FY09 included a 6.0% contribution to revenue growth from higher prices, which was offset by an unfavorable currency translation effect of 6.0%. Segment-wise, net sales from Equipment Operations decreased to $6.19 billion from $7.47 billion. Within this segment, agricultural equipment sales edged down 4.3% to $4.50 billion, largely due to lower shipment volumes, while commercial and consumer equipment sales plunged 23.5% to $1.10 billion, hurt by lower production volumes. Construction and Forestry sales plummeted 53.4% to $600.00 million, primarily due to higher raw material costs, partially offset by lower selling, administrative and general expenses. Additionally, finance and interest income fell 13.2% to $442.10 million, and other income remained relatively flat.

The company paid two quarterly dividends of $0.28 per share as compared to $0.25 per share in Q2 FY08. Also, the company plans to adopt a new operating model, which will result in pre-tax charges of approximately $25.00 million, to be recorded in Q4 FY09.

Looking ahead, Deere projects equipment sales to be down 19.0% for FY09 and down about 26.0% for Q3 FY09, including a negative currency translation impact of about 5.0% for the year and 6.0% for the quarter. Additionally, the company expects net income to be about $1.10 billion for the year with more risk on the bottom-line.