Deere reports higher-than-expected profit

Deere, the world's biggest manufacturer of farm equipment reported a higher-than-predicted quarterly profit due to higher margins in its construction equipment, a lower-than-expected tax rate and cost cuts.

For the second quarter ended on April 30, Deere’s profit was $980.7 million, or $2.65 per share against expectation of $2.48 a share. Revenue dropped by 9% to $9.95 billion.

During the second quarter, Sales of Deere’s harvesters and green-and-yellow tractors dropped by 12%.

Trimmed forecast

The company trimmed down its forecast for sales of farm equipment for full-year due to worsening conditions in the countries of the former Soviet Union and South America.

Tensions between Ukraine and Russia were interrupting farm credit in the Commonwealth of Independent States which is putting the 2014 crop at risk.

In Brazil, contracting margins in the sugar cane industry were not encouraging capital investment and in Argentina import duties were discouraging tractor sales.

This year, demand for company’s products would decrease due to bumper crop which will lead to reduce commodity prices. Lower commodity prices affect Deere adversely because they diminish incomes and discourage buying of new equipment.

A rebound in construction activity is expected by analysts which would help Deere that also manufactures equipment for builders.