Deere harvests quarterly profit

Deere & Co, the world's largest maker of tractors and combines, said second-quarter profit rose 22 percent, as demand for farm machinery outpaced sales of excavators and backhoes.

Net income climbed to $763.5 million, or $1.74 a share, from $623.6 million, or $1.36, a year earlier, the Moline, Illinois-based company said yesterday. Sales for the three months ended April 30 gained 18 percent to $8.1 billion. Profit missed analysts' estimates by 1 cent.

Demand for food and biofuels has pushed up prices for corn, soybeans and wheat, giving farmers worldwide more spending power. Rising orders from Brazil and other overseas markets have prompted Chief Executive Officer Robert Lane to boost production in Russia and take a 50 percent stake in a Chinese excavator maker. In the United States, the biggest housing slump in at least 17 years curbed sales of construction and forestry equipment.

"Farm equipment is the biggest driver for them," said Matt Collins, an analyst with Edward Jones & Co in St Louis, in an interview before the earnings. He has a "neutral" rating on the stock. "The weak US dollar makes the equipment pretty attractive" outside North America.

The company in February forecast net income of $700 million to $725 million and sales growth of 23 percent, to about $8.37 billion.

Deere rose 82 cents to $90.19 on Tuesday in New York Stock Exchange composite trading. The stock has gained 51 percent in the past 12 months. The company completed a 2-for-1 stock split in December.

Economic stimulus

Record farm income and a US economic stimulus plan that allows farmers to write off the value of new equipment sooner are expected to lift sales of tractors and combines in North America. In Brazil, farmers are buying tractors to feed new sugarcane mills and ethanol demand.

"New equipment purchase are correlated to high crop prices and there's been a little sustainability on that," said Bill Batcheller, who helps manage $85 million in assets including Deere shares at Butler Wick & Co in Youngstown, Ohio. "The fundamentals look pretty good, particularly internationally."

Corn futures in Chicago reached a record $6.39 a bushel on May 9 and have gained 64 percent in the past year through Tuesday. Soybeans have gained 84 percent.

Lane is expanding production capacity and plans to invest an additional $90 million in its Waterloo, Iowa, factory.

Agencies

(China Daily 05/15/2008 page16)