Deere reported Q1/15 net income was $386.8 million, down 43.2% from $681.1 million in the same period last year.

Deere said worldwide net sales and revenues for Q1/15 decreased 17% to $6.383 billion, compared with $7.654 billion last year. Net sales of the equipment operations were $5.605 billion for the quarter compared with $6.949 billion a year ago.

Financial services reported net income of $156.8 million for the quarter compared with $142.2 million last year. Deere said the improvement was primarily due to growth in the credit portfolio and higher insurance margins, partially offset by less favorable financing spreads. Last year’s results also benefited from a more favorable effective tax rate.

Net income attributable to John Deere Capital Corporation was $133.6 million for Q1/15, compared with $136.5 million last year. Lower results for the quarter were primarily due to a less favorable effective tax rate and lower financing spreads, partially offset by growth in the credit portfolio. Net receivables and leases financed by JDCC were $31.508 billion and $30.019 billion at January 31, 2015 and 2014, respectively.

Highlights from the news release included:

• Agriculture and turf sales decreased 27% for the quarter due largely to lower shipment volumes, the previously announced sales of John Deere Landscapes and John Deere Water, and the unfavorable effects of currency translation. These factors were partially offset by price realization.
• Operating profit was $268 million compared with $797 million for the quarter last year. Lower results were driven primarily by reduced shipment volumes and a less favorable sales mix, partially offset by lower selling, administrative and general expenses and price realization.
• Construction and forestry sales increased 13% for the quarter mainly as a result of higher shipment volumes. Operating profit was $146 million for the quarter compared with $94 million in 2014. The improvement was due to higher shipment volumes, partially offset by higher sales-incentive costs and the unfavorable effects of foreign-currency exchange.

Market Conditions & Outlook

• Agriculture & Turf: Deere’s worldwide sales of agriculture and turf equipment are forecast to decrease by about 23% for fiscal-year 2015, including a negative currency-translation effect of about 4%.
• Lower commodity prices and falling farm incomes are putting pressure on demand for agricultural machinery, especially for larger models. Conditions are more positive in the U.S. livestock sector, supporting the sale of smaller sizes of equipment. Based on these factors, industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 25 to 30% for 2015.
• Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are forecast to increase by about 5% for 2015. The gain reflects economic growth and higher housing starts in the U.S. offset in part by weakening conditions in the energy sector and energy-producing regions. Global forestry sales are expected to hold steady with the attractive levels of 2014, as gains in the U.S. and Europe are offset by declines elsewhere.
• Financial Services. Fiscal-year 2015 net income attributable to Deere & Company for the financial services operations is expected to be approximately $630 million. The outlook reflects the expected impact of the previously announced agreement to sell the crop insurance operations and growth in the average credit portfolio. These factors are projected to be partially offset by lower financing spreads, an expected increase in the provision for credit losses from the low level in 2014 and a less favorable tax rate.

To view the full Deere & Company news release, click here.