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Home / Business / Deere blames Trump's trade war for lower revenues and plans to cut production in major plants by 20% economy

Deere blames Trump's trade war for lower revenues and plans to cut production in major plants by 20% economy



Deere & Co. is reducing production at some of North America's major plants as tensions in the trade and harsh weather affect farmers' incomes and reduce equipment demand.

Deere from Moline cut the full-year earnings forecast on Friday. The agricultural machinery manufacturer posted a profit of $ 1.13 billion or $ 3.52 per share in the second quarter. This is less than the $ 1

.21 billion or $ 3.67 per share reported in the same quarter last year.

The revised forecast is another indicator that farmers and especially those in the Midwest are suffering from the Trump government's trade battles. On Friday, the president tried to alleviate the fears of escalating trade confrontations by lifting tariffs on industrial metals with Mexico and Canada, and he has promised another aid package for tariff-damaged farmers.

Deere said it had lowered its forecasts because farmers did not buy that much equipment. Farmers are worried about declining crop prices, international trade disputes and extreme weather events that have delayed sowing, again here in Iowa.

Deere's earnings were below Wall Street's expectations, with afternoon stocks tumbling more than 7 percent.

"Continued concerns about access to the export market, short-term demand for commodities such as soybeans, and a late planting season in much of North America are causing farmers to be more cautious on larger purchases," said Chairman and CEO Samuel Allen in the report.

On a Friday morning conversation with analysts, Josh Jepsen, Director of Investor Relations, said in response to market momentum, Deere reduced production in its agribusiness to below retail sales. The production of some of his major North American plants will be lower for the remainder of the year.

He said that the changes would have a major impact on the production of large agricultural equipment, as the main factories deliver about 20% less than last year.

Locally, Deere manufactures large agricultural equipment such as combines and tractors at its factories in East Moline and Waterloo.

Deere spokesman Ken Golden said that the company does not specify where production cuts are made, but only plans to under-market market demand in the second half of the year.

"Production changes can be made without changing the workforce," says Golden in an email. "We have announced no change in the workforce."

Deere lowered its earnings guidance to $ 3.3 billion for the year, compared to the previous forecast of $ 3.6 billion. It also lowered its sales expectations to 7% and now expects growth of 5%.

said Jepsen announces lower guidance and decision For the second half of the year, Deere does not anticipate a trade agreement.

"As a result, we are reducing production to calibrate our field inventory where we want to end the year 2020," he said. "The 20% … this is just one example of our large Ag factories, which is not distributed across the division, but on a unit-by-unit basis, the size we see in some of our larger plants."

The cuts are due to the US and China imposing billions of dollars in import duties, most of which harms soybean farmers, with around 60% of US soybeans being shipped to China.

Soybean prices fell to a 10-year low this week.

Deere is not the only major agricultural producer hit by the trade war. Caterpillar shares will also trade lower this year.

Jepsen said that reducing production is the first step in responding to the uncertain market.

In the second quarter, global sales increased 6% to $ 11.34 billion from $ 10.72 billion in the same period last year.

Deere recorded an increase in construction and forestry sales in the second quarter. Sales increased 11% to $ 2.99 billion, reflecting higher shipment volumes and pricing.

Despite the lower forecast for the year, Ryan Campbell, Chief Financial Officer, expects a "full, gradual recovery" as challenges – including trade tensions, harsh weather conditions and lower demand for equipment – decrease.

"Although we have reduced our net income guidance, the $ 3.3 billion projected for the year is still the second largest in our history, and our second quarter revenue and earnings are the largest second quarter in the company's history." "Golden said in an email." We believe that more customers of agricultural machinery are taking a break due to short-term uncertainties. We continue to believe that the long-term factors leading to higher revenues remain intact. "

The Associated Press contributed to this.


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