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Shares of Deere & Co., the world’s largest agricultural machinery maker, fell as much as 4% on fears that rising costs and supply chain problems could intensify over the course of the market. next year.
Executives told analysts during Friday’s earnings call that the challenges are wide ranging, from rising raw material costs to labor issues to logistics with the supply chain. supply. The underdog comment comes after the machinery producer said net income for the year would be between $ 5.7 billion and $ 5.9 billion, from an earlier range of $ 5.3 billion to $ 5.7 billion.
Domestic steel prices have risen nearly 90% this year as demand has increased for everything from washing machines to automobiles to combines, thanks to the reopening of economies around the world. AGCO Corp., one of Deere’s competitors, warned investors last month that the massive steel price hike was finally hitting farmers’ wallets. While Deere has warned of increasing supply chain challenges in the fourth quarter and 2022, it said the price increases will offset costs for the entire year.
Deere sees growing fortunes in Europe and Asia, where the company has said sales of agricultural and sod products will be larger than expected. The Moline, Illinois-based company predicts its agriculture and turf business in Europe to grow 10-15%, compared to previously forecast a 10% increase, while sales of the same segment in Asia will increase. “Significantly” after only expecting it to be “slightly” higher.
The tractor manufacturer is benefiting from soaring agricultural prices, with crops such as wheat, corn, soybeans and coffee reaching multi-year highs thanks to rising global demand as economies begin to recover from the pandemic and supply problems exacerbated by weather problems in the main producing regions. Deere sales were helped by higher machine prices.
The current global fleet of farm equipment is the oldest in more than two decades, with low inventories and extensive order books underpinning a possible multi-year farm equipment recovery, according to Bloomberg Intelligence.
“Looking ahead, we expect demand for agricultural and construction equipment to continue to benefit from favorable fundamentals,” Deere chief executive John May said in the statement.
Deere hasn’t changed its outlook for the United States and Canada, saying it still sees sales for the year increase by around 25% for large farm implements, along with tractors and combines from America. South by about 20%. The company slashed its outlook for global forestry sales, expecting an increase of around 15% from an earlier range of 15% to 20%. ——— (C) 2021 Bloomberg LP Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.
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