Deere FY 4Q15 Earnings Call Notes

Deere & Company (DE) Management On Q4 2015 Results

Expecting 2016 farm receipts roughly flat with this year

“our 2015 forecast calls for cash receipts to be down about 8% from 2014s peak levels. Moving to 2016, we expect total cash receipts to be about $394 billion, roughly flat with this year.”

Unfavorable growing conditions could result in prices moving quickly higher

“global grain stocks-to-use ratios remain at somewhat sensitive levels, even after the abundant harvest of the past two years. Global grain and oilseed demand remains strong, while supplies are now fully adequate. Even so, unfavorable growing conditions in any key region of the world, as well as unknown impacts from any geopolitical tensions could result in prices quickly moving higher.”

Lower sales forecast in China because of economic slowdown

“In China, the governments continued investment in equipment subsidies and mechanization is supportive of agriculture. However, the economic slowdown there and lower commodity prices have lead to a decrease in the industry sales forecast”

Appears there will be continued weakness in the dairy market

“it appears that we’ll continue to have some weakness in the dairy market, as an example as we go well into 2016. And that’s a significant part of the business in Europe. So I think that is probably the biggest difference.”

There’s still more inventory than we would like but we’re making progress

“We would continue to say there is more large row crop tractors in used row crop tractors in the market in the US and Canada than we would prefer. So it does continue to be a focus of ours, as we go through 2016. But we are making progress, so we are seeing that large Ag inventory coming down. In fact if you look at the high point in 2014, we’re down about 18% from that point. So again, making progress.”

Resale values are holding in quite well

“The good news there too is our resale values are holding in quite well. We talked last quarter about if you look over a 2 year kind of horizon, down a small single digit, I’d tell you those used pricing continues – the used pricing continues to remain very steady at those levels and versus competition we’re maintaining a very healthy premium.’

We don’t anticipate a significant decrease in acres planted next year

“We have not at this point disclosed acres and so on for next year’s crop. I don’t think we certainly don’t anticipate a significant decrease in the acres planted. And think I’ll follow up a little bit on the last question you had though, because I think the situation in Argentina with the elections over last weekend could have some impact on that.”

Buildup of used equipment in the UK because usually export to Europe and Euro is weaker

“When you think about used equipment, I’ll split it a little bit. In the UK, certainly we’re seeing some increased levels of used equipment and that’s really coming from the – again it’s FX driven. So the Euro has been impacted more than the British pound and a lot of the used equipment from the UK goes to Europe and into Euro based countries. And so obviously, now with that shift in FX, it is creating more challenge for the export of that used equipment out of the UK.”