John Deere (DE) 4th Quarter 2015 Earnings Call Notes

Deere’s (DE) Josh Jepsen said the global agricultural economy and parts of the construction sector remain on uneven ground

“Our results were lower than last year reflecting the continuing impact of the downturn in the global farm economy and weakness in construction equipment markets.”

Yet despite the deceleration of equipment sold, they were able to remain profitable

“All of Deere’s businesses remained solidly profitable for the quarter. This shows our continuing progress, managing costs and creating a more flexible responsive cost structure.”

Deere’s (DE) Josh Jepsen said the amount of equipment sold into China remains an uncertainty

Because of the economic slowdown in China, we continue to anticipate lower industry sales. While government support of mechanization is helping the sector, changes in government subsidies are causing uncertainty.  In Asia, sales are expected to be flat to down slightly due in part to weakness in China.

Deere is seeing the most pronounced weakness in their most expensive equipment products

Low commodity prices and stagnant farm incomes in the U.S. and Canada are continuing to pressure demand for farm equipment with the decline being most pronounced in the sale of high horsepower models.”

Pricing for their equipment remains challenged 

Certainly, the price environment is very challenging, especially for construction. We have a large competitor who’s been pretty open about some negative pricing for their business. And so far, our business has been able to hold the line and keep pricing on a positive plan.”

Deere discussed their thinking on the trade off between market share and maintaining price

Pricing continues to be important to us. We continue to, in most cases, trade at a premium to our competition and certainly we would continue to be focused on price realization in small Ag. Now, where we’ve really increased our focus is on innovation in that area and we brought in some very attractive product. So in that case, quite often, it’s not so much about discounting but making sure you have the right features on that product the customers are willing to pay for, and not having excessive amounts of features that they aren’t willing to pay for, if you will. So that tends to be our focus. It’s making sure we really understand that market that we’re delivering the product that customer is looking for and that we can do that with positive pricing.”