Deere & Co. chairman and CEO Samuel Allen told shareholders Wednesday that 2014 would be a "pivotal year" with sales expected to fall short of last year's record. But the company is poised to help meet the growing world population's need for productive machinery in agriculture and construction.
In his presentation at the annual shareholders meeting, Allen said 2013 had been the company's third straight year of record profits and its eighth annual record in the last 10 years. Nearly 300 stockholders, including retirees and employees, attended the meeting at the world headquarters in Moline.
In the company's first-quarter earnings earlier this month, Deere said it is forecasting its full-year 2014 income to be lower at $3.3 billion. Allen also repeated that Deere expects a 6 percent drop in company sales of agricultural and turf equipment "with much of the decline falling on larger equipment."
"2014 therefore promises to be a pivotal year, in which the investments and operating changes we've made — focused on a more flexible cost structure and wider range of revenue sources — will be called on to keep our performance moving ahead,'' he said.
The company's video presentation focused in on Deere's technology advances in machinery and data systems while giving a futuristic glimpse of what tomorrow's technologies could be. A farmer was shown using a plasma screen in his home to check conditions in the fields.
Allen said last year, Deere developed "an unprecedented number of new products, most of which are marvels of advanced technology.'' He cited one example in the new Exact Emerge planters, which will double the field speed at which a farmer can plant and improve planting precision. The breakthrough planter, which could allow a farmer to plant at up to 10 miles per hour, "could be a real game-changer in helping farmers achieve higher yields," he said.
The idea of such an innovative planter impressed one of the youngest shareholders, 15-year-old Morgan Grivetti of Hinckley, Ill., who has been attending annual meetings half of his life. "I like the idea of the new planter and the speeds you can run it at,'' he said after the meeting. "John Deere is always improving on everything."
According to Allen, global demographic changes such as increasing population and an emerging middle class are a key reason for the company's optimism. The world's rapid population growth and a shift of more people to urban areas, he said will create "more demand for agricultural products and a greater need for farm mechanization."
"Demographic changes on this scale also will drive a need for roads, bridges and buildings and for the equipment required to construct them,'' he said.
Still, he said the goal "is for every business, every product, and every geographic region, to earn its cost of capital under all circumstances, even at the bottom of a cycle."
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In fact, the shareholder meeting comes less than two weeks after Deere announced 120 layoffs at John Deere Harvester Works in East Moline, which Deere said were made to match market demand to production levels.
Allen said Deere has been aggressive in its investments in capacity, distribution and product development. In the past four years, it has launched about 20 major capital projects around the globe, including the opening of seven new factories in Brazil, Russia, India and China.
The John Deere Strategy, launched in 2010, places an emphasis on global expansion, he said, adding that it targets doubling sales to $50 billion by 2018 from 2010's sales. In line with that strategy, Allen said Deere is constantly reassessing its portfolio. Last year, Deere sold off its landscape unit, exited the wind-energy business and bought a manufacturer of ultra-wide planters. And after the meeting, the board of directors voted to sell its irrigation operations to an Israeli company.
After attending their first annual meeting, stockholders Dan and Heide Cordray of Peoria were inspecting a piece of Deere construction equipment. Dan Cordray, who worked 40 years for Caterpillar, said he enjoyed the futuristic concepts in the video. "We have been talking about those things for years, but it's not in my house yet."