Despite a slowdown in farm equipment sales due to trade uncertainty, Chairman and CEO Samuel Allen expects Deere & Co. to persevere — as it has over the past 10 years during both the global financial crisis and grueling farm recession.
Wednesday morning, Allen looked back on the past decade, where each year he has addressed shareholders during Deere's annual meeting. He said Deere "showed its resilience" and remained profitable despite industry challenges and downturns.
"Through our performance in 2018 and other recent years, Deere has shown an improving ability to produce solid results under even less-than-ideal conditions," Allen told stockholders. "Our success reflects the impact of a steady investment in new products and markets. It also reflects our leadership in precision technologies."
Speaking to a standing-room-only crowd at John Deere World Headquarters in Moline, Allen said the global equipment manufacturer posted its fifth-highest level of earnings in 2018, expanded its customer base and updated its strategic plan.
Last year, Deere reported net income of $2.4 billion, 10 percent more than in 2017.
And he expects the trend to continue in 2019, forecasting higher sales and earnings. While Deere's first-quarter results were an improvement, they fell short of Wall Street expectations. Deere retained its yearly earnings guidance, with full-year net income expected to increase around 7 percent to be $3.6 billion.
"Farmers, it seems, have turned cautious about making major purchases due to their concerns over tariffs and trade policies," Allen said. "That said, we have high hopes for 2019."
Allen said construction sales were boosted by Deere's $5 billion-plus acquisition of the German company Wirtgen Group in 2017.
“In its first year as part of Deere, Wirtgen more than met our expectations in product performance, customer service and financial impact,” he said. “It has added global size and scale to our construction-equipment business. It is even proving helpful in the sale of core construction products like motor graders, which are widely used in road building.”
Deere’s leader boasted development in precision technology, including the AutoTrac precision-guidance systems, which guides tractors through the field with minimal assistance from the operator. The Combine Advisor is a suite of technologies using cameras and artificial intelligence to automate a combine’s settings.
Other new technologies included products allowing farmers to plant seeds and apply chemicals with greater speed and accuracy, plus a service allowing dealers to monitor the condition of their equipment remotely when a problem arises.
“Precision technology is almost certain to define the future of agriculture, and perhaps other industries we serve, and Deere is well on its way to becoming the undisputed leader,” Allen said.
After Allen’s comments, one shareholder voiced concerns about Deere not moving quickly enough away from the use of diesel engines, plus asked about the implementation of electric, battery-powered equipment.
Allen countered and said the use of diesel and related emissions have been rapidly declining, and for now, hybrid operating systems are the most cost-efficient for large equipment.
Allen said Deere’s updated strategic plan stresses the importance of becoming a “techno-industrial leader.” It lays out a vision for leading the industry in precision technology, artificial intelligence, vehicle automation and autonomy, he said.
He also highlighted Deere’s emphasis on social responsibility, environmental stewardship and charitable contributions, which totaled $38 million last year.
Allen concluded the annual meeting with the statement he’s shared with stockholders for the past 10 years: “Our best days are still to come.”
“For 10 annual meetings, I’ve stood before you discussing the company’s challenges and achievements, its trials and triumphs, and describing my hopes for the future,” Allen told shareholders. “On each of those occasions, I’ve expressed my fervent belief that there has never been a better time to be associated with John Deere.”