Deere & Company · NYSE:DE
Deere & — Investor Presentation (December 2019)
50 slides from Deere &'s investor presentation, December 2019
Slide 1: Investor Presentation December 2019 – January 2020
Investor Presentation December 2019 – January 2020 1
Slide 2: Safe Harbor Statement & Disclosures
Safe Harbor Statement & Disclosures This presentation includes forward-looking comments subject to important risks and uncertainties. It may also contain financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Refer to Deer
Slide 3: Table of Contents
Table of Contents Slide John Deere Strategy 4 Use-of-Cash 19 John Deere Financial Services 24 Agriculture Fundamentals 28 Construction & Forestry Fundamentals 44 Appendix 48 3
Slide 4: John Deere Strategy
SWAT aS John Deere Strategy ST Stats ‘ SST
Slide 5: The John Deere Strategy
THE JOHN DEERE STRATEGY OUR PURPOSE Committed to those linked to the land OUR ASPIRATIONS: GLOBAL AGRICULTURAL jh Cone RUC TION OUTPACE 15% 2 Realizing sustainable EQUIPMENT soLUTiONs N CONT INDUSTRY OPERATING MARGIN. ASSET TURNS Ait reel thea innovation PREEMINENCE. <soMohs IN GROWTH (aT MID-C¥CLE)
Slide 6: Exceptional Operating Performance - OROA
Exceptional Operating Performance - OROA Equipment Operations 21.3% OROA* in 2019 40% 2013 2011 30% 2014 2012 2010 2007 2018 2008 2004 28% 2019 2017 2006 2005 20% 2015 20% 2016 2009 12% OROA (SVA** Neutral) 10% 12% 2003 2002 0% 2001 -10% 80% 100% 120% % of Mid-Cycle Volume * Operating Return on Oper
Slide 7: Exceptional Operating Performance – SVA
Exceptional Operating Performance – SVA Equipment Operations $1.5 billion SVA* in 2019 $4,000 Adoption of SVA Model $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 * Shareholder Value Added; for reconciliation to GAAP see “SVA*
Slide 8: Exceptional Operating Performance – Operating Cash Flow
Exceptional Operating Performance – Operating Cash Flow Equipment Operations $3.2 billion Net Cash Flow in 2019 $5,000 Adoption of SVA* Model $4,000 Sale of Trade Receivables to John Deere Financial $3,000 $ Millions $2,000 $1,000 $0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2
Slide 9: Productivity Improvement
Productivity Improvement ~ 3% CAGR* over 30 years Net Sales and Revenues per Employee $700 $600 $500 $ Thousands $400 $300 $200 $100 $0 1991 1995 1999 2003 2007 2011 2015 2019 * Compound Annual Growth Rate 9
Slide 10: Investment in New Products and Technologies
Investment in New Products and Technologies R&D as Percent of Net Sales 1,800 8% 1,600 1,400 6% 1,200 1,000 4% $ Millions 800 600 2% 400 200 0 0% 2005 2007 2009 2011 2013 2015 2017 2019 R&D $ % of Net Sales 10
Slide 11: Net Sales by Product Category
Net Sales by Product Category Equipment Operations – Fiscal 2019 Agriculture & Turf Construction & Forestry $24.1 billion* $11.5 billion* Other Other $0.4 Turf Construction $1.1 Roadbuilding $2.7 Large Ag $3.2 $5.2 $11.7 $8.7 $1.3 Small Ag Compact $1.4 Forestry *Includes Other Revenues 11
Slide 12: Net Sales by Major Markets
Net Sales by Major Markets Equipment Operations** $20.6 $19.3 $5.3 $5.5 $3.6 $4.0 $3.8 $3.4 $2.2 $2.2 U.S. & Canada Western Europe Central Europe & CIS Latin America Asia, Africa, Australia, New Zealand & Middle East 2018 2019 $ Billions • *U.S. & Canada not to scale with other markets • **2018 incl
Slide 13: John Deere Precision Ag
John Deere Precision Ag Profitable + Sustainable 13 |13 John | John Deere Deere | Precision | Document Ag | Title December | Date 2018
Slide 14: Deere is the global leader in precision agriculture
Deere is the global leader in precision agriculture Best Industry World Class Machines Leading Technology Dealer Channel 14
Slide 15: Traditional Agriculture to Next Frontier of Agriculture
Traditional Agriculture Next Frontier of Agriculture Bigger. Faster. Stronger. Automated. Easy to Use. More Precise. 15
Slide 16: Best machines, smarter over time, better together
Best machines, smarter over Our Strategy: Help our customers become the time, better most profitable & sustainable growers together 010110 001001 001110 001001 110111 With our technology we make farming 010101 automated, easy to use and more precise across all operations 1011000 0100010 0011 010010
Slide 17: Migration from Field to Plant
Migration from Field → Plant Field Zone Row Plant 17
Slide 18: Case Study: Combine Advisor
Case Study: Combine Advisor TM Making Every Grain Count Ops Center Remote View & Adjust Grain Quality Camera Intelligent Combine Adjust Active Yield Customer Value: Automated machine settings, more consistent Grain harvest quality, reduced need for Gen4 loss Display skilled labor 18 sensor
Slide 19: Use-of-Cash
Use-of-Cash 19
Slide 20: Deere Use-of-Cash Priorities
Deere Use-of-Cash Priorities Cash from Operations ➢ Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost Committed to “A” Rating and readily available short- and long-term funding mechanisms ➢ Reflects the strategic nature of our financial services oper
Slide 21: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared 1Q 2004 – 4Q 2019 Dividend raised 171% since 2010 $0.80 $0.76 $0.70 $0.60 $0.50 $0.40 $0.30 $0.28 $0.20 $0.10 $0.14 $0.00 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 * Adjusted for 2 for 1 stock split on 26 November 2007 21
Slide 22: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans 37% net share reduction since 2004 4Q 2019: Cost of repurchases $373.0 million Share Repurchase Shares repurchased 2.3 million 40 $3.0 Millions of Shares* $2.5 YTD 2019: 30 Cost of repurchases $1,237.0 million $2.0 $ Billions Shares repurchased 7.
Slide 23: Sources and Uses of Cash Fiscal 2004-2019
Sources and Uses of Cash Fiscal 2004-2019 Equipment Operations $50,000 = Source of Cash $4,332 ~ 58% of cash from $679 = Use of Cash operations returned to shareholders $40,000 $12,663 $1,353 $30,000 $ Millions $43,921 $9,597 $20,000 $15,720 $10,000 $674 $4,287 $3,196 $0 Beginning Cash Cash From Acq
Slide 24: John Deere Financial Services
John Deere Financial Services 24
Slide 25: John Deere Financial Services Net Income
John Deere Financial Services Consistent earnings throughout the cycle Net Income $4,000 $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1991 1995 1999 2003 2007 2011 2015 2019 John Deere Financial (attributable to Deere & Company) Equipment Operations 25
Slide 26: John Deere Financial Services Portfolio
John Deere Financial Services ~$47 billion Net Owned Portfolio as of 3 November 2019 Portfolio Composition by Segment Portfolio Composition by Geography Portfolio Composition by Product Australia 3% Region 1 Operating Lease Region 3 (Asia & Africa) 17% (Latin America) 2% C&F 6% 19% Region 2 (Europe)
Slide 27: John Deere Capital Corporation Write-offs
John Deere Capital Corporation Continued extremely low write-offs in Agriculture & Turf and Construction & Forestry Agriculture & Turf* Construction & Forestry 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% -1.0% -1.0% 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 1995 1999 2003 2007 2011 201
Slide 28: Agriculture Fundamentals
Agriculture Fundamentals 28
Slide 29: Global Stocks-to-Use Ratios
Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% 80% Wheat Cotton Ratios Corn 30% 60% Cotton 20% 40% Soybeans 10% 20% 0% 0% 1995 1998 2001 2004 2007 2010 2013 2016 2019P Source: USDA, 8 November 2019 29
Slide 30: Global Grain Supply and Demand
Global Grain Supply and Demand 3,000 2,500 Million Metric Tons 2,000 1,500 1,000 500 0 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 19/20 Production Consumption Source: USDA, 8 November 2019 30
Slide 31: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $500 $400 $300 $ Billions $200 $100 $0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020F Crops Livestock Government Payments USDA Aid* *USDA Aid includes partial MFP1 and two tranches of MFP2 Note: USDA announced a trade retaliation relief package $16B in 2019. The $16B pack
Slide 32: U.S. Net Farm Cash Income
U.S. Net Farm Cash Income 2019 Previous 2019 ($ billions) 2018 Forecast Forecast 2020 Forecast Total Cash Receipts $387.2 $391.2 $393.0 $390.7 Other Farm-Related Income $29.1 $34.7 $34.5 $35.1 Gross Cash Income $416.3 $425.9 $427.5 $425.8 Cash Expenses ($311.3) ($312.7) ($331.8) ($321.7) Net Cash In
Slide 33: U.S. Farm Balance Sheet
U.S. Farm Balance Sheet $3,500 30% $3,000 25% $2,500 $2,000 $ Billions 20% $1,500 $1,000 15% $500 $0 10% 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1975–2018: USDA, 30 August 2019 2019F–2020F: Deere & Com
Slide 34: EU Macroeconomic Data
EU 28 Macroeconomic Data 16% GDP Composition 2% 12% 24% 8% 4% 0% 74% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Germany UK France Rate Growth GDP Growth – Major Economies 2018 2019F 2020F Source: IHS Markit November 2019 34
Slide 35: EU Ag Economic Data
EU 28 Ag Economic Data Crop Value of Production $150 − Utilized agricultural area ~ 190 million hectares $120 US$ Billions − Arable land ~ 110 million hectares $90 $60 − Growth potential for Western Ag equipment industry in Central & Eastern Europe $30 − Ongoing farm & Ag land consolidation and yiel
Slide 36: Brazil Macroeconomic Data
Brazil Macroeconomic Data 16% GDP Composition 12% 5% 8% 21% 4% 0% 74% -4% -8% Services Industry Agriculture Source: Brazilian Institute of Geography and Statistics (IBGE), 2017 -12% Interest CPI Unemployment GDP Rate Inflation Growth 2017 2018 2019F Source: IHS Global Insight, November 2019 36
Slide 37: Brazil Ag Economic Data
Brazil Ag Economic Data Crop Value of Production $150 − Agricultural area ~ 283 million hectares* $120 US$ Billions − Arable land & permanent crops ~ 87 $90 million hectares $60 − ~ 17 million hectares brought into $30 production from 2002-2012 (~ half from pasture) $0 2009 2012 2015 2018F − ~ 1 mil
Slide 38: CIS Macroeconomic Data
CIS Macroeconomic Data 16% GDP Composition (Russia) 12% 4% 8% 36% 4% 0% 60% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Russia Ukraine Kazakhstan Rate Growth GDP Growth – Major Economies 20182 2019F 2020F Source: IHS Markit, No
Slide 39: CIS Ag Economic Data
CIS Ag Economic Data Crop Value of Production $150 − Utilized agricultural area ~ 560 million hectares $120 US$ Billions − Arable land ~ 195 million hectares $90 $60 − Significant opportunities to improve yield rates in all major crops* $30 − Land under cultivation (sown crops) expected to $0 remain
Slide 40: China Macroeconomic Data
China Macroeconomic Data 16% GDP Composition 12% 9% 8% 4% 48% 43% 0% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Rate Growth 2018 2019F 2020F Source: IHS Markit, November 2019 40
Slide 41: China Ag Economic Data
China Ag Economic Data Crop Value of Production $300 − Utilized agricultural area ~ 515 million hectares $225 US$ Billions − Arable land & permanent crops ~ 122 million hectares $150 − Rural population % of total declined 15% from $75 2003-2014 $0 2010 2013 2016 2019F − Average farm size ~ 0.47 hect
Slide 42: India Macroeconomic Data
India Macroeconomic Data 16% GDP Composition 12% 16% 8% 4% 54% 30% 0% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Rate Growth 2018 2019F 2020F Source: IHS Markit, November 2019 42
Slide 43: India Ag Economic Data
India Ag Economic Data Crop Value of Production $300 − Utilized agricultural area ~ 180 million hectares $225 US$ Billions − Arable land ~ 157 million hectares $150 − Average farm size ~ 1.2 hectares $75 − Number of farms ~ 129 million $0 2010 2013 2016 2019F Includes corn, wheat, rice, barley, sorg
Slide 44: Construction & Forestry Fundamentals
Construction & Forestry Fundamentals 44
Slide 45: U.S. Housing Starts
U.S. Housing Starts 2.5 2.0 Millions of Units 1.5 1.0 0.5 0.0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 Multi-Family Housing Starts Single-Family Housing Starts Source: 1969–2018: U.S. Census Bureau, October 2019 2019F–2020F: Deere & Company forecast as of 27 November 2019 45
Slide 46: U.S. Construction Spending
U.S. Construction Spending $2,400 % Total Construction Spend 60% 40% $2,000 20% 0% $1,600 -20% -40% $1,200 -60% $ Billions* $800 -80% -100% $400 -120% -140% $0 -160% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020F Government Infrastructure Investment Government Investment in Structures Nonre
Slide 47: End to End Road Construction Portfolio
End to End Road Construction Portfolio 47
Slide 48: Appendix
Appendix 48
Slide 49: SVA Reconciliation to GAAP
SVA** Reconciliation to GAAP Equipment Operations ($ millions except where noted) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Net Sales 7,663 8,830 9,640 11,082 11,926 9,701 11,169 11,077 11,703 13,349 17,673 19,401 19,884 Average Identifiable Assets With Inventories at LIFO 5,5
Slide 50: John Deere
@é JOHN DEERE
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