Deere & Company · NYSE:DE
Deere & — Q2 2019 Earnings Presentation
32 slides from Deere &'s earnings presentation, May 17, 2019
Slide 1: 2Q 2019 Earnings Call
2Q 2019 Earnings Call 17 May 2019 1
Slide 2: Safe Harbor Statement & Disclosures
Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the company’s plans and projections for the future, including estimates and assumptions with respect to economic, political, technological, weather, market acce
Slide 3: 2Q 2019 Overview
2Q 2019 Overview 2Q 2019 ($ millions except where noted) 2Q 2019 2Q 2018 vs. 2Q 2018 Net Sales & Revenues $11,342 $10,720 6% Net Sales (equipment operations) $10,273 $9,747 5% Net Income (attributable to Deere & Company) $1,135 $1,208 6% Adjusted Net Income (attributable to Deere & Company) $1,135 $
Slide 4: 2Q 2019 Overview: Equipment Operations
2Q 2019 Overview Equipment Operations 2Q 2019 vs. 2Q 2018 Net Sales 5% Price realization 4 points Currency translation 4 points 4
Slide 5: Worldwide Agriculture & Turf
Worldwide Agriculture & Turf 2Q 2019 Overview 2Q 2019 ($ millions) 2Q 2019 vs. 2Q 2018 Net Sales $7,282 3% Operating Profit* $1,019 4% *2Q 2019 operating profit impacted by: − Production costs − Foreign currency exchange − Research & development costs + Price realization + Shipment volumes 5
Slide 6: 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, 10 May 2019 6
Slide 7: U.S. Principal Crop Cash Receipts
U.S. Principal Crop Cash Receipts 160 140 120 100 $ Billions 80 60 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F Food Grains Feed Crops Cotton Oil Crops USDA Aid* *Include both rounds of USDA Aid payment Note: USDA authorized a one-time $12B aid package to assist f
Slide 8: Agriculture & Turf Industry Outlook
Agriculture & Turf Industry Outlook Fiscal 2019 Previous Forecast Forecast U.S. and Canada Ag Flat to up 5% Flat to up 5% EU 28 Ag ~ Flat ~ Flat South America Ag (tractors and combines) Flat to up 5% Flat to up 5% Asia Ag Flat to slightly down Flat to slightly down U.S. and Canada Turf and Utility F
Slide 9: Worldwide Agriculture & Turf Outlook
Worldwide Agriculture & Turf Deere & Company Outlook Fiscal 2019 Previous Forecast Forecast Net Sales ~ 2% ~ 4% Currency translation ~ 3% ~ 2% Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 9
Slide 10: Cory Reed, President, Ag & Turf
Cory Reed President, Ag & Turf 010110 001001 001110 001001 1101110 INNOVATING10101 ACROSS THE ENTIRE CROP PRODUCTION SYSTEM 1011000 0100010 0011 010010 011100 101101 10
Slide 11: Worldwide Construction & Forestry
Worldwide Construction & Forestry 2Q 2019 Overview 2Q 2019 ($ millions) 2Q 2019 vs. 2Q 2018 Net Sales $2,991 11% Operating Profit* $347 34% *2Q 2019 operating profit impacted by: + Price realization + Shipment volumes + Wirtgen − Production costs − Product mix 11
Slide 12: U.S. Economic Indicators
Worldwide Construction & Forestry U.S. Economic Indicators Fiscal 2019 Previous Forecast Forecast GDP Growth Housing Starts (thousands) Total Construction Investment Government Construction Investment Global Transportation Investment Crude Oil Price Source: IHS Markit, Calendar Year Estimates – Apri
Slide 13: Worldwide Construction & Forestry Outlook
Worldwide Construction & Forestry Deere & Company Outlook Fiscal 2019 Previous Forecast* Forecast* Net Sales ~ 11% ~ 13% Currency translation ~ 2 points ~ 2 points Wirtgen ~ 4 points ~ 4 points * Includes 12 months of Wirtgen sales, vs 10 months in fiscal 2018 Source: Deere & Company forecast as of
Slide 14: Worldwide Financial Services Credit Loss History
Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 2.0% 1.5% 1.0% 0.23% 0.5% 15 Year Average 0.0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019F Source: Deere & Company forecast as of 17 May 2019 14
Slide 15: Worldwide Financial Services
Worldwide Financial Services Fiscal 2019 Previous ($ millions) 2Q 2019 Forecast Forecast Net Income (attributable to Deere & Company) $121 ~$600 ~ $630 Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 15
Slide 16: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory Fiscal 2019 Previous ($ millions) 2Q 2019* Forecast** Forecast** Agriculture & Turf $447 ~ $50 ~ $25 Construction & Forestry $833 ~ $300 ~ $175 Total (as reported) $1,280 ~ $250 ~ $200 Total (constant exchange) $1,813 ~ $375 ~ $175 * Change at 28 April 2019
Slide 17: Cost and Expenses
Cost and Expenses Equipment Operations Fiscal 2019 Previous ($ millions) 2Q 2019 Forecast Forecast COS (percent of Net Sales) 75% ~76% ~75% Research and Development 10% ~ 6% ~ 5% SA&G Expense 1% ~ 6% ~ 7% Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 1
Slide 18: Income Taxes
Income Taxes Equipment Operations Fiscal 2019 Previous 2Q 2019 Forecast Forecast Effective Tax Rate 22% 24-26% 24-26% Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 18
Slide 19: Net Operating Cash Flows
Net Operating Cash Flows Equipment Operations Fiscal 2019 Forecast* ~ $4.1 billion $5,000 $4,000 $3,000 $ Millions $2,000 $1,000 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F * Previous forecast ~$4.4 billion Note: 2010-2016 adjusted with the adoption of FASB ASU No. 2016-09 “Improvements to
Slide 20: Deere & Company Outlook
Deere & Company Outlook Fiscal 2019 Forecast Fiscal 2019 Previous ($ billions except where noted) Forecast Forecast Net Sales (equipment operations) ~ 5% ~ 7% Price realization ~ 3 points ~ 3 points Currency translation ~ 3 points ~ 2 points Wirtgen ~ 1 point ~ 1 points Net Income (attributable to D
Slide 21: Appendix
Appendix 21
Slide 22: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans 36% net share reduction since 2004 Share Repurchase 2004–2Q 2019: 40 $3.0 Cumulative cost of repurchases $17.8 billion Millions of Shares* $2.5 Shares repurchased 254.0 million 30 $2.0 $ Billions 20 $1.5 December 2013 authorization of $8 billion:
Slide 23: The John Deere Strategy
23 THE JOHN DEERE STRATEGY OUR PURPOSE Committed to those linked to the land OUR ASPIRATIONS cuosat acmicucTune AGLOBALLEADER —— ourace ist 2 eee EQUIPMENT SOLUTIONS. FOUtpMENT INDUSTRY OPERATING MARGIN ASSET TURNS SVA growth through innovation PREEMINENCE IN GROWTH (ar MID-C¥CLE) (ar MID-CYCLE) a s
Slide 24: Other Information
Other Information Equipment Operations Fiscal 2019 Previous ($ millions) Forecast Forecast Capital Expenditures ~ $1,150 ~ $1,150 Depreciation & Amortization ~ $1,025 ~ $1,025 Pension/OPEB Expense ~ $125 ~ $120 Pension/OPEB Contributions ~ $200 ~ $200 Source: Deere & Company forecast as of 17 May 20
Slide 25: U.S. Farm Commodity Prices
U.S. Farm Commodity Prices $20 $1.00 $16 $0.80 Cotton - $ per Pound $12 $0.60 $ per Bushel Cotton $8 $0.40 Soybeans Wheat $4 $0.20 Corn $0 $0.00 2004 2006 2008 2010 2012 2014 2016 2018 Source: USDA, 10 May 2019 25
Slide 26: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $500 $400 $300 $ Billions $200 $100 $0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019F Crops Livestock Government Payments USDA Aid* *USDA Aid includes only the ~$8B crop aid payment Note: USDA authorized a one-time $12B aid package to assist farmers from the trade dispute
Slide 27: Economic Update: EU Dairy, Beef and Pork Prices
Economic Update EU 28 Dairy, Beef and Pork Prices €470 €420 Beef meat and Pork meat - € per 100 kg €420 €360 Milk - € per MT €370 €300 €320 €240 €270 €180 €220 €120 2010 2013 2016 2019F Milk Milk 10yr avg Beef meat Beef meat 10yr avg Pork meat Pork meat 10yr avg Source: EU Com, LTO, January 2019 Dee
Slide 28: Economic Update: Brazil Crop Value of Production
Economic Update Brazil Crop Value of Production $150 $120 US$ Billions $90 $60 $30 $0 2009 2012 2015 2018F Includes key grains, ethanol, sugar Source: IHS Global Insight, May 2019 28
Slide 29: April 2019 Retail Sales and Dealer Inventories
April 2019 Retail Sales (Rolling 3 Months) and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 13% More than the industry 2WD Tractors (40 < 100 PTO hp) 2% In line with the industry 2WD Tractors (100+ PTO hp) 2% More than the industry 4WD Tractors 2% M
Slide 30: April 2019 Retail Sales (Rolling 3 Months)
April 2019 Retail Sales (Rolling 3 Months) Retail Sales EU 28 Ag Deere* Tractors Low double digits Combines Single digit Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Double digits Construction & Forestry First-in-the-Dirt Low double digits Settlements Single digit * Based on
Slide 31: Supplemental Statement of Consolidated Income Information
Supplemental Statement of Consolidated Income Information Reconciliation of GAAP to Non-GAAP Financial Measures In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclud
Slide 32: 3Q 2019 earnings call scheduled for 16 August 2019
Deere & Company’s 3Q 2019 earnings call is scheduled for 9:00 a.m. central time on Friday, 16 August 2019