Deere & Company · NYSE:DE
Deere & — Q4 2018 Earnings Presentation
34 slides from Deere &'s earnings presentation, Nov 21, 2018
Slide 1: 4Q 2018 Earnings Call
4Q 2018 Earnings Call 21 November 2018 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: 2018 Overview
2018 Overview Fiscal 2018 ($ millions except where noted) Fiscal 2018 vs. Fiscal 2017 Net Sales & Revenues $37,358 26% Net Sales (equipment operations) $33,351 29% Net Income (attributable to Deere & Company) $2,368 10% Adjusted Net Income (attributable to Deere & Company) $3,073* 42% Diluted EPS ($
Slide 4: 4Q 2018 Overview
4Q 2018 Overview 4Q 2018 ($ millions except where noted) 4Q 2018 vs. 4Q 2017 Net Sales & Revenues $9,416 17% Net Sales (equipment operations) $8,343 18% Net Income (attributable to Deere & Company) $785 54% Adjusted Net Income (attributable to Deere & Company) $748* 47% Diluted EPS ($ per share) $2.
Slide 5: 4Q 2018 Overview: Equipment Operations
4Q 2018 Overview Equipment Operations 4Q 2018 vs. 4Q 2017 Net Sales 18% Price realization 2 points Currency translation 3 points Wirtgen 11 points 5
Slide 6: Worldwide Agriculture & Turf: 4Q 2018 Overview
Worldwide Agriculture & Turf 4Q 2018 Overview 4Q 2018 ($ millions) 4Q 2018 vs. 4Q 2017 Net Sales $5,605 3% Operating Profit* $567 5% *4Q 2018 operating profit impacted by: − Production costs − Foreign currency exchange − Research & development costs + Shipment volumes + Price realization 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* *USDA Aid includes only the ~$4.7B crop aid payment Note: USDA authorized a one-time $12B aid package
Slide 8: Global Stocks-to-Use Ratios
Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% 80% Wheat Cotton Ratios Corn 30% 60% Cotton 20% 40% Soybeans 10% 20% 0% 0% 1994 1997 2000 2003 2006 2009 2012 2015 2018P Source: USDA, 8 November 2018 8
Slide 9: John Lagemann, Precision Ag & Crop Care
John Lagemann Precision Ag & Crop Care Senior Vice President, Ag & Turf Sales and Marketing 9
Slide 10: Evolution of Agriculture in Brazil and Deere
Evolution of Agriculture in Brazil and Deere 250 0.35 Area +70% Localization of sprayers in Catalão 229 Production +500% 0.3 200 Inauguration of Montenegro tractor DE acquires 100% factory 0.25 of SLC 150 0.2 DE begins tractor Bank Operations assembly at launched combine plant 0.15 100 DE acquires 2
Slide 11: Agriculture & Turf Industry Outlook
Agriculture & Turf Industry Outlook Fiscal 2019 Forecast U.S. and Canada Ag Flat to up 5% EU 28 Ag ~ Flat South America Ag (tractors and combines) Flat to up 5% Asia Ag Flat to slightly down U.S. and Canada Turf and Utility Flat to up 5% Source: Deere & Company forecast as of 21 November 2018 11
Slide 12: Worldwide Agriculture & Turf Outlook
Worldwide Agriculture & Turf Deere & Company Outlook Fiscal 2019 Forecast Net Sales ~ 3% Currency translation ~ 2% Source: Deere & Company forecast as of 21 November 2018 12
Slide 13: Worldwide Construction & Forestry: 4Q 2018 Overview
Worldwide Construction & Forestry 4Q 2018 Overview 4Q 2018 ($ millions) 4Q 2018 vs. 4Q 2017 Net Sales $2,738 65% Operating Profit* $295 243% *4Q 2018 operating profit impacted by: + Wirtgen + Shipment volumes + International operations impairment last year + Price realization + Warranty expenses − P
Slide 14: U.S. Economic Indicators
Worldwide Construction & Forestry U.S. Economic Indicators Fiscal 2019 Forecast GDP Growth Housing Starts (thousands) Total Construction Investment Government Construction Investment Global Transportation Investment Crude Oil Price Source: IHS Markit, Calendar Year Estimates – October 2018 14
Slide 15: Worldwide Construction & Forestry Outlook
Worldwide Construction & Forestry Deere & Company Outlook Fiscal 2019 Forecast* Net Sales ~ 15% Currency translation ~ 2 points Wirtgen ~ 5 points * Includes 12 months of Wirtgen sales, vs 10 months in fiscal 2018 Source: Deere & Company forecast as of 21 November 2018 15
Slide 16: Worldwide Financial Services: Credit Loss History
Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 2.0% 1.5% 1.0% 0.17% 0.5% 15 Year Average 0.0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019F Source: Deere & Company forecast as of 21 November 2018 16
Slide 17: Worldwide Financial Services
Worldwide Financial Services Fiscal 2019 ($ millions) 4Q 2018 Fiscal 2018 Forecast Net Income (attributable to Deere & Company) $261 $942 ~ $630 Adjusted Net Income (attributable to Deere & Company) $153* $601* * Excludes favorable tax reform related net deferred tax liability remeasurement and deem
Slide 18: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory Previous ($ millions) Fiscal 2018* Forecast* Agriculture & Turf $963 ~ $300 Construction & Forestry $2,362 ~ $2,125 Total (as reported) $3,325 ~ $2,425 Total (constant exchange) $3,500 ~ $2,525 * Change at 28 October 2018 vs. 29 October 2017 Note: Before th
Slide 19: Cost and Expenses
Cost and Expenses Equipment Operations Fiscal 2019 ($ millions) 4Q 2018 Fiscal 2018 Forecast COS (percent of Net Sales) 76% 77% ~75% Research and Development 18% 21% ~ 6% SA&G Expense 8% 15% ~ 7% Source: Deere & Company forecast as of 21 November 2018 (previous forecast as of 17 August 2018) 19
Slide 20: Income Taxes
Income Taxes Equipment Operations Previous Fiscal 2019 4Q 2018 Fiscal 2018 Forecast Forecast Effective Tax Rate 34% 57% ~ 55% 25-27% Source: Deere & Company forecast as of 21 November 2018 (previous forecast as of 17 August 2018) 20
Slide 21: Net Operating Cash Flows
Net Operating Cash Flows Equipment Operations Fiscal 2019 Forecast ~ $4.8 billion $6,000 $5,000 $4,000 $ Millions $3,000 $2,000 $1,000 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019F * Includes impact of voluntary contribution to Pension/OPEB; previous forecast ~ $3.5 billion Note: 2010-2016
Slide 22: Deere & Company Outlook
Deere & Company Outlook Fiscal 2019 Forecast Fiscal 2019 ($ billions except where noted) Forecast Net Sales (equipment operations) ~ 7% Price realization ~ 3 points Currency translation ~ 2 points Wirtgen ~ 2 points Net Income (attributable to Deere & Company) ~ $3.6 Source: Deere & Company forecast
Slide 23: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans 36% net share reduction since 2004 Share Repurchase 2004–4Q 2018: 40 $3.0 Cumulative cost of repurchases $17.4 billion Millions of Shares* $2.5 Shares repurchased 251.0 million 30 $2.0 $ Billions 20 $1.5 December 2013 authorization of $8 billion:
Slide 24: The John Deere Strategy
THE JOHN DEERE STRATEGY OUR PURPOSE Committed to those inked to the and I OUR ASPIRATIONS: GLOBAL AGRICULTURAL jh Cone RUC TION outpace 15% 2 I Realizing sustainable EQUIPMENT soLUTiONs N CONT INDUSTRY oreranncmaran Ml asserTurys I eee innovation PREEMINENCE SOLUTIONS INGROWTH J MBE] TMI) and discip
Slide 25: Appendix
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Slide 26: Other Information
Other Information Equipment Operations Fiscal 2019 ($ millions) Fiscal 2018 Forecast Capital Expenditures $893 ~ $1,150 Depreciation & Amortization $974 ~ $1,050 Pension/OPEB Expense $6 ~ $120 Pension/OPEB Contributions $1,426 ~ $200 Source: Deere & Company forecast as of 21 November 2018 26
Slide 27: 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 2005 2007 2009 2011 2013 2015 2017 Source: USDA, 8 November 2018 27
Slide 28: 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 ~$4.7B crop aid payment Note: USDA authorized a one-time $12B aid package to assist farmers from the trade dispu
Slide 29: 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 2009 2012 2015 2018F Milk Milk 10yr avg Beef meat Beef meat 10yr avg Pork meat Pork meat 10yr avg Source: EU Com, LTO, October 2018 Dee
Slide 30: Economic Update: Brazil Finance Rates
Economic Update Brazil Eligible Finance Rates for Agriculture Equipment 12% 10% 9.5% 8% 7.5% 6% 4% 2% 0% 2011 2012 2013 2014 2015 2016 2017 2018 All Farmers Farmers with Annual Revenues ≤R$90M Farmers with Annual Revenues >R$90M Note: PSI-FINAME was key credit line for machinery acquisition 2011-201
Slide 31: October 2018 Retail Sales and Dealer Inventories
October 2018 Retail Sales (Rolling 3 Months) and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 8% More than the industry 2WD Tractors (40 < 100 PTO hp) 5% More than the industry 2WD Tractors (100+ PTO hp) 2% Low single digit 4WD Tractors 3% More than
Slide 32: October 2018 Retail Sales (Rolling 3 Months)
October 2018 Retail Sales (Rolling 3 Months) Retail Sales EU 28 Ag Deere* Tractors Double digits Combines Double digits Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Double digits Construction & Forestry First-in-the-Dirt Double digits Settlements Double digits * Based on int
Slide 33: 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 34: 1Q 2019 earnings call scheduled for 15 February 2019
Deere & Company’s 1Q 2019 earnings call is scheduled for 9:00 a.m. central time on Friday, 15 February 2019