Deere cuts profit outlook again as US-China trade war hits farmers
US tractor maker Deere & Co has cut its full-year earnings forecast for the second time in four months as the US-China trade war continues to hit American farmers.
In a move that led its shares 3.8 per cent lower in pre-market trading, Deere lowered its net income outlook to $3.2bn from a previous $3.3bn, saying that the “continued uncertainty” in the agricultural sector had weighed on its results.
Deere’s net sales for the three months to July 28 fell by 3.8 per cent on the same quarter last year to $8.97bn. Net income declined to $899m from $910m.
The US farmers who buy Deere’s machinery face losing their fourth largest customer after Beijing told its state-owned enterprises to halt their purchases of US agricultural goods earlier this month.
Farm products, especially the soyabeans Chinese companies import from the US to feed its growing demand for the pigs and poultry that feed on the legumes, have become a central battleground in Donald Trump and Xi Jinping’s trade war. This is not least because many US farming states are strong support bases for Mr Trump.
Deere’s third-quarter results, published on Friday morning “reflected the high degree of uncertainty that continues to overshadow the agricultural sector,” the group’s chairman and chief executive Samuel Allen said.
He blamed farmers’ uncertainty on “concerns about export-market access, near-term demand for commodities such as soyabeans, and overall crop conditions [that] have caused many farmers to postpone major equipment purchases.”
The last time Deere sounded the earnings alert, in mid-May, the group also raised concerns that the stronger US dollar would lower the reported revenues from its exports.