Rising Costs Could Hurt Deere’s Profit

The Wall Street Journal reports that Deere & Co., Moline, IL, posted a 7.1% rise in fiscal third-quarter profit. The company’s ag equipment sales increased 35% to $4.54 billion. It said it now expects worldwide sales of its ag equipment to jump 38% this fiscal year, up from a previous forecast of 35%. Deere also said it already has orders for 70% of its expected 2009 combine retail sales, before some orders have even been priced.

Raw materials and freight costs are expected to rise $425 million to $475 million this fiscal year. To help offset their cost increases, especially for steel, Deere said it would raise prices by 7% to 10.5%. But Deere said despite the pending price hikes, rising materials expenses could still greatly reduce their profit in the coming months.

A weaker dollar also had helped boost Deere’s sales outside the U.S. About 5% of earnings have come from foreign currency. Deere reported net income for the quarter ended July 31 of $575.2 million, compared with $537.2 million a year earlier. Revenue rose 17% to $7.74 billion from $6.63 billion.