John Deere 2011 Annual Report Download - page 14

MARKET CONDITIONS AND OUTLOOK
In spite of an unsettled global economy, demand for the
company’s products is expected to experience substantial growth
in fiscal year 2012 and the company is forecasting further
increases in sales and earnings as a result. Company equipment
sales are projected to increase about 15 percent for the year
and 16 to 18 percent for the first quarter, compared with the
same periods of 2011. Included is a favorable currency transla-
tion impact of about 3 percent for the first quarter and about
1 percent for the year. Net income attributable to
Deere & Company for the year is anticipated to be approxi-
mately $3.2 billion.
Agriculture and Turf. Worldwide sales of the company’s
agriculture and turf segment are forecast to increase by about
15 percent for fiscal year 2012, with a favorable currency
translation impact of about 1 percent. Farmers in the world’s
major markets are continuing to experience favorable
incomes due to strong demand for agricultural commodities.
The company’s sales are expected to benefit as well from
advanced new products being launched throughout the world
and major expansion projects such as those in emerging markets.
Industry farm machinery sales in the U.S. and Canada
are forecast to increase 5 to 10 percent in 2012, following an
increase in 2011. Overall conditions remain positive and
demand continues to be strong, especially for high horsepower
equipment.
Industry sales in the EU 27 nations of Western and
Central Europe are forecast to be approximately the same for
2012 as a result of general economic concerns in the region.
Sales in the Commonwealth of Independent States are expected
to be moderately higher, after rising substantially in 2011.
Sales in Asia are forecast to increase strongly again in 2012.
In South America, industry sales for the year are projected to
be about the same as the strong levels of 2011.
Industry sales of turf and utility equipment in the U.S.
and Canada are expected to increase slightly in 2012.
Construction and Forestry. Worldwide sales of the company’s
construction and forestry equipment are forecast to grow by
about 16 percent for fiscal year 2012, with a favorable currency
translation impact of about 1 percent. The increase reflects
slightly improved market conditions and improved activity
outside of the U.S., including strength in Canada. Construction
equipment sales to independent rental companies are expected
to see further gains. The company’s sales also are expected to
be supported by a range of advanced new products and by
geographic expansion. After considerable growth in 2011,
world forestry markets are projected to be about the same in
2012 due to weaker economic conditions in Europe.
Financial Services. Fiscal year 2012 net income attributable
to Deere & Company for the financial services operations is
expected to be approximately $450 million. The forecast
decline from 2011 is primarily due to an increase in the
provision for credit losses, which is anticipated to return to a
more typical level, as well as higher selling, administrative and
general expenses in support of enterprise growth initiatives.
Partially offsetting these items is expected growth in the credit
portfolio.
SAFE HARBOR STATEMENT
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: Statements under “Overview,” “Market Conditions
and Outlook” and other forward-looking statements herein that
relate to future events, expectations, trends and operating
periods involve certain factors that are subject to change, and
important risks and uncertainties that could cause actual results
to differ materially. Some of these risks and uncertainties could
affect particular lines of business, while others could affect all of
the company’s businesses.
The company’s agricultural equipment business is subject
to a number of uncertainties including the many interrelated
factors that affect farmers’ confidence. These factors include
worldwide economic conditions, demand for agricultural
products, world grain stocks, weather conditions (including its
effects on timely planting and harvesting), soil conditions,
harvest yields, prices for commodities and livestock, crop and
livestock production expenses, availability of transport for crops,
the growth of non-food uses for some crops (including ethanol
and biodiesel production), real estate values, available acreage
for farming, the land ownership policies of various govern-
ments, changes in government farm programs and policies
(including those in Argentina, Brazil, China, Russia and the
U.S.), international reaction to such programs, global trade
agreements, animal diseases and their effects on poultry, beef
and pork consumption and prices, crop pests and diseases, and
the level of farm product exports (including concerns about
genetically modified organisms).
Factors affecting the outlook for the company’s turf and
utility equipment include general economic conditions,
consumer confidence, weather conditions, customer profitabil-
ity, consumer borrowing patterns, consumer purchasing
preferences, housing starts, infrastructure investment, spending
by municipalities and golf courses, and consumable input costs.
General economic conditions, consumer spending
patterns, real estate and housing prices, the number of housing
starts and interest rates are especially important to sales of the
company’s construction and forestry equipment. The levels of
public and non-residential construction also impact the results
of the company’s construction and forestry segment. Prices for
pulp, paper, lumber and structural panels are important to sales
of forestry equipment.
All of the company’s businesses and its reported results are
affected by general economic conditions in the global markets
in which the company operates, especially material changes in
economic activity in these markets; customer confidence in
general economic conditions; foreign currency exchange rates
and their volatility, especially fluctuations in the value of the
U.S. dollar; interest rates; and inflation and deflation rates.
General economic conditions can affect demand for the
company’s equipment as well.
Customer and company operations and results could be
affected by changes in weather patterns (including the effects of
dry weather in parts of the U.S. and wet weather in parts of
Eastern and Western Europe); the political and social stability of
the global markets in which the company operates; the effects
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