Deere & Co. is interested in seeing its customers go to seed and grow. The company, one of the world's largest makers of farm equipment, is also a major producer of construction, forestry, and commercial and residential lawn care equipment. Deere operates through three business segments: the agriculture and turf and construction and forestry segments make up its equipment operations; a credit segment provides financial services. Deere, famous for its "Nothing Runs Like A Deere" marketing, sells John Deere and other brands through retail dealer networks and also makes products for outlets Home Depot and Lowes.
Deere's largest operating segment is agriculture and turf, which accounts for 70% of revenue. Consolidated into five product platforms -- crop harvesting, turf and utility, hay and forage, crop care, and tractors -- the segment makes such products as loaders, combines, corn pickers, cotton and sugarcane pickers, and even golf course equipment and outdoor power products. Besides John Deere, brands include Frontier, Green Systems, as well as SABO in Europe and Benye in China.
The company's construction and forestry segment represents 20% of its total revenue. Making 90% of the types of equipment used in North America, this segment distributes backhoe loaders, crawler dozers, motor graders, log skidders, and skid-steer loaders.
Besides equipment, the company's other main operational division, financial services, provides credit services for Deere dealers and wholesalers.
North America accounts for around 65% of Deere's revenue each year. The company owns nine facilities housing one centralized parts distribution center and eight regional parts depots and distribution centers throughout North America. The company also owns centralized parts distribution centers in Brazil, Germany, India, and Russia and regional parts depots and distribution centers located in Argentina, Australia, China, Mexico, South Africa, Sweden, and the UK.
Sales and Marketing
Deere operates through roughly 25 sales and marketing locations and nearly 20 warehousing locations spanning 15 countries including Argentina, Australia, Brazil, Chile, China, Ecuador, France, India, Israel, Italy, Mexico, Russia, Spain, Turkey, and the US.
Through US and Canadian facilities, Deere markets products to approximately 2,365 dealer locations, most of which are independently owned and operated. Of these, about 1,520 sell agricultural equipment, while approximately 425 sell construction, earthmoving, material handling and/or forestry equipment. Nortrax owns some of the dealer locations. Outside the US and Canada, Deere agriculture and turf equipment is also sold to distributors and dealers for resale.
Deere has seen its revenues drop the last three years. From 2015 to 2016, revenues declined 8% from $29 billion to $27 billion, and profits plunged 21% from $1.9 billion to $1.5 billion. Its cash flow from operations, however, has remained consistent the last three years, hovering around the $3.7 billion mark for each of those years.
Throughout 2016, Deere experienced lower equipment sales resulting from difficult conditions in the farm and construction equipment markets. This and other factors led to sales drops across its construction and forestry (13%) and agriculture and turf (7%) segment sales.
The erosion of profits in 2016 was fueled by higher production costs primarily related to the impact of engine emission programs in the company's equipment operations and a higher effective tax rate.
Deere is focused on enhancing its operations as strong demand for agricultural commodities (mainly grain and oilseeds) continues. To keep manufacturing in sync with demand, Deere increases production during the second and third quarters when customers are buying more.
The company is specifically focused on the precision agriculture market as a means for growth. This involves equipment and machinery used to monitor and measure crop yield, moisture content, or seeding population in real time. Other products generate prescriptions for planting seeds and applying fertilizer or pesticide with better accuracy. All of this helps farmers manage costs and increase revenue through improved productivity and higher yields. One of these products was Deere's StarFire 6000 receiver, introduced in 2016.
Mergers and Acquisitions
In 2016 the company acquired Hagie Manufacturing Company, a manufacturer of high-clearance sprayers located in Clarion, Iowa, for $53 million. The deal accelerated John Deere's market reach in precision planting equipment and added engineering expertise to further develop planting technology.
Looking to grow internationally, Deere in 2016 also picked up Monosem, a European market leader in precision planters. The purchase included four facilities in France and two in the US.