Deere Benefiting From Cash Growth, Inventory Control: CFO
03 März 2009 - 8:55PM
Dow Jones News
Deere & Co. (DE) has avoided the drastic production cuts of
its competitors because of its focus on lowering costs and
generating cash, the company's chief financial officer said
Tuesday.
Michael Mack said tight control over inventories of farm and
construction machinery when demand was booming in recent years has
allowed Deere to take more measured steps in response to the slump
in the equipment market.
"It certainly has been a benefit in a downturn," Mack said
during a presentation at the International Strategy and Investment
Group's industrial conference in New York.
He said net cash flow generated by the company's operations
totaled nearly $2.5 billion last year, more than double the amount
generated in 1999. That cash flow has given Deere a liquidity
cushion amid uncertain market conditions.
As a result, Deere, the world largest manufacturer of farm
equipment, has been noticeably less glum in its outlook than its
competitors, despite forecasting steep declines in sales this year
in most regions of the world.
While Deere has delayed some plant expansions and made limited
reductions in its work force, the company hasn't closed
factories.
Investors, though, have been skeptical. Deere's stock has
plunged to a six-year low, though was up 3.75% at $25.61 in Tuesday
afternoon trading.
Rival CNH Global N.V., (CNH) a unit of Italian car maker Fiat
SpA, has suspended its production of construction equipment through
the first half of the year to drive down costs and inventories. The
company also suspended its dividend to shareholders.
"We are keeping our factories at very limited production," said
Albert Trefts, CNH's director of the investor relations, during a
separate presentation at the ISI conference.
He said production of CNH's construction equipment is off 70%
from the same period in 2008.
CNH's stock price has fallen about 88% in past 12 months. The
stock was recently up recently up 4.7% at $6.29.
Both Deere and CNH predicted North American sales of high
horsepower tractors would be a pocket of strength this year as
foreign sales slump under pressure from tighter credit standards
and weather conditions.
"We will see good high-horsepower tractor sales in North America
at least through the first half of the year," Trefts said.
- By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com