This investment will expand Deere’s products and services in its already successful cotton picker business. Management said that by combining BHC’s assets with Deere’s existing manufacturing capacity, John Deere will have improved efficiency and better geographic reach to serve its customers.
Deere continues to focus on its global growth strategy. Earlier in the third quarter, the company announced its plans to expand its farm, forestry and construction operations in Russia. It is setting up a manufacturing and parts center near Moscow. Deere considers Russia an important growth market
for agriculture, forestry and construction equipment. The company said that it will make significant investments over the next five to seven years to expand its capacity for manufacturing and supporting all types of Deere equipment.
The company is currently facing tough market conditions. It saw a 19% drop in sales in fiscal 2009 as farmers and other customers cut their spending under recessionary conditions. Deere now projects a 1% drop in for fiscal 2010, including a 10% drop in the first quarter. We do not see any drivers for growth in farm spending and U.S. construction activity over the coming months.
We maintain a Neutral recommendation on the stock.