John Deere(US:DE)2023-12-14 16:00Financial Performance - In fiscal year 2023, the Production and Precision Agriculture (PPA) segment generated net sales of $26,790 million, a 22% increase from $22,002 million in fiscal year 2022[14]. - The Small Agriculture and Turf (SAT) segment reported net sales of $13,980 million in fiscal year 2023, reflecting a 4% increase from $13,381 million in fiscal year 2022[16]. - The Construction and Forestry (CF) segment achieved net sales of $14,795 million, accounting for 27% of total equipment operations net sales[12]. - CF segment net sales for fiscal year 2023 reached $14,795 million, an 18% increase from $12,534 million in fiscal year 2022[22]. - Net income rose to $2.073 billion in 2023, compared to $1.073 billion in 2022, reflecting strong market conditions[120]. - Net sales for equipment operations increased to $26.790 billion in 2023, up 22% from $22.002 billion in 2022, driven by strong demand and price realization[126]. - Financial services revenue rose by 36% to $5.554 billion in 2023, driven by higher average financing rates and increased receivables[131]. - Net income attributable to Deere & Company was $9,547 million in 2023, an increase from $6,251 million in 2022, marking a growth of 53%[160]. - Total income before income taxes was $48,232 million in 2023, compared to $43,450 million in 2022, indicating an increase of 11%[159]. - The company reported a total number of shares repurchased in Q4 2023 of 6,479 thousand, with an average price per share of $410.43[100]. Strategic Initiatives - The company aims to enhance customer value through its Smart Industrial Operating Model, focusing on production systems, technology stack, and lifecycle solutions[9]. - The Leap Ambitions framework, introduced in fiscal year 2022, targets economic value and sustainability, with goals related to workforce safety, product circularity, and environmental footprint[9]. - The company plans to introduce electric and hybrid-electric options across its product families, including a fully autonomous, battery-powered electric agricultural tractor[9]. - The acquisition of Smart Apply, Inc. in fiscal year 2023 aims to improve productivity and optimize inputs for high-value crop customers[16]. - The company is focused on integrating precision technologies and connectivity capabilities to support sustainability goals for its customers[16]. - The company continues to invest in advanced technology and integrated agricultural solutions to enhance productivity and sustainability for its customers[14]. - The company is committed to delivering hybrid-electric and battery electric equipment solutions to reduce emissions while maintaining performance[22]. - The company aims to offer an electric option in each turf and compact utility tractor product family by 2026 to comply with new emissions regulations[40]. Market Conditions and Demand - Backlog orders as of October 29, 2023, were approximately $7.9 billion for the PPA segment and $3.3 billion for the SAT segment, down from $9.7 billion and $4.6 billion, respectively, in the previous year[35]. - The CF segment backlog orders were approximately $6.4 billion as of October 29, 2023, compared to $8.2 billion at the same time last year[35]. - Retail demand for turf and utility equipment is typically higher in the second and third fiscal quarters, influencing production and shipment schedules[21]. - Demand for large agricultural equipment is expected to decline in 2024 across North America, Europe, and South America[116]. - Agricultural fundamentals are anticipated to moderate in 2024 due to lower commodity prices and elevated interest rates, despite declining input costs[116]. Operational Challenges - The company has implemented early order programs for certain equipment, offering discounts to customers who place orders in advance of the use season[21]. - The construction and forestry segment aims to address industry challenges such as jobsite safety and skilled labor shortages through smart technology solutions[22]. - The company is facing risks associated with fluctuating agricultural commodity prices, which directly affect sales of agricultural equipment[58]. - The company anticipates that changes in government farm programs and policies could influence demand for agricultural equipment[55]. - The company is exposed to currency fluctuations that can materially affect its financial results due to its global operations[58]. - The company may encounter difficulties in integrating acquisitions and joint ventures, which could delay anticipated benefits[61]. - The company has faced challenges in attracting and retaining qualified employees, which could impair its ability to execute its business strategy[79]. - Significant disruptions to the supply chain have led to increased order backlogs and production inefficiencies, adversely affecting business operations[76]. Financial Health and Investments - The company’s internal control over financial reporting was deemed effective as of October 29, 2023[107]. - The company has a strategy to enhance manufacturing efficiency through lean initiatives and digitally connected factory projects[27]. - The company reported finance and interest income of $636 million in 2023, significantly higher than $213 million in 2022, showing a growth of 198%[159]. - Cash returned to shareholders increased by $3.7 billion in 2023, reflecting strong financial performance[137]. - The company has $21.2 billion in payments due on borrowings and securitization borrowings in the next year, along with interest payments of $2.2 billion[139]. - The company’s credit ratings are A+ (Fitch), A2 (Moody's), and A (S&P), with stable or positive outlooks[138]. - The company repurchased common stock worth $7,216 million in 2023, significantly higher than the $3,597 million repurchased in 2022, representing a 100.5% increase[179]. Regulatory and Compliance Issues - The company is subject to stringent engine emission regulations, which may increase research and development costs and affect its ability to manufacture certain products[68]. - Compliance with emissions regulations has added to the cost of products, but the company does not expect a material impact from new California regulations on its business[40]. - The company is subject to complex and changing laws and regulations, which could increase compliance costs and adversely affect business operations[86]. - Ongoing legal proceedings, including a class action lawsuit regarding monopolization claims, could have a material adverse effect on the company's operations and financial results[90]. Research and Development - Research and development expenses increased by 14% to $2.177 billion in 2023, focusing on new technology solutions and product introductions[123]. - The company is investing significantly in research and development for precision technology solutions, which may not yield the desired profitability or sustainability outcomes for customers[62]. - Future strategies include the integration of new technologies such as automation and machine learning to enhance precision technology solutions[156]. Shareholder Returns - The company declared dividends per share of $5.05, an increase from $4.36 in the previous year[165]. - The company has a share repurchase plan announced in December 2022 to buy up to $18.0 billion of shares, with $13.0 billion remaining to be repurchased as of the end of Q4 2023[100]. - The maximum number of shares that may yet be purchased under the repurchase plan is 35.9 million[100].