|
In
a pitch to investors, Chief Executive Officer John May said the
measures are expected to boost operating profit margin to 15% by
2022 from 12.5% projected for this year.
The steps, outlined by the company's new leadership, are part of
a broader trend in the U.S. manufacturing sector which is facing
its deepest slump in more than a decade.
In a bid to smooth earnings volatility, manufacturers such as
Caterpillar <CAT.N> are slashing costs and focusing on more
profitable parts and services businesses.
May, who took over Deere's reins in November, aims to shore up
the company's fortunes which have taken a hit from Sino-U.S.
trade tensions as well as poor weather in the American farm belt
that has slowed equipment purchases by farmers.
The Moline, Illinois-based company reported lower profits in the
latest quarter and has warned of lower earnings this year.
U.S. President Donald Trump announced last month that China had
agreed to double its pre-trade war purchases of U.S.
agricultural products over the next two years as part of a Phase
1 trade deal. Still, Deere expects industry sales of farm
equipment in the United States and Canada, its biggest market,
to decline about 5% this year.
In response to weak demand, the company has cut production and
laid off workers.
May said Deere is reviewing its overseas manufacturing footprint
in markets that have peaked or where it has over-invested. He
did not provide the names of those facilities.
The company is also carrying out a voluntary separation program
for its salaried employees, now projected to result in savings
of $120 million, lower than $150 million estimated earlier.
May expects the cuts to add 1 percentage point to Deere's
profits by 2022.
The company is aiming to get a similar profit boost from
investments in data-driven farming, known as precision
agriculture, which enables farmers to plant according to the
fertility of the soil, helping reduce input costs and enhance
yields.
Similarly, it is betting on its parts and maintenance services
business to contribute 50 basis points in added profits over the
next two years. The segment currently accounts for a fifth of
the company's sales.
(Reporting by Rajesh Kumar Singh; Editing by Cynthia Osterman)
[© 2020 Thomson Reuters. All rights
reserved.] Copyright 2020 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
