John Deere Reports 38% Drop in Construction Revenue
Total net sales for the quarter dropped 37% year-over-year, while total operating profit dropped 68%.
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John Deere’s construction business had a tough start to its fiscal year, bringing in just under $2 billion in net sales versus the $3.2 billion it saw in first-quarter 2024.
This represents a 38% year-over-year decline in revenue, which Deere attributed to lower shipment volumes due to planned underproduction of retail demand.
Operating profit for the company’s construction business also fell 89% from $566 million to $65 million, due again to lower shipments volumes as well as unfavorable price realization and higher selling, general, administrative and research & development expenses.
A breakdown of John Deere’s construction operating profit showed first-quarter sales volume was down $407 million year-over-year.
Deere’s operating margin in its construction business fell from 17.6% in its 2024 first quarter to 3.3%.
Total net sales for the quarter came in at $3.1 billion, also down 37% year-over-year, while total operating profit dropped 68% to $338 million.
John Deere forecasts its total 2025 construction net sales will be down 10% to 15% and for the total U.S. and Canada earthmoving equipment market to be down 10%.
Joshua Rohleder, manager of investor communications at John Deere, said during an earnings call, “In Construction and Forestry, end market fundamentals remain supportive of replacement demand, albeit dampened by elevated interest rates, macro uncertainty, and a competitive environment. Planned underproduction in our earthmoving segment during the first quarter drove further reductions in field inventory levels, enabling production optionality as market demand develops over the course of the year.”
Rohleder added that earthmoving rental refleeting remains at low levels.
Josh Beal, director of investment relations, added that some shipments in the roadbuilding division had been pushed as the industry shifted to more normal seasonality and that Deere expects to see those sales occur across the rest of the year.
“We underproduced [construction and forestry] retail demand by approximately 35% in the first quarter, resulting in an earthmoving inventory reduction of more than 15% over the past three months and nearly 30% in the prior two quarters combined,” said Beal. “In fact, this was more than we had initially anticipated as retail sales for compact construction came in better than expected at the end of the calendar year. We're encouraged by these results, as they provide us with operational flexibility, as earthmoving demand evolves throughout the remainder of the year.”
