UPDATE

Deere & Co. today reported an increase in net income for the quarter and fiscal year that concluded on Oct. 31, capping off a strong performance despite a strike that occurred in the final weeks of its year.

The company reported net income of $1.28 billion in the fourth quarter, up from $757 million for the same, three-month stretch the previous year. Net income for the entirety of fiscal year 2021 was $5.96 billion, more than double the $2.75 billion recorded in the previous fiscal year. 

The construction and forestry division, which includes John Deere Dubuque Works, saw operating profit increase by 38% to $270 million in the fourth quarter. For the full year, the company reported division profits of $1.49 billion, an increase of 152% compared to the previous fiscal year. 

Brent Norwood, manager of investor communication, said these figures represented the division’s “strongest financial results in over 15 years.” 

This growth came despite a strike of Deere union workers that commenced on Oct. 14. The work stoppage lasted for five weeks, including more than two weeks that fell within fiscal year 2021. 

In a prepared statement in a company press release, CEO John May addressed the recent union strike, which was resolved Nov. 17. 

"Last week’s ratification of a six-year agreement with the UAW brings our highly skilled employees back to work building the finest products in our industries," he said. "The agreement shows our ongoing commitment to delivering best-in-class wages and benefits.”

A panel of Deere leaders addressed a series of investor questions -- many related to the recent strike -- during a conference call this morning after the latest earnings figures were released.

During the back-and-forth, officials acknowledged that Deere is in the process of recovering from “record-low inventories” but expressed optimism that a “production ramp-up” will allow the company to grow inventory and market share in the months ahead.

Deere leaders told investors that the recently ratified union agreement represented a “groundbreaking contract," and they addressed how the increase in wages and benefits could influence the company’s cost structure moving forward.

Under the newly ratified deal, union members will receive a 10% pay increase in their first year of the contract, as well as subsequent increases of 5% in the contract’s third and fifth years. The deal also included 3% lump-sum payments in the second, fourth and sixth years of the deal and provided an $8,500 ratification bonus.

Officials predicted that the company’s incremental costs will grow "$250 to $300 million” per year as a result of the new agreement. Some increased costs, such as retirement benefits, will continue to be felt even after the six-year agreement has come to an end, they noted.

But expectations for higher sales, including in the construction and forestry division, continued to drive optimism about future profits. 

Overall net sales for the construction and forestry division are expected to increase 10% to 15% in fiscal year 2022, with product lines across the board expected to generate higher sales activity.

“Markets for earth-moving and compact construction equipment are expected to remain strong in fiscal year '22,” said Norwood.

He emphasized that multiple factors, including continued strength in the housing market and increased activity in the oil and gas sector, have contributed to that positive forecast. Keeping up with the demand could prove challenging, according to Norwood.

“Demand for earth-moving and compact construction equipment is expected to exceed our production for the year, resulting in continued low inventory levels,” he said.

The forestry industry also is expected to perform well in fiscal year 2022.

“We expect the industry to be up about 10 to 15% as lumber production looks to remain at elevated levels throughout the year, even though lumber prices have come down from peaks in mid-summer,” Norwood said.

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