Deere & Company (NYSE:DE) Q1 2023 Earnings Call Transcript

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Brent Norwood: Yes. Thanks Kristen for the question. Maybe a couple of €“ I will make a couple of near-term comments and then would love to talk about the longer term there. I mean for 2023, that’s a market that’s going to see record production for corn and soy and near-record production for cotton and sugar. Profitability will be outstanding this year. So, really good near-term fundamentals. Our guides up flat to up 5% after a really big 2022. So, we are really excited about the fundamentals there. Right now, also in the near-term, and I will point this out, it is a little bit of a tail of two markets, right, where large ag is performing at a higher level than small ag. Again, small ag, more sensitivity to things like interest rates.

But Brazil continues to be the strongest market for us in South America. Now, longer term, it is a market we are incredibly excited about. There is probably no other market in the world that has the scale that Brazil has. And the need for technology there is so significant. And it’s not just this next-generation technology that we are talking about, there is a lot of tools that we have today that haven’t been fully deployed in Brazil. Connectivity is maybe one of the biggest barriers. We are working really hard to solve that. And when we do solve that, we think there is a significant unlock just utilizing today’s technology much less when we get to a point where we have got things like autonomy and See & Spray deployed in Brazil. So, you will continue to see that as a market we are going to invest heavily in, in a market that really plays to our strength, particularly as we have seen just a continuation of this migration from lower horsepower equipment to higher horsepower, more precise equipment, I think it really plays to Deere strength longer term there.

Josh Jepsen: Hey Kristen. As Brent mentioned, the appetite and the adoption of technology there, in particular in Brazil, is happening faster than anywhere else in the world. I think importantly, we have already gone on a significant journey with our dealers over €“ really over the past two decades in terms of building dealers of scale with the ability to support service, very sophisticated farmers, high levels of technology, and they are very excited about it. The other important piece, too, is we have talked about in the past, we have a target of having margins in South America, be North American and like. And we have really done that. Over the last year, we have seen the margin performance significantly improved to now where it’s North American like, if not a bit better, so really good about the progress and the future there in an area of continued focus. Thanks.

Brent Norwood: I think we have time for one last caller.

Operator: Absolutely, our next question comes from Mike Shlisky with D.A. Davidson. Go ahead please. Your line is open.

Mike Shlisky: Yes. Hi. Good morning and thanks for taking my question. You touched on this in earlier, Brent I think, but you had mentioned advanced fleet age and the driver up production in precision ag. If you meet your overall financial goals for 2023, do you think farmers will have cut up on three days by the end of the year? Will they still be older than they probably should be going into 2024? And maybe to answer that question and a similar one on Construction & Forestry, but that also be go age into 2024.

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