Deere & Company

Good morning and welcome to Deere and Company's second quarter earnings conference call. Your lines have been placed on listen only until the question and answer session of today's conference. I would now like to turn the call over to Mr. Brent Norwood, Director of Investor Relations. Thank you. You may begin.

Hello. Also on the call today are Ryan Campbell, Chief Financial Officer, Josh Jepson, Deputy Financial Officer, Gal Yabar, Director of Corporate Economics, and Rachel Bock, Manager of Investor Communications. Today, we'll take a closer look at Deere's second quarter earnings, then spend some time talking about our markets and our current outlook for the fiscal year 2022. After that, we'll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com slash earnings. First, a reminder, This call is being broadcast live on the Internet and recorded for future transmission and use by Deere and Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the company's plans and projections for the future that are subject to important risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8K and periodic reports filed with the Securities and Exchange Commission. also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeer.com slash earnings under quarterly earnings and events. I will now turn the call over to Rachel Bach.

Thanks, Brent, and good morning. John Deere completed the second quarter with sound execution despite being constrained by persistent supply challenges. Financial results for the quarter included a 19.9% margin for the equipment operations. Egg fundamentals remained solid with our order books largely full through the balance of the year and demand starting to build for our model year 23 products. Furthermore, the construction and forestry markets also continued to benefit from strong demand and price realization. contributing to the division's solid performance in the quarter. Slide three shows the results for the second quarter. Net sales and revenues were up 11% to $13.37 billion, while net sales for the equipment operations were up 9% to $12.034 billion. Net income attributable to Deere and Company was $2.098 billion, or $6.81 per diluted share. Taking a closer look at our production and precision ag business on slide four, net sales of 5.117 billion were up 13% compared to the second quarter last year, primarily due to price realization and higher shipment volumes. Price realization in the quarter was positive by about 11 points. Operating profit was 1.07 billion, 5.7 billion, resulting in a 21% operating margin for the segment. The year-over-year increase in operating profit was primarily due to price realization and higher shipment volumes, partially offset by higher production costs and higher R&D spend. The production costs were mostly elevated material and freight. Supply challenges also contributed to production inefficiencies, driving higher overheads for the period. The increased R&D spend reflects our continued focus on developing and integrating technology solutions into our equipment and unlocking value for our customers. Operating profit for the quarter was also negatively impacted by an impairment of 46 million related to the events of Russia to Ukraine. Next, small leg and turf on slide five. Net sales were up 5%, totaling 3.57 billion in the second quarter as price realization more than offset negative currency translation. Price realization in the quarter was positive by just over eight points, while currency translation was negative by about two points. For the quarter, operating profit was down year over year at $520 million, resulting in a 14.6 operating margin. The decreased profit was primarily due to higher production costs, specifically materials, and an unfavorable sales mix. These items were partially offset by price realization. To share more perspective on the current global ag and turf industry and fundamentals, I'm happy to be joined today by Galia Barr, Director of Corporate Economics. Galia?