Deere & Company · NYSE:DE
Deere & — Investor Presentation (August 2020)
49 slides from Deere &'s investor presentation, August 2020
Slide 1: Investor Presentation August 2020 – October 2020
Investor Presentation August 2020 – October 2020 1
Slide 2: Safe Harbor Statement & Disclosures
Safe Harbor Statement & Disclosures This presentation includes forward-looking comments subject to important risks and uncertainties. It may also contain financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Refer to Deer
Slide 3: Table of Contents
Table of Contents Slide John Deere Strategy 4 Use-of-Cash 18 John Deere Financial Services 23 Agriculture Fundamentals 27 Construction & Forestry Fundamentals 43 Appendix 47 3
Slide 4: John Deere Strategy
SWAT aS John Deere Strategy ST Stats ‘ SST
Slide 5: Exceptional Operating Performance - OROA
Exceptional Operating Performance - OROA Equipment Operations 21.3% OROA* in 2019 40% 2013 2011 30% 2014 2012 2010 2007 2018 2008 2004 28% 2019 2017 2006 2005 20% 2015 20% 2016 2009 12% OROA (SVA** Neutral) 10% 12% 2003 2002 0% 2001 -10% 80% 100% 120% % of Mid-Cycle Volume * Operating Return on Oper
Slide 6: Exceptional Operating Performance – SVA
Exceptional Operating Performance – SVA Equipment Operations $1.5 billion SVA* in 2019 $4,000 Adoption of SVA Model $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 * Shareholder Value Added; for reconciliation to GAAP see “SVA*
Slide 7: Exceptional Operating Performance – Operating Cash Flow
Exceptional Operating Performance – Operating Cash Flow Equipment Operations $3.2 billion Net Cash Flow in 2019 $5,000 Adoption of SVA* Model $4,000 Sale of Trade Receivables to John Deere Financial $3,000 $ Millions $2,000 $1,000 $0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2
Slide 8: Productivity Improvement
Productivity Improvement ~ 3% CAGR* over 30 years Net Sales and Revenues per Employee $700 $600 $500 $ Thousands $400 $300 $200 $100 $0 1991 1995 1999 2003 2007 2011 2015 2019 * Compound Annual Growth Rate 8
Slide 9: Investment in New Products and Technologies
Investment in New Products and Technologies R&D as Percent of Net Sales 1,800 8% 1,600 1,400 6% 1,200 1,000 4% $ Millions 800 600 2% 400 200 0 0% 2005 2007 2009 2011 2013 2015 2017 2019 R&D $ % of Net Sales 9
Slide 10: Net Sales by Product Category
Net Sales by Product Category Equipment Operations – Fiscal 2019 Agriculture & Turf Construction & Forestry $24.1 billion* $11.5 billion* Other Other $0.4 Turf Construction $1.1 Roadbuilding $2.7 Large Ag $3.2 $5.2 $11.7 $8.7 $1.3 Small Ag Compact $1.4 Forestry *Includes Other Revenues 10
Slide 11: Net Sales by Major Markets
Net Sales by Major Markets Equipment Operations** $20.6 $19.3 $5.3 $5.5 $3.6 $4.0 $3.8 $3.4 $2.2 $2.2 U.S. & Canada Western Europe Central Europe & CIS Latin America Asia, Africa, Australia, New Zealand & Middle East 2018 2019 $ Billions • *U.S. & Canada not to scale with other markets • **2018 incl
Slide 12: John Deere Precision Ag
John Deere Precision Ag Profitable + Sustainable 12 |12 John | John Deere Deere | Precision | Document Ag | Title December | Date 2018
Slide 13: Deere is the global leader in precision agriculture
Deere is the global leader in precision agriculture Best Industry World Class Machines Leading Technology Dealer Channel 13
Slide 14: Traditional Agriculture vs Next Frontier of Agriculture
Traditional Agriculture Next Frontier of Agriculture Bigger. Faster. Stronger. Automated. Easy to Use. More Precise. 14
Slide 15: Best machines, smarter over time, better
Best machines, smarter over Our Strategy: Help our customers become the time, better most profitable & sustainable growers together 010110 001001 001110 001001 110111 With our technology we make farming 010101 automated, easy to use and more precise across all operations 1011000 0100010 0011 010010
Slide 16: Migration from Field to Plant
Migration from Field → Plant Field Zone Row Plant 16
Slide 17: Case Study: Combine Advisor
Case Study: Combine Advisor TM Making Every Grain Count Ops Center Remote View & Adjust Grain Quality Camera Intelligent Combine Adjust Active Yield Customer Value: Automated machine settings, more consistent Grain harvest quality, reduced need for Gen4 loss Display skilled labor 17 sensor
Slide 18: Use-of-Cash
Use-of-Cash 18
Slide 19: Deere Use-of-Cash Priorities
Deere Use-of-Cash Priorities Cash from Operations ➢ Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost Committed to “A” Rating and readily available short- and long-term funding mechanisms ➢ Reflects the strategic nature of our financial services oper
Slide 20: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared 1Q 2004 – 3Q 2020 Dividend raised 171% since 2010 $0.80 $0.76 $0.70 $0.60 $0.50 $0.40 $0.30 $0.28 $0.20 $0.10 $0.11 $0.00 2004 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 * Adjusted for 2 for 1 stock split on 26 November 2007 20
Slide 21: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans 3Q 2020: 37% net share reduction since 2004 No shares repurchased 40 $3.0 2004–3Q 2020: Millions of Shares* Cumulative cost of repurchases $18.8 billion $2.5 30 Shares repurchased 261.0 million $2.0 $ Billions December 2013 authorization of $8 bil
Slide 22: Sources and Uses of Cash Fiscal 2004-2019
Sources and Uses of Cash Fiscal 2004-2019 Equipment Operations $50,000 = Source of Cash $4,332 ~ 58% of cash from $679 = Use of Cash operations returned to shareholders $40,000 $12,663 $1,353 $30,000 $ Millions $43,921 $9,597 $20,000 $15,720 $10,000 $674 $4,287 $3,196 $0 Beginning Cash Cash From Acq
Slide 23: John Deere Financial Services
John Deere Financial Services 23
Slide 24: John Deere Financial Services
John Deere Financial Services Consistent earnings throughout the cycle Net Income $4,000 $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1991 1995 1999 2003 2007 2011 2015 2019 John Deere Financial (attributable to Deere & Company) Equipment Operations 24
Slide 25: John Deere Financial Services
John Deere Financial Services ~$47 billion Net Owned Portfolio as of 3 November 2019 Portfolio Composition by Segment Portfolio Composition by Geography Portfolio Composition by Product Australia 3% Region 1 Operating Lease Region 3 (Asia & Africa) 17% (Latin America) 2% C&F 6% 19% Region 2 (Europe)
Slide 26: John Deere Capital Corporation
John Deere Capital Corporation Continued extremely low write-offs in Agriculture & Turf and Construction & Forestry Agriculture & Turf* Construction & Forestry 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% -1.0% -1.0% 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 1995 1999 2003 2007 2011 201
Slide 27: Agriculture Fundamentals
Agriculture Fundamentals 27
Slide 28: Global Stocks-to-Use Ratios
Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% 80% Wheat Cotton Ratios Corn 30% 60% Cotton 20% 40% Soybeans 10% 20% 0% 0% 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020P Source: USDA, 12 August 2020 28
Slide 29: Global Grain Supply and Demand
Global Grain Supply and Demand 3,000 2,500 Million Metric Tons 2,000 1,500 1,000 500 0 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17 18/19 20/21 Production Consumption Source: USDA, 19 August 2020 29
Slide 30: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $500 $400 $300 $ Billions $200 $100 $0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020F Crops Livestock Government Payments USDA Aid* CFAP Aid *USDA Aid includes MFP1 and three tranches of MFP2 Note: Coronavirus Food Assistance Program (CFAP) provides up to $16B in direct p
Slide 31: U.S. Net Farm Cash Income
U.S. Net Farm Cash Income ($ billions) 2018 2019 Forecast 2020 Forecast Total Cash Receipts $386.4 $398.2 $389.9 Other Farm-Related Income $29.1 $34.3 $31.4 Gross Cash Income $415.5 $432.5 $421.3 Cash Expenses ($311.3) ($311.8) ($308.2) Net Cash Income $104.2 $120.7 $113.1 Source: 2018: USDA, 5 Febr
Slide 32: U.S. Farm Balance Sheet
U.S. Farm Balance Sheet $3,500 30% $3,000 25% $2,500 $2,000 $ Billions 20% $1,500 $1,000 15% $500 $0 10% 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1975–2018: USDA, 5 February 2020 2019F–2020F: Deere & Company for
Slide 33: EU Macroeconomic Data
EU 28 Macroeconomic Data 16% GDP Composition 2% 12% 24% 8% 4% 0% 74% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Germany UK France Rate Growth GDP Growth – Major Economies 2019 2020F 2021F Source: IHS Markit August 2020 33
Slide 34: EU Ag Economic Data
EU 28 Ag Economic Data Crop Value of Production $150 − Utilized agricultural area ~ 190 million hectares $120 US$ Billions − Arable land ~ 110 million hectares $90 $60 − Growth potential for Western Ag equipment industry in Central & Eastern Europe $30 − Ongoing farm & Ag land consolidation and yiel
Slide 35: Brazil Macroeconomic Data
Brazil Macroeconomic Data 16% GDP Composition 12% 5% 8% 21% 4% 0% 74% -4% -8% Services Industry Agriculture Source: Brazilian Institute of Geography and Statistics (IBGE), 2017 -12% Interest CPI Unemployment GDP Rate Inflation Growth 2018 2019 2020F Source: IHS Markit, August 2020 35
Slide 36: Brazil Ag Economic Data
Brazil Ag Economic Data Crop Value of Production $150 − Agricultural area ~ 283 million hectares* $120 US$ Billions − Arable land & permanent crops ~ 87 $90 million hectares $60 − ~ 17 million hectares brought into $30 production from 2002-2012 (~ half from pasture) $0 2010 2013 2016 2019E − ~ 1 mil
Slide 37: CIS Macroeconomic Data
CIS Macroeconomic Data 16% GDP Composition (Russia) 12% 4% 8% 36% 4% 0% 60% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Russia Ukraine Kazakhstan Rate Growth GDP Growth – Major Economies 2019 2020F 2021F Source: IHS Markit Augu
Slide 38: CIS Ag Economic Data
CIS Ag Economic Data Crop Value of Production $150 − Utilized agricultural area ~ 560 million hectares $120 US$ Billions − Arable land ~ 195 million hectares $90 $60 − Significant opportunities to improve yield rates in all major crops* $30 − Land under cultivation (sown crops) expected to $0 remain
Slide 39: China Macroeconomic Data
China Macroeconomic Data 16% GDP Composition 12% 9% 8% 4% 48% 43% 0% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Rate Growth 2019 2020F 2021F Source: IHS Markit August 2020 39
Slide 40: China Ag Economic Data
China Ag Economic Data Crop Value of Production $300 − Utilized agricultural area ~ 515 million hectares $225 US$ Billions − Arable land & permanent crops ~ 122 million hectares $150 − Rural population % of total declined 15% from $75 2003-2014 $0 2011 2014 2017 2020F − Average farm size ~ 0.47 hect
Slide 41: India Macroeconomic Data
India Macroeconomic Data 16% GDP Composition 12% 16% 8% 4% 54% 30% 0% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Inflation Unemployment GDP Rate Growth 2019 2020F 2021F Source: IHS Markit August 2020 41
Slide 42: India Ag Economic Data
India Ag Economic Data Crop Value of Production $300 − Utilized agricultural area ~ 180 million hectares $225 US$ Billions − Arable land ~ 157 million hectares $150 − Average farm size ~ 1.2 hectares $75 − Number of farms ~ 129 million $0 2011 2014 2017 2020F Includes corn, wheat, rice, barley, sorg
Slide 43: Construction & Forestry Fundamentals
Construction & Forestry Fundamentals 43
Slide 44: U.S. Housing Starts
U.S. Housing Starts 2.5 2.0 Millions of Units 1.5 1.0 0.5 0.0 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020F Multi-Family Housing Starts Single-Family Housing Starts Source: 1968–2018: U.S. Census Bureau, July 2020 2019F–2020F: Deere & Company forecast as of 21 August 2020 44
Slide 45: U.S. Construction Spending
U.S. Construction Spending $2,400 % Total Construction Spend 60% 40% $2,000 20% 0% $1,600 -20% -40% $1,200 -60% $ Billions* $800 -80% -100% $400 -120% -140% $0 -160% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020F Government Infrastructure Investment Government Investment in Structures Nonre
Slide 46: End to End Road Construction Portfolio
End to End Road Construction Portfolio 46
Slide 47: Appendix
Appendix 47
Slide 48: SVA Reconciliation to GAAP
SVA** Reconciliation to GAAP Equipment Operations ($ millions except where noted) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Net Sales 7,663 8,830 9,640 11,082 11,926 9,701 11,169 11,077 11,703 13,349 17,673 19,401 19,884 Average Identifiable Assets With Inventories at LIFO 5,5
Slide 49: John Deere
@é JOHN DEERE
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