In response to the soaring demand for large farm tractors, Deere & Company (DE - Analyst Report) has decided to expend $70 million for increasing the manufacturing capacity of the same at its Waterloo, Iowa facility.
The expansion is aimed at increasing the facility’s production capacity by 10%. Deere’s expansion efforts, at this facility, including the current one, will enhance capacity by more than 50% from 2002 levels.
The company expects to multiply the number of tractors to be built by the middle of 2013. The large farm tractors already have a broad demand base across the world encompassing 130 countries.
Deere experienced a strong market demand for large agricultural equipment globally over the years. It is expected that the investment decision on the part of the company will further boost performance of the Agricultural and Turf segment.
In the recently reported quarter, the company’s Agricultural and Turf segment contributed 69.8% of the total revenue. Deere generates the majority of its revenue from this segment.
For the full year 2012, Deere expects worldwide sales of Agriculture and Turf equipment to grow by 15%. According to the company, the favorable global farm conditions, introduction of advanced products and expansion projects in the end markets would benefit the segment.
According to the report of Agricultural Outlook Forum 2012 by the US Department of Agriculture, the agricultural production in U.S. is expected to be favorable for 2012. It predicts corn, soybean and wheat production to increase. This may further escalate the demand for agricultural equipment including large tractors.
Currently, the shares of Deere retain a Zacks #2 Rank (short-term “Buy” recommendation). It competes with companies like Caterpillar Inc. (CAT - Analyst Report), CNH Global NV and Kubota Corporation .
Based in Illinois Deere & Co., is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally. Deere & Co.’s credit subsidiary, John Deere Capital Corporation (JDCC) is one of the largest equipment finance companies in the U.S. with more than 2.4 million accounts.