The world’s largest manufacturer of agricultural equipment, Deere & Co. (DE), announced its plans to invest in Russia by doubling the manufacturing space at its Domodedovo production facility near Moscow. The company intends to establish its own leasing facility in Russia for the sale of agricultural, construction and forestry machinery.
The investment at the Domodedovo facility will enable Deere to expand its product line in Russia by adding new equipment such as log forwarders, which are extensively used in the Russian forestry industry.
Deere Chairman and Chief Executive Officer (CEO) Samuel Allen made the announcement while he was on a trip to Russia for the 11th annual investment conference of the American Chamber of Commerce. Allen and other U.S. CEOs accompanied Vice President Joe Biden to the conference.
Allen contended that this investment is an opportunity for Deere to serve customers in the Commonwealth of Independent States and other neighboring markets along with Russia, since Russia can make a significant and sustainable contribution to help meet the world’s growing demand for food, energy, and forest products.
The leasing entity will be set up through John Deere Financial Service division, adding to financing offered by local banks and leasing companies. This division will cater to the financing needs of the Russian customers by providing them retail financing solutions.
Deere’s announcement comes nearly a month after the company reported its first quarter results for fiscal 2011. The company delivered earnings of $1.20 per share in the quarter, striding ahead of the Zacks Consensus Estimate of $1.00. It more than doubled from 57 cents earned in the year-ago quarter.
The outstanding performance in the quarter was largely driven by strong demand for farm machinery coupled with improved conditions in construction and forestry markets. Deere’s worldwide total sales increased 27% year over year to $6.1 billion, beating the Zacks Consensus Estimate of $5.9 billion handily.
Deere continues to focus on expanding its production capacities. To capitalize on the upturn in the Indian tractor market, the largest in the world, Deere invested $100 million in building a new factory and expanding the existing tractor facility in Pune in January 2011. The company also plans to expend $50 million to build a new factory in China to manufacture construction equipment for China’s domestic market and for export to other markets.
Deere’s competes with Caterpillar Inc. (CAT) which is a leading manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar is also a leading U.S. exporter with more than half of its sales being generated outside the U.S.
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