Deere plans to almost double sales via global expansion

Deere & Co., the world's largest manufacturer of agriculture equipment, said it plans to almost double sales to $50 billion by 2018 by expanding operations outside the U.S.

The company has a goal of achieving a 12 percent operating margin by 2014, Chief Executive Officer Sam Allen said today at Deere's annual shareholder meeting at its Moline headquarters. Deere will intensify its focus on its agriculture business, which will continue to be the company's biggest unit, and the construction unit, Allen said. The company will also make “major investments” in construction to enhance its global presence, he said.

“The revised strategy also lays out some challenging aspirations or goals,” he said. “By hitting these marks, the company would grow to about twice its present size and deliver about three times as much economic profit at normal volumes.”

Deere raised its fiscal 2011 profit forecast last week after advancing crop prices boosted North American sales of combines and tractors. The company got 35 percent its sales from outside the U.S. and Canada in the fiscal year ended Oct. 31.

“It's a realistic goal that's attainable at an earlier date,” said Eli Lustgarten, an analyst for Longbow Research in Independence, Ohio, who has a “buy” rating on the shares, said in a telephone interview.

The plan represents the first revision in the company's strategy in a decade, Allen said. Deere has been working on it over the past two years and will roll out the plan in fiscal 2011, Ken Golden, a company spokesman, said in an interview.

Under former CEO Bob Lane, Deere had an operating-margin goal of 10 percent and a growth target that was equal to an annual increase in sales of about 7 percent, Golden said. The latest strategy translates into annual sales growth of about 9 percent, Golden said.

Deere's sales rose 13 percent to $26 billion in fiscal 2010. Its operating margin -- calculated as operating income divided by net sales -- was 10.6 percent in fiscal 2010, according to Bloomberg data.

Deere fell $2.87, or 3.2 percent, to $88.13 at 2:25 p.m. in New York Stock Exchange composite trading. The shares have climbed 57 percent in the past 12 months.