John Deere’s construction division has experienced a challenging start to its fiscal year, with net sales plummeting to just under $2 billion in the first quarter of 2025, compared to $3.2 billion in the same period of 2024. This represents a 38% drop in revenue, attributed to lower shipment volumes stemming from the company’s strategic decision to produce less to meet retail demand.
Operating profit for John Deere’s construction business saw a staggering 89% decline, dropping from $566 million in Q1 2024 to only $65 million in Q1 2025. The sharp decline in profitability is mainly due to the decreased shipment volumes, unfavorable price realizations, and higher costs in areas such as selling, general, and administrative expenses as well as research & development.
A detailed breakdown of the company’s construction operating profit showed a significant reduction in first-quarter sales volume, which was down by $407 million year-over-year. Deere’s operating margin for its construction segment also dropped sharply from 17.6% in Q1 2024 to just 3.3% in the current quarter. The overall net sales for the company’s total business were $3.1 billion, a 37% decrease compared to the previous year, while total operating profit decreased by 68%, amounting to just $338 million.
Looking ahead, John Deere forecasts that 2025 construction net sales will decline by 10% to 15%, with a 10% drop in the overall U.S. and Canadian earthmoving equipment market. Despite these setbacks, Deere remains optimistic about the long-term outlook, as end market fundamentals for replacement demand are still positive, albeit affected by higher interest rates, macroeconomic uncertainty, and a competitive marketplace.
During an earnings call, Joshua Rohleder, the manager of investor communications at John Deere, explained that the company’s underproduction strategy for the first quarter has allowed them to reduce inventory levels in the earthmoving sector, thus providing production flexibility as market demand evolves. He also noted that rental refleeting in the earthmoving industry remains low, signaling potential future growth.
In addition, Josh Beal, the director of investment relations, mentioned that roadbuilding shipments had been delayed due to the industry returning to more normal seasonal patterns. However, Deere expects to catch up on these sales later in the year. Beal emphasized that Deere’s decision to underproduce retail demand by 35% in the first quarter led to a 15% reduction in earthmoving inventory, with a cumulative decrease of 30% over the past two quarters. The strong performance in compact construction equipment sales at the end of the year gave the company confidence in its future operational flexibility.
As the year progresses, John Deere plans to adjust its production strategy according to the changing demands in the earthmoving market, remaining hopeful for a recovery in the latter half of 2025.
Fulian Operation Team
2025.3.19
