Business news in brief

QUOTE OF THE DAY

“The path from higher producer prices to higher consumer prices usually takes a little while.”

Markus Schomer, Pinebridge Investments LLC chief economist

Article, 1D

Lower demand cuts into Deere's profit

MOLINE, Ill. -- Deere & Co. reported a 9.5 percent decline in second-quarter net income Wednesday on lower demand for farming equipment and cut its sales forecast for the year.

The company beat Wall Street's quarterly expectations on both profit and revenue, but the sales outlook weighed on shares.

With farmer income projected to decline, Deere said sales of its agriculture and turf equipment could fall 7 percent for the full year. It had projected a 6 percent decrease in February.

The U.S. economic rebound and housing recovery are helping to offset some of the decline in agriculture. The company expects its construction and forestry equipment sales to rise 10 percent this year.

Overall, the company expects a 4 percent drop in equipment revenue for fiscal 2014. It projected a 3 percent fall three months ago. For the current quarter, it's also expecting a 4 percent decline in equipment revenue.

Net income in the most recent quarter fell to $980.7 million, or $2.65 per share, compared with $1.08 billion, or $2.76 per share, in the same quarter a year ago.

That was much better than the per-share forecast of $2.47 on Wall Street, according to a poll of analysts taken by FactSet.

Revenue fell 8.9 percent to $9.95 billion, from $10.91 billion, but that also edged out analyst expectations of $9.63 billion.

Shares of Deere, based in Moline, Ill., fell $1.91, or 2 percent, to close at $91.70.

-- The Associated Press

Citigroup fires 11 over fraud in Mexico

Citigroup Inc., the U.S. bank investigating a $400 million loan fraud at its Mexico unit, fired 11 people for reportedly failing to prevent or discover the wrongdoing and said more will face punishment.

The dismissals affect four managing directors, including two heads of business units in Mexico, according to a memorandum sent Wednesday and signed by Chief Executive Officer Michael Corbat. All 11 are based in that country, according to a person briefed on the investigation who asked to remain anonymous because the information isn't public. The New York-based bank previously fired one person.

"While our internal investigation is ongoing, we have unfortunately identified additional employees across business and functional lines whose actions or inactions failed to protect our company from this fraud," Corbat, 54, said in the memorandum. More people inside and outside Mexico may be punished, he wrote.

Citigroup said in February that invoices backing as much as $400 million of loans to Oceanografia SA, an oil-services firm based in Ciudad del Carmen, were found to be fraudulent. After a review of its lending programs, Citigroup, which originally called the fraud an isolated incident, later said it had found a second case.

-- Bloomberg News

Chinese airline orders 50 Boeing 737s

Boeing Co. will sell 50 single-aisle 737 jets with a list value of at least $3.8 billion to a low-fare carrier being set up by China's Juneyao Airlines Co. as the government eases controls on low-cost travel.

The purchase by Juneyao's 9 Air subsidiary will consist of planes from the 737 Next Generation family and the upgraded Max, Boeing said in an emailed statement without giving a breakdown. That would value the deal at $3.8 billion to $5.5 billion based on retail prices. Buyers typically pay less than the sticker price.

The sale will help Chicago-based Boeing in a Chinese aircraft market that Airbus Group NV predicts will overtake the U.S. as the world's largest by 2032. China's Civil Aviation Administration in February said it would loosen regulations and study tax breaks to encourage low-fare carriers, while China Eastern Airlines Corp. in March ordered 70 Airbus A320s.

"The low-cost-carrier environment is getting increasingly friendlier," said Patrick Xu, a transportation and infrastructure analyst at Barclays in Hong Kong. "We are starting to see more startups."

Boeing shares fell 46 cents to close Wednesday at $132.99.

-- Bloomberg News

U.K. bank cautious on interest-rate rise

LONDON -- The Bank of England dampened expectations Wednesday that interest rates in the U.K. will be raised imminently as Mark Carney, the bank's governor, said the country's economy has only begun heading back to normal.

While unveiling the bank's quarterly economic projections Wednesday, Carney was cautious, noting that despite positive news -- including a drop in the unemployment rate to its lowest level in five years -- progress must be made in closing the level of spare capacity in the economy. The British economy is still smaller than it was in 2008 after a deep recession caused by the global financial crisis.

"As time has moved on and the recovery has been sustained, the economy has edged closer to the point at which bank rate will need gradually to rise," Carney said. "The exact timing will inevitably be the subject of considerable speculation and interest."

Even when that's achieved, Carney said, borrowing rates will most likely rise only gradually. The bank's benchmark interest rate stands at a record low level of 0.5 percent. It has stayed there for more than five years.

-- The Associated Press

Netflix share of peak Net traffic climbs

LOS ANGELES -- Netflix increased its share of fixed-line Internet traffic in North America in the first half of 2014, accounting for 34 percent of data flowing to consumers during peak times, up from 32 percent in the latter half of 2013.

That's according to a new report from Sandvine Inc., a Canadian networking services company.

Sandvine also found that file-sharing -- the main tool of content piracy -- had fallen to 8.3 percent of all daily network traffic, compared with 31 percent in 2008, as legitimate options flourished.

Sandvine for the first time identified Internet users who are likely "cord cutters," or those who drop traditional pay TV. They were the top 15 percent heaviest users of streaming audio and video.

The group accounted for 54 percent of all Internet traffic, consuming on average 212 gigabytes of data per month. That would be roughly equivalent to watching 100 hours of video per month, Sandvine said.

-- The Associated Press

Business on 05/15/2014

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