Josh Rolleter
Manager of Investor Communications at Deere & Company
Good morning, and thank you all for joining. John Deere finished the third quarter with another strong performance resulting in 22.6% margin for equipment operations. Performance exceeded expectations as a result of sustained demand for both farm and construction equipment, as well as sound operational execution across all business units. Ag fundamentals continue to remain healthy with a full order book and positive customer sentiment supporting a strong finish to fiscal year 2023. Meanwhile, construction and forestry remain sold-out for the remainder of the fiscal year with robust shipments driven by strong retail demand and rental re-fleeting.
Slide three begins with results for the third quarter. Net sales and revenues were up 12% to $15.801 billion, while net sales for the equipment operations were up 10% to $14.284 billion. Net income attributable to Deere & Company was $2.978 billion or $10.20 per diluted share. Third quarter net income results include a $243 million tax benefit and $47 million of associated interest income stemming from a favorable tax ruling on Brazilian VAT tax subsidies.
Turning now to Slide four, let's begin our segment review with the Production and Precision Ag business. Net sales of $6.806 billion were up 12% compared to the third quarter last year, primarily due to price realization. Price realization for the quarter was positive by just under 12 points. Currency translation was also positive by approximately one point. Operating profit was $1.782 billion, resulting in a 26.2% operating margin for the quarter. The year over year increase was driven by favorable price realization, improved shipment volumes and favorable sales mix, which was partially offset by higher production costs, increased SA&G and R&D spending, and unfavorable currency exchange.
Shifting to small Ag and Turf on Slide five. Net sales were up 3%, totaling $3.739 billion in the third quarter. The increase was a result of price realization, which was partially offset by lower shipment volumes. Price realization was positive by slightly over nine points. Currency was also positive by slightly under half a point. Operating profit improved year over year to $732 million, resulting in 19.6% operating margin. The year over year increase was primarily due to price realization and was partially offset by higher production costs, lower shipment volumes, and increased SA&G and R&D spending.
Slide six shows our industry outlook for Ag and Turf markets globally. In the U.S., and Canada, we expect industry sales of large Ag equipment to be up approximately 10% during the fiscal year, reflecting a continuation of strong demand. Ag fundamentals remain solid, with farm net income expected to be near historical highs even if down from last year's record levels. Drier weather conditions over the summer put some downward pressure on yields, tightening ending grain stock estimates and further supporting commodity prices. Solid order visibility provides a high level of confidence as we move into the fourth quarter.
Within Small Ag & turf, we estimate industry sales in the U.S. and Canada to be down between 5% and 10%, as strength for midsized equipment continues to be offset by weaker consumer oriented products, which have been pulled down in part by high interest rates. Midsized tractors in the 100 to 180 horsepower range are sold out for the remainder of the year, while production cuts in the sub 40 horsepower compact tractor range have helped bring inventory levels down from April highs. Hay and forage continues to see significant year over year increases as production shortages in 2022 fully abate.
Turning to Europe, the industry is forecasted to be flat to up 5% for fiscal year 2023. Our visibility for the rest of 2023 remains excellent, as order books are largely pre-sold at this point in the year. In South America, we expect industry sales of tractors and combines to be flat to down 5% following a record year of equipment in 2022. Positive sentiment around record grain production in 2023 was somewhat offset by political uncertainty and a delayed government sponsored financing plan. The market remains stable and order books now provide visibility through the remainder of 2023. Industry sales in Asia are forecasted to be down moderately, as volumes in India remain subdued when compared to record levels in 2021.
Moving now to segment forecasts on Slide seven. For Production and Precision Ag, net sales continue to be forecasted up around 20% for the fiscal year. The forecast assumes roughly 15 points of positive price realization for the full year and minimal currency impact. Segment operating margin for the year remains between 25% and 26%, reflecting strong execution globally.
Slide eight gives our forecast for the Small Ag and Turf segment. Net sales are expected to remain up around 5% in fiscal year 2023. Guidance includes about nine points of positive price realization and approximately one point of currency headwind. The segment's projected operating margin is now between 17% and 18%, reflecting stronger than expected operational efficiency, notably in Europe.
Now switching to Construction & Forestry on Slide nine. Net sales for the quarter were $3.739 billion, up 14%, primarily due to price realization and higher shipment volumes. Price realization was positive by nearly 10 points and currency translation was also positive by approximately half a point. Operating profits increased year over year to $716 million, resulting in a 19.1% operating margin due to price realization and improved shipment volumes. These were partially offset by increased SA&G and R&D expenses, higher production costs and unfavorable currency impacts.
Slide 10 shows our 2023 industry outlook for Construction & Forestry. Industry sales of earthmoving and compact construction equipment in North America are both projected to remain flat to up 5%. Demand for earthmoving and compact construction equipment remains robust, driven primarily by the early stages of infrastructure spending and rental re-fleeting. The industry has also benefited from some stabilization in housing, as well as reshoring efforts in the manufacturing sector, which are helping to offset weaknesses in office and commercial real estate. In forestry, we estimate the global industry will be flat to down 5%, with growth in Europe offset by softening markets in the U.S. and Canada. Global road building markets are forecasted to be flat to up 5%. Strong performance in North America and emerging markets in South America and India are supporting flat fundamentals across Europe.
Continuing on with the C&F segment outlook on Slide 11. Year's Construction & Forestry 2023 net sales are now forecasted up between 15% and 20%, with results likely to converge towards the middle of that range. Our net sales guidance for the year contains about 11 points of positive price realization. Operating margin is now expected to be between 18.5% to 19.5%.
Next, we'll transition to our financial services operations on Slide 12. Worldwide Financial Services net income attributable to Deere & Company in the third quarter was $216 million. The 3% year over year increase was due to income earned on a higher average portfolio, partially offset by less favorable financing spreads. For fiscal year 2023, our outlook remains at $630 million, reflecting less favorable financing spreads, the second quarter correction of the accounting treatment for financing incentives, a higher provision for credit losses, increased SA&G expenses, and lower gains on operating lease dispositions. These were partially offset by benefits from a higher average portfolio balance.
Finally, Slide 13 outlines our guidance for net income, effective tax rate and operating cash flow. For fiscal year '23, we are raising our outlook for net income by $0.5 billion to be between $9.75 billion and $10 billion, reflecting another quarter of strong results and continued optimism for the remainder of the year. Next, our guidance incorporates an updated effective tax rate between 21% and 23%, which reflects the impact of a favorable tax ruling in Brazil, as mentioned earlier. Lastly, cash flow from equipment operations is now projected to be in the range of USD10.5 billion to USD11 billion.
This concludes our formal remarks. We will now turn to a few specific topics relevant to the quarter before opening the line for Q&A. Let's begin with Deere's performance this quarter, Brent. We had another really strong quarter with operational results coming in just ahead of our own expectations. Net sales for equipment operations were up 10% year over year, while operating margins came in at 22.6% for the quarter. Can you break down what went well for us this quarter?
