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In an Aug. 31, 2011 photo people examine John Deere farming equipment on display during the Farm Progress Show in Decatur, Ill.

Seth Perlman/AP

Deere & Co, the world's largest farm equipment maker, reported a weaker-than-expected quarterly profit as higher manufacturing costs and other expenses cut into earnings and a strong dollar reduced the value of international sales.

Deere forecast higher sales and earnings for its new fiscal year.

Overhead costs and spending on research and development rose by about $100-million (U.S.) from the previous quarter, JPMorgan analyst Ann Duignan said in a note to clients.

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"Expectations were high coming into this report," she added.

Net income rose to $687.6-million, or $1.75 per share, in the fourth quarter ended on Oct. 31 from $669.6-million, or $1.62 per share, a year earlier.

The results missed the analysts' average estimate by 13 cents a share, according to Thomson Reuters I/B/E/S.

R&D expenses were up about 14 per cent year-over-year, Deere said, while selling, administrative and other costs rose 9 percent, partly because of increased incentive compensation, according to presentation materials ahead of the company's earnings conference call.

Sales rose 14 per cent to $9.79-billion, with equipment operations contributing $9.05-billion. Analysts were expecting sales of $8.85-billion.

Stronger machinery sales in North America and higher prices offset weaker international demand and the negative impact from currency fluctuations.

Moline, Illinois-based Deere said it expected flat North American demand for farm equipment in fiscal 2013 after a strong 2012. Industry sales in euro zone countries will be flat to down slightly, while soft Indian and Chinese economies will keep demand flat there as well.

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The company said it expected South America to show the strongest demand in 2013, reflecting a commodities boom.

Overall, Deere equipment sales will rise around 5 per cent in fiscal 2013, with earnings increasing to about $3.2-billion from $3.07-billion in 2012, the company said.

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