Soft mining market hits Cat outlook

Caterpillar says it will achieve revenues of between US$ 57 billion and US$ 61 billion this year, compared to its previous estimate of US$ 60 billion to US$ 68 billion. Weak demand around the world for mining equipment was blamed for the downward revision.

The change in outlook came as the company announced a -45% drop in net profits for the first quarter of the year at US$ 880 million, compared to US$ 1.59 billion in the same period last year. Revenues were down -17% to US$ 13.2 billion, compared to just less than US$ 16 billion a year ago.

Caterpillar chairman and CEO Doug Oberhelman said, “In our year-end 2012 financial release, we said the first quarter of 2013 would be challenging, and it certainly was. As expected, inventory changes were a major factor. Caterpillar and out dealers usually add inventory in the first quarter to prepare for higher end-user demand in the spring and summer. In the first quarter of 2012, we added about US$ 2 billion to inventory, but this year we cut inventory by US$ 0.5 billion.”

Sales from Caterpillars Construction Industries division, which makes equipment used by the construction industry, fell -17% in the first quarter to US$ 4.2 billion, compared to US$ 5.06 billion in Q1 2012. In comparison, the Resources Industries division, which makes mainly mining equipment was down -23% and the Power Systems business dropped -12%.

Commenting on the future outlook, Mr Oberhelman said, “as we began 2013, we were concerned about economic growth in the US and China and are pleased with the relative stability we have seen so far this year. In the US, we are encouraged by progress so far and are becoming more optimistic on the housing sector in particular, In China, first quarter economic growth was slightly less than many expected, but in our view, remains consistent with slow growth in the world economy. In fact, our sales in China were higher in the first quarter of 2013 than they were in the first quarter of 2012, and machine inventories in China have declined substantially from a year ago.”