Caterpillar Reports Higher-Than-Expected Profit -- 3rd Update
By James R. Hagerty
Caterpillar Inc., reaping the benefits of aggressive cost cutting, reported a stronger-than-expected rise of 4.8% in first-quarter profit but said the outlook for mining-equipment sales has deteriorated.
The Peoria, Ill.-based company said it expects earnings for the full year of $5.55 per share, up from an earlier forecast of $5.30 per share. That would still fall short of last year's $5.75 per share and the $8.48 recorded for 2012.
Caterpillar said it expects sales in its resource industries division, which mainly makes mining equipment, to fall 20% this year. Previously, Caterpillar had forecast a 10% sales decline for that division. Mining equipment accounted for about a fifth of the company's total sales last year.
Sales of Caterpillar's large mining trucks, the size of small houses and able to carry as much as 400 tons of ore, are down 80% from two years ago, the company said. Sales of replacement parts for mining equipment also fell, and Caterpillar said miners seemed to be delaying maintenance work. The company said miners were focused on boosting productivity at existing mines rather than investing in new ones.
Operating profit in the resource industries division plunged 68% in the latest quarter, but profit tripled in construction equipment from the depressed year-ago level. Operating profit was up 40% in the energy and transportation division, which makes electric generators, rail locomotives and engines used in factories and boats and in producing oil and gas.
For the first quarter, the world's largest maker of construction and mining equipment reported profit of $922 million, or $1.44 per share, up from $880 million, or $1.31 per share, a year earlier. Wall Street analysts had expected earnings of about $1.21 per share in the latest quarter, according to FactSet. Sales, including revenue from financing activities, edged up 0.2% to $13.24 billion.
Caterpillar over the past year has been closing plants and otherwise scaling back production in the U.S. and Europe. It said the resulting restructuring costs in the first quarter totaled $149 million, or 17 cents a share after taxes. Caterpillar has closed five plants that it acquired as part of its $8.8 billion purchase of Bucyrus International Inc., a maker of mining equipment, in 2011. That is about a third of the plants formerly owned by Bucyrus.
Company officials said that the closed plants were small and that their production could be handled more efficiently in larger plants with spare capacity.
When will mining orders start recovering? "We don't know the answer to that," Bradley Halverson, chief financial officer of Caterpillar, said in an interview. For the long term, however, "we absolutely love the mining business," he said, arguing that global needs for resources eventually would spur more investment in mines.
Caterpillar's global work force stood at about 132,000 at the end of the quarter, down nearly 7% from a year earlier.
Construction equipment was much stronger largely because Caterpillar's dealers began stocking up again as demand improved, especially in the U.S. but also modestly in Europe, executives said in a call with analysts. In the year- earlier quarter, the dealers held off on buying because many had too much inventory.
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