Mining hits Caterpillar’s second quarter

By Chris Sleight24 July 2014

Caterpillar chairman & CEO, Doug Oberhelman.

Caterpillar chairman & CEO, Doug Oberhelman.

Caterpillar had revenues of US$ 14.2 billion for the second quarter of the year, a -3% decline on the same period last year. Although the company’s sales of construction equipment were up +11% compared to a year ago, it was a weak quarter for the Resources Industries division, which serves the mining sector.

Second quarter sales for the Construction Industries division total US$ 5.41 billion for the second quarter of the year, with North America and the Europe, Africa & Middle East region posting particularly strong growth. The only downside was a -2% decline in sales in Asia-Pacific, which Caterpillar said was due to weaker conditions across the region. The division’s operating profit for the quarter was up +83% compared to a year ago at US$ 674 million.

Caterpillar Chairman and CEO, Doug Oberhelman said “We’re pleased with our second-quarter results, particularly the improvement in profit. We increased the bottom line despite a weak quarter for our Resource Industries segment, which is principally mining.”

The company’s net profit for the quarter was up +4% on the same period last year at US$ 999 million.

Caterpillar said that its outlook for the rest of the year remained consistent with its earlier predictions, which is to say revenues of US$ 54 billion to US$ 56 billion. However, it has upped its profit guidance as it says restructuring costs will be at the lower end of its previous forecast. Profits per share are expected to come in around US$ 5.75, compared to the previous estimate of US$ 5.55.

“After a sizable drop in sales and revenues in 2013, our ongoing forecasting process has, since the third quarter of last year, pegged 2014 as a roughly ­flat year for sales. That’s still the case. There have been plusses and minuses, but they’ve both been relatively muted in the context of our total sales and revenues. While we’d certainly like to see improvement in economies around the world, and more specifically, the mining industry, the stability that we’ve seen this year has helped. Even though sales and revenues are relatively flat compared to last year, we’ve improved the bottom line with better execution and continued focus on costs,” said Mr Oberhelman.

Stock repurchase

Caterpillar has also announced it will repurchase some US$ 2.5 billion worth of shares in the third quarter of the year, adding to the US$ 1.7 billion repurchased in the first quarter of 2014.

“With a strong balance sheet, positive cash flow, sufficient cash on hand and more modest needs for capital expenditures, it makes sense to continue to reward stockholders. In 2013, we repurchased US$ 2 billion of stock and raised the dividend by +15%. In June of 2014, we increased the dividend an additional +17%, and by the end of the third quarter, we expect to have repurchased about US$ 4.2 billion of stock in 2014. Rewarding stockholders is an important goal and our actions demonstrate our commitment,” Mr Oberhelman said.

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