Poor showing continues for Cat

By Mike Hayes26 October 2016

Caterpillar released its financial results for the third quarter of 2016 this week, showing minimal signs of a recovery in the construction market.

The firm announced a profit for the quarter of US$ 283 million, equating to 48 cents per share. This compares with a profit of US$ 559 million (or 94 cents per share) in the same period in 2015.

While the firm announced a slight increase in sales of aftermarket equipment parts in the quarter, it was somewhat overshadowed by a 16% fall in revenue, down from US$ 11 billion to US$ 9.2 billion, and short of the US$ 9.8 billion anticipated by analysts.

As Caterpillar announced its shares were down 1.7% at US$ 84.53, executives highlighted global economic weakness as a reason for a fall in sales demand, and also pointed to the glut of secondhand construction machinery on the market.

Caterpillar vice president of finance Mike DeWalt said, "When demand goes down, dealers want to hold onto less. So that has put some downward pressure on our sales [to dealers]".

The company’s outgoing CEO, Doug Oberhelman – set to stand down in January and be replaced by Jim Umpleby – outlined signs of improvement in 2017, including rising commodity prices and a more positive outlook for the Chinese construction market.

He said, "We've been through an awful, rough period the last four years, but I do think we're set up for the future."

Currently undergoing a restructuring programme that could include the closure of up to 20 plants in the next two years, Caterpillar has already reduced its global workforce by over 14,000 people, to an estimated 108,800.

It is also possible that the company will report a loss in its full-year results, due to pension and benefits costs that could total around US$ 2 billion, and that were not included in the outlook for this year.

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