Caterpillar Says Sales Woes Could Linger -- 2nd Update
25 Oktober 2016 - 6:04PM
Dow Jones News
By Andrew Tangel
Caterpillar Inc., the world's largest maker of mining and
construction equipment, said it predicts 2017 will be as rough as
this year as the company suffers in the global commodities
bust.
The Peoria, Ill.-based manufacturing giant said Tuesday it
expects next year's revenue from sales of its hulking yellow
bulldozers, trucks and other heavy machines won't be "significantly
different" from the about $39 billion in sales it expects for all
of 2016, its fourth-straight year of declining revenue. The company
previously said it expected $40 billion to $40.5 billion in revenue
for 2016.
"Economic weakness throughout much of the world persists and, as
a result, most of our end markets remain challenged," Caterpillar
Chairman and Chief Executive Officer Doug Oberhelman said in a
prepared statement. The company indicated it could report a loss
for all of 2016 because of an expected accounting adjustment in the
fourth quarter related to pension and postretirement benefit
costs.
It would be Caterpillar's first annual loss since 1992,
according to a Caterpillar spokeswoman.
Caterpillar's outlook for 2017 provides the first glimpse into
the company's fortunes in the tenure of incoming CEO Jim Umpleby,
who is slated to take over Jan. 1. Caterpillar last week announced
Mr. Oberhelman would step down as the company reels from his bold
bet on the global commodities boom that ultimately backfired.
The company said the accounting adjustment could amount to a hit
of $2 billion, or $3.50 a share, to this year's posttax earnings.
The Caterpillar spokeswoman noted changing interest rates and
investment returns could affect the ultimate size of the expected
fourth-quarter adjustment.
Caterpillar also trimmed its profit outlook for the year, saying
it expects earnings per share of $2.35, or $3.25 excluding
restructuring costs. That forecast doesn't include the looming
adjustment.
Trouble continued for Caterpillar in the third quarter, with
revenue plunging 16% to $9.2 billion from the prior year as sales
of construction, mining and oil equipment remained weak. Mr.
Oberhelman cited an abundance of used construction equipment and
idle locomotives in North America, and idle mining trucks around
the globe.
Without an increase in orders, the company said the downturn
could stretch into the first half of next year. If commodity prices
stabilize or rise that could make for a rosier second half, it
said.
Caterpillar pointed to indications of hope: commodity prices off
their recent lows, signs of improvement in the Chinese construction
market and the likely bottoming of construction sales in Russia and
Brazil.
But the company said it hasn't seen an increase in orders for
new equipment. Construction activity and equipment sales in North
America also fell short of predictions, and there is continued
uncertainty in Europe in the wake of the U.K.'s Brexit vote.
"We remain cautious as we look ahead to 2017, but are hopeful as
the year unfolds we will begin to see more positive momentum," Mr.
Oberhelman said in the statement.
Over all for the third quarter, Caterpillar reported a profit of
$283 million, or 48 cents a share, down from $559 million, or 94
cents a share, a year earlier. Excluding restructuring costs,
earnings per share fell to 85 cents from $1.05 a year ago.
The company is splitting its top jobs and named Dave Calhoun, an
executive at a New York private-equity firm, as Caterpillar's next
chairman when Mr. Oberhelman steps down from that role at the end
of March.
Mr. Oberhelman embarked on an ambitious expansion that included
building new plants, beefing up the company's ranks and, in 2011,
buying Milwaukee mining-equipment maker Bucyrus International Inc.
in an $8.8 billion-deal, Caterpillar's largest.
But demand has dropped for Caterpillar's heavy machines around
the world. The company is in the midst of a restructuring that will
close or consolidate 20 plants by the end of 2018.
Caterpillar continued to shrink its workforce in the third
quarter, to 97,100 full-time employees, down from 100,000 three
months ago and significantly lower than the 108,900 full-time
employees it had a year ago.
Caterpillar's stock price has suffered. Shares are about flat
over the last five years, compared with a 75% rise by the broader
S&P 500. Caterpillar shares were down less than a percent to
$85.73 midday Tuesday.
Joshua Jamerson contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
October 25, 2016 11:49 ET (15:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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