A steep decline in demand for mining equipment coupled with reductions in inventory are to blame for Caterpillar’s slumping first-quarter financial results, the company reports.
The company reported a profit of $880 million in the first quarter of 2013, a 45-percent tumble from the $1.586 billion the company pulled in the first quarter of 2012. Sales and revenues experienced a fall as well. First-quarter 2013 sales and revenues dropped 21 percent from $16 billion in 2012, to $13.2 billion.
In a prepared statement, CEO Doug Oberhelman said the company expected this past quarter to be “challenging” and a big factor was a “significant year-to-year swing” in inventory.
“Caterpillar and our 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 $2 billion to inventory, but this year, we cut inventory by about a half billion dollars,” Oberhelman said. “In the first quarter of 2012, Cat dealers added machine inventory of about $875 million, and this year, they reduced machine inventory by about $700 million.”
In response, the company revised its 2013 outlook. It now expects sales and revenues in a range of $57 billion to $61 billion. Previously, the outlook expected a range of $60 billion to $68 billion.
Oberhelman said though the company was concerned with economic growth in the U.S. and China at the beginning of the year, it is now “more optimistic on the (U.S.) housing sector” while growth in China “remains consistent with slow growth in the world economy.”
The company has experienced the effects of the mining industry’s reduction in spending. Caterpillar’s first-quarter sales of mining equipment were $3.67 billion, a decrease of 34 percent. Meanwhile, operating profit in the first quarter from mining tumbled to $477 million, a decrease of 59 percent.
