Caterpillar Cuts Guidance, Announces More Job Cuts -- 2nd Update
July 26 2016 - 3:21PM
Dow Jones News
By Bob Tita
Caterpillar Inc. said Tuesday it doesn't anticipate a rebound
this year for its construction and mining equipment, as the company
shrunk its profit forecast and warned of additional layoffs.
Caterpillar topped second-quarter profit and sales expectations.
But the Peoria, Ill.-based company sees no end in sight to the
four-year-long slide in sales from falling prices for oil and mined
commodities and lower demand from key foreign markets.
"We're not expecting an upturn to happen this year," Chairman
and Chief Executive Doug Oberhelman said Tuesday.
Caterpillar said anemic economic growth along with geopolitical
events that undermine customer confidence such as the Brexit
referendum in Britain, the hostile rhetoric from the U.S.
presidential campaigns and the attempted coup in Turkey are holding
down global machinery demand.
"It's not any one thing. All of that contributes," said Vice
President Mike DeWalt during a conference call with analysts.
"We're a little more negative on the world economy. We have
sluggish economic growth throughout world, but not enough to drive
growth in our end markets."
Second-quarter sales of machinery and engines dropped 17% from a
year ago to $9.65 billion, with the most pronounced weakness
occurring in the mining equipment business, where sales sank 29%.
Operating profit from machinery and engines plunged 44% to $678
million.
Company executives said recent growth in U.S. housing and
infrastructure construction is helping to stabilize demand for
earth-moving equipment in North America, but added that equipment
inventories remain elevated and dealers are facing market pressure
to offer discounts on machinery that erode profits.
"It's a pretty tough pricing environment in construction," said
Mr. DeWalt.
Caterpillar has been aggressively slashing its costs in the wake
of lower sales. The company said it reduced second-quarter expenses
by $670 million from a year earlier. But the company also expects
business downsizing expenses to total about $700 million this year,
up from an earlier forecast of $550 million.
Caterpillar said it would cut an unspecified number of
additional jobs later in the year on top of the more than 10,000
jobs the company already plans to eliminate through 2018.
Caterpillar's work force has fallen by 20%, or more than 30,000
jobs, since the end of 2012. The company also intends to close or
consolidate up to 20 plants by the end of 2018.
Caterpillar trimmed its full-year profit outlook to about $2.75
a share, or $3.55, without restricting costs. The company had
previously forecast $3 a share, or $3.70 without restructuring. The
company narrowed its revenue range for this year to $40 billion to
$40.5 billion from $40 billion to $42 billion.
Over all for the quarter, the company reported a profit of $550
million, or 93 cents a share, down from $802 million, or $1.31 a
share, a year earlier. Excluding restructuring costs, earnings per
share were $1.09. Revenue slid 16% to $10.34 billion. Analysts were
expecting 96 cents a share with $10.1 billion of revenue.
--Lisa Beilfuss contributed to this article.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
July 26, 2016 15:06 ET (19:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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