Cat Reports 3Q Decline as Mining Orders Drop

October 23, 2013

Caterpillar announced third-quarter sales and revenues of $13.423 billion, down from $16.445 billion in the third quarter of 2012. Profit per share for the third quarter of 2013 was $1.45, down from third-quarter 2012 profit per share of $2.54. The company attributes the decline to a drop in mining orders since mid-2012.

An earlier version of this story inaccurately described Caterpillar's results. The company reported a decline in sales. Construction Equipment regrets the error.

“This year has proven to be difficult, with expected sales and revenues nearly $11 billion lower than last year. That is a 17 percent decline from 2012, with about 75 percent of the drop from Resource Industries, which is principally mining,” said Caterpillar Chairman and CEO Doug Oberhelman. “We expect Resource Industries to be down close to 40 percent for the full year and Power Systems’ and Construction Industries’ sales to each be down about 5 percent,”

In the third quarter, the Machinery and Power Systems (M&PS) operating cash flow was $2.1 billion, and the company is expecting 2013 to be its second best year in history for cash flow. Strong cash flow has enabled the company to improve its balance sheet, repurchase $2 billion in Caterpillar stock this year, raise the quarterly dividend by 15 percent and improve the debt-to-capital ratio. The company’s debt-to-capital ratio was 34 percent at the end of the third quarter, and it is expected to improve further by year-end. This represents a substantial improvement over the past five years from the 58 percent debt-to-capital ratio at the end of 2008.

The company now expects sales and revenue for the year to total approximately $55 billion, revised down from the previous outlook of $56 to $58 billion. Profit per share was revised to $5.50 from $6.50 at the middle of the previous outlook’s range.

Caterpillar’s strategy is focused on cost flexibility and reducing costs. The company has reduced its global staff by more than 13,000 in the past year and has implemented temporary plant shutdowns and layoffs for thousands of employees.

The company is holding its outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5 percent range. The company expects sales growth in Construction Industries, relatively flat sales in Power Systems and a decline in Resource Industries’ sales.

“There are encouraging signs, but there is also a good deal of uncertainty worldwide as we look ahead to 2014, and our preliminary outlook reflects that uncertainty,” Oberhelman said. “Despite prospects for improved economic growth and continued strong mine production around the world, we won't be increasing our expectations for Resource Industries until mining orders improve. We can’t change the economy or industry demand, but we've taken many actions to align our costs with the environment we’re in currently. While we’ve done much already, we're not finished and expect to take deeper actions to improve our cost structure and balance sheet. We're not seeing bright spots in mining yet, but the turnaround will happen at some point, and when it does, we'll be ready to respond.”