Caterpillar sales in the first quarter of 2020 dropped 21 percent to $10.6 billion compared to the $13.5 billion reported in Q1 of 2019. The drop was mostly attributed to the Covid-19 pandemic, which includes the shutting down of 25 percent of its production facilities.
Caterpillar cited lower sales volume driven by lower end-user demand and the impact from changes in dealer inventories. Dealers increased machine and engine inventories about $100 million during the first quarter of 2020, compared with about $1.3 billion during the first quarter of 2019.
First-quarter profit per share was $1.98, compared with $3.25 profit per share in the first quarter of 2019.
Operating profit margin was 13.2 percent for the first quarter of 2020, compared with 16.4 percent for the first quarter of 2019. CFO Andrew Bonfield addresses the first quarter results in this video:
How is Caterpillar responding to Covid-19?
“We remain committed to the safety, health and well-being of our employees around the world, and I am proud of our employees and dealers for their dedication to our customers, their communities and each other,” said chairman/CEO Jim Umpleby in a prepared statement. Caterpillar has implemented safeguards in its facilities to protect team members, including increased frequency of cleaning and disinfecting facilities, social distancing practices, and other measures consistent with specific regulatory requirements and guidance from health authorities.
Many governments classified Caterpillar’s operations as an essential activity for support of critical infrastructure. Even so, Caterpillar has suspended operations temporarily at certain facilities during the last several weeks due to supply chain issues, weak customer demand, or government regulations. As of mid-April 2020, globally and across the three primary segments, approximately 75 percent of the company’s primary production facilities continue to operate. Some facilities that were temporarily closed have reopened. The company will continue to monitor the situation and may suspend operations temporarily at additional facilities if warranted by business conditions.
In its efforts to cut costs, Caterpillar is reducing discretionary expenses and suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives.
Caterpillar is prioritizing spending to allow continued investment in services and expanded offerings, key elements of its strategy for profitable growth introduced in 2017.
What is Caterpillar’s 2020 outlook?
Caterpillar’s financial results for the remainder of 2020 will be impacted by continued global economic uncertainty due to the Covid-19 pandemic. As such, Caterpillar withdrew its earnings guidance on March 26 and is not providing a financial outlook for 2020 at this time.
“We have taken decisive actions to enhance our strong financial position, while continuing to execute our strategy for profitable growth,” said Umpleby. “Caterpillar has faced and overcome many challenges in our 95-year history. Our goal is to emerge from the pandemic an even stronger company.”