CHICAGO Caterpillar Inc.s resource industries group saw sales decline in the first quarter as mining investment growth slowed worldwide and North American utilities continued to adopt natural gas as a fuel.
"Almost all the decline we saw was in North America, where coal mining has been down" and exports have reached "record" levels amid a weak domestic market, corporate controller Mike DeWalt said during an April 22 earnings call.
The Peoria, Ill.-based manufacturer has lowered its production schedules.
"Weve had plant shutdowns in a number of facilities during the fourth quarter and continued that in many facilities in the first quarter," DeWalt reported.
"We do anticipate some additional inventory reduction in 2013, (but) we expect to increase production levels in the second quarter," he added.
While Caterpillars economic expectations havent changed much, it has lowered its sales and profits outlook (amm.com, April 22).
"Mining is the primary reason for the decline in our outlook," DeWalt said. "Previously, we had expected that after depressed order levels for mining during the second half of 2012, wed begin to see some improvement as 2013 unfolded. Unfortunately, that hasnt happened."
Caterpillar now expects direct sales of new mining machines to fall about 50 percent from 2012 and sales of its Bucyrus acquisitions mining machines to fall 15 percent. Dealer sales wont fall that much, though.
"End user demand is not quite as bad as our production and sales level. Commodity demand overall has held up reasonably well, and our machines are being used in the field," DeWalt said. "Most of what we sell is for replacements, and at some point here, thats going to have to perk back up."
The resource industries group "will come back" even if world economic growth is a mere 3 percent over time, chairman and chief executive officer Doug Oberhelman said.
However, the decline in new mining equipment sales "is substantially more than the decline in commodity consumption would suggest," DeWalt said. Caterpillar will produce only "a couple hundred more mining trucks this year than it did in 2009.