LONDON The top executive of Caterpillar Inc. remains optimistic about the prospects for the mining industry despite a decline in activity virtually halving company profits.
The mining and heavy equipment producer posted second-quarter net income of $960 million, down 43.5 percent from nearly $1.7 billion in the same period a year earlier, on a 15.8-percent decline in revenue to $14.62 billion.
But chairman and chief executive officer Doug Oberhelman said he maintained a positive view of the mining sector. "Weve taken action to aggressively (reduce) costs, and weve been successful in the market with end-user demand for Cat machines outpacing the industry overall. In addition, our business in China improved, and our sales and end-user demand for Cat machines were up in the quarter, (although) the overall construction equipment industry was down," he said.
The company has revised down its revenue outlook for 2013 to a range of $56 billion to $58 billion from $57 billion to $61 billion previously.
"We now expect a more significant reduction in dealer machine inventory. Thats the main reason for the reduction in the sales and revenues outlook," Oberhelman said. "During the second quarter, dealers increased their utilization of inventory from our product distribution centers, which allows them to meet customer (demand) with less inventory. With the sharp reduction in dealer inventory and (the) decline in mining, 2013 is turning out to be a tough year."
The remainder of 2013 will remain a tough environment for mining, according to Caterpillar, which expects to continue selling less mining equipment to dealers than dealers are delivering to end-users. "Mining has proven to be a very cyclical business, and we understand that," Oberhelman said. "Our long-term view remains positive for mining. The world needs mined commodities and we believe that demand will continue to increase."
A version of this article was first published by AMM sister publication Metal Bulletin.