CHICAGO Caterpillar Inc. posted third-quarter net income of $946 million, down 44.3 percent from nearly $1.7 billion in the same period last year on sales that dipped 18.4 percent to $13.42 billion.
The Peoria, Ill.-based heavy equipment manufacturer said it now expects sales to total $55 billion this year compared with a previous forecast of $56 billion to $58 billion.
"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 (the) Resource Industries (division), which is principally mining," Caterpillar chairman and chief executive officer Douglas R. Oberhelman said during a conference call Oct. 23. "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.
He said that not only is mining down year to date, but demand for equipment has been difficult to forecast.
Orders for new mining equipment began to drop significantly in mid-2012 and have continued at very low levels, Oberhelman said. "Unfortunately, order rates have not picked up much despite continuing strong commodity production."
Caterpillar steadily cut costs by lowering production and laying off workers beginning in the second half of 2012, including at its South Milwaukee, Wis., plant, which makes mining equipment (amm.com, Oct. 3).
Other cost-cutting measures have included many temporary plant shutdowns, a headcount reduction of more than 13,000 people globally throughout the past year, temporary layoffs for thousands of salaried and management employees, lower program spending, lower incentive pay, lower capital expenditures and implementation of general austerity measures across the company.
"Weve lowered costs about $700 million and reduced capital expenditures by about $400 million" year to date, Oberhelman said.
Caterpillar expects better economic growth worldwide next year but said the direction of U.S. fiscal and monetary policy remains uncertain, eurozone economies are far from healthy and China continues to transition to a more consumer-demand-led economy.
"There are encouraging signs, but there is also a good deal of uncertainty. Were not seeing bright spots in mining yet, but the turnaround will happen ... and when it does, well be ready to respond," Oberhelman said.