Caterpillar Announces Record Third-Quarter Results
Caterpillar Inc. (CAT) reported record third-quarter results that could also bode well for smaller competitors like Titan Energy Worldwide, Inc. (TEWI) and PowerSecure International, Inc. (POWR) operating in the same industry.
Caterpillar Inc. (NYSE: CAT) today announced a third-quarter profit of $0.64 per share, down $0.75 per share from the third quarter of 2008. Sales and revenues of $7.298 billion were down 44 percent from $12.981 billion in the third quarter of 2008.
“We are pleased with this quarter’s profit given the severe economic environment and with our sales well below end-user demand as dealers continue to aggressively draw down inventories,” said Chairman and Chief Executive Officer Jim Owens.
“During the quarter, our primary focus continued to be on trough management and operational execution. We lowered production as dealers continued to cut inventories, we reduced costs, maintained positive price realization, lowered inventory, delivered positive operating cash flow and improved our financial position. I’m confident that Team Caterpillar, supported by our strong dealers and suppliers, can leverage our comprehensive lineup of products and services to improve our leadership position as we move from recession to growth,” Owens added.
Third-quarter profit of $404 million was down $464 million from $868 million in the third quarter of 2008. The decline was primarily due to significantly lower sales volume. The negative impact of lower volume was partially offset by lower costs, a favorable effective tax rate, favorable price realization and pre-tax LIFO inventory decrement benefits of $120 million or $0.16 per share. Manufacturing costs, selling, general and administrative and research and development expenses were all significantly lower than a year ago. The favorable effective tax rate included $129 million of benefits related to prior year tax returns. Utilizing the Caterpillar Production System with 6 Sigma, the company has reduced inventory by about $2 billion since the end of 2008 and expects continued reduction through the remainder of the year.
“We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway,” Owens said. “However, the world economy is still facing significant challenges. There is uncertainty about the timing and strength of recovery.”
2009 Outlook
Caterpillar expects 2009 sales and revenues of $32 to $33 billion. The 2009 profit outlook range has improved to $1.10 to $1.30 per share compared to the previous range of $0.40 to $1.50 per share. The 2009 profit outlook includes redundancy costs of about $0.75 per share. Excluding redundancy costs, the profit forecast for 2009 is $1.85 to $2.05 per share compared to the previous range of $1.15 to $2.25 per share.
“Caterpillar’s improved profit outlook for 2009 is a clear demonstration of our ability to implement our economic trough plans, which we announced as part of our corporate strategy in 2005,” Owens said. “While we are still navigating through a very difficult environment in 2009, we see signs of improving economic conditions throughout most of the world.”
Preliminary 2010 Sales and Revenues Outlook
The preliminary outlook for 2010 sales and revenues is an increase of 10 to 25 percent from the midpoint of the 2009 outlook range, in part driven by the end of dealer inventory reductions which significantly impacted sales in 2009.
“While 2010 will still be a difficult year, we expect improvement in our top line from the lows of 2009, and it’s critical that we manage on the way up as well as we did in the face of declining volume. As a result, we’ve already started planning for an upturn. When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared,” Owens said.
Employment
Worldwide employment was 94,225 at the end of third quarter 2009. Employment declined by approximately 17,900 from third quarter 2008.
Since late 2008, we have taken a variety of steps to bring our workforce in line with demand. This includes full-time Caterpillar employees who have been laid off or separated and those who have taken advantage of incentive-based voluntary plans offered by the company. Since the end of 2008, full-time employment has declined by about 18,700.
In addition, we have long utilized a flexible workforce made up of part-time/temporary, contract and agency workers to better respond to shifts in demand. These workers are not included in our full-time employment. Since late 2008, we have reduced this flexible workforce by more than 18,000. Looking forward, we will adjust our workforce as production levels and resource requirements change. We expect the recovery and demand for jobs to vary depending on specific regions of the world, industry and product.
About Caterpillar
For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2008 sales and revenues of $51.324 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at http://www.cat.com/.
CONTACT: Daniel Minton, Managing Director, 406-862-5400, daniel@accelerize.com