Equipment sales stay strong for Caterpillar

MINERS are back buying equipment, with Caterpillar reporting overall first quarter sales and revenues up 31% year on year to US$12.86 ($A17) billion and that it is boosting its profit outlook.
Equipment sales stay strong for Caterpillar Equipment sales stay strong for Caterpillar Equipment sales stay strong for Caterpillar Equipment sales stay strong for Caterpillar Equipment sales stay strong for Caterpillar

Miners are back buying equipment again.

Caterpillar's Resource Industries division's total sales were $2.3 billion in the first quarter, an increase of $548 million year on year.

Compared to the first quarter last year, commodity prices remained strong and drove improved market conditions and financial health of mining companies.

Miners have started spending again after delaying any purchases for some time. They have also started to make expansionary investments, leading to higher equipment sales.

Aftermarket parts sales have also grown thanks to increased production and consequent higher machine utilisations.

Macroeconomic growth globally also led to increased sales of quarry and aggregate and heavy construction equipment.

Resource Industries' profit for the first quarter was $378 million, more than double the $160 million it booked in the first quarter of 2017, thanks mostly to the higher sales volume.

Favourable price realisation and variable manufacturing costs, including cost absorption, were partially offset by higher short-term incentive compensation expenses and slightly unfavourable currency impacts.

Cost absorption was favourable because inventory increased in the first quarter of 2018 to support higher production and was about flat in the first quarter of 2017.

The increase was primarily due to higher end-user demand for equipment in all regions.

On top of that, favourable price realisations and the favourable impact of changes to dealer inventories contributed to increased sales.

Dealer inventories increased more in the first quarter of 2018 than in the first quarter of 2017.

The increase in production needed to meet those inventories and across the rest of its business led Caterpillar to add 4400 full-time employees over the past year. Its flexible workforce has also grown 6500, mostly due to higher production volumes.

The good result has caused Caterpillar to upgrade its full-year profit outlook for 2018 from a range of $7.75 to $8.75 a share to $9.75 to $10.75 a share.

Caterpillar CEO Jim Umpleby said at the end of the quarter the order backlog was about $17.5 billion, up $1.7 billion from the end of 2017.

"The increase was in Energy & Transportation and Construction Industries while Resource Industries was about flat," he said.

 

 

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