Sales and revenues for Q4 were $16.07 billion, a 6.8% drop from the $17.2 billion in the final quarter of 2011 and a slight dip from the $16.4 billion for the period ended September 30.

Caterpillar, the world’s largest maker of construction and mining equipment, said revenue was hit by dealers decreasing their new machine inventories which resulted in lower sales, as well as a drop in production and a $2 billion decline in Caterpillar inventory.

Profit in the quarter ended December 31 was just $697 million compared with $1.5 billion in Q4 2011.

It was mainly due to a previously announced 87c per share goodwill impairment after accounting misconduct was discovered at Zhengzhou Siwei Mechanical and Electrical Manufacturing, a company purchased as part of Caterpillar’s acquisition of ERA Mining in November 2011.

Profit per share for 2012 hit $8.48, an all-time high.

Chairman and chief executive officer Doug Oberhelman said the Illinois-based company had performed well given the ongoing global economic turmoil.

“From an operational standpoint, 2012 was a very successful year with record sales and profit in a tough economic climate,” he said.

“Considering the weak economy in the United States, along with much of Europe in recession and China slowing, we had a solid year.”

Oberhelman said he was pleased the company was able to reduce inventory by $2 billion in Q4, a focus for Caterpillar when the world economy began to soften again mid-year.

Between the company and dealers lowering inventory, there was a substantial reduction in production levels which had a negative impact on Q4 sales and profits.

“The $2 billion inventory reduction in the fourth quarter was a remarkable effort but we’re not done,” Oberhelman said.

“Reduced production levels are likely to continue at least through the first quarter of 2013 until inventories and dealer order rates move back in line with end-user demand.”

The company set its 2013 outlook for sales and revenues in the range of $60-68 billion with a profit per share of $7-9, which Oberhelman said reflected the level of uncertainty Caterpillar saw in the world today.

“We’re encouraged by recent improvements in economic indicators but remain cautious,” he said.

Oberhelman said the company expected some improvement in the US economy but growth would be relatively weak, while China’s economy would also improve at slower rates and Europe remained a concern.

Caterpillar expects the first half of 2013 will be weaker than the first half of 2012 but is unsure where the second half will lead.

If recent economic indicators prove true and there is improvement, Oberhelman said 2013 could be another record year for the company.

“However, if like the last two years growth and confidence decline in the second half, 2013 could be a tough year,” he said.

“Either way, as we demonstrated with inventory reductions in the fourth quarter, our team is prepared to execute and deliver.”