FLEETS

Profit hopes up at Cat

IT APPEARS the equipment market is turning with Caterpillar reporting markedly improved end user demand and increasing its full year profit outlook.

Noel Dyson
Things are starting to look a little brighter for Caterpillar.

Things are starting to look a little brighter for Caterpillar.

It is even paying out short-term incentives again, forking out US$400 million in the third quarter. That is quite a change given the company paid no short-term incentives in the same period last year.

Caterpillar CEO Jim Umpleby said he was seeing strength in a number of industries and regions and the company was working with its supply chain to boost production to satisfy customer demand for those markets that have improved.

“Higher sales volumes and our team’s focus on cost discipline resulted in improved profit margins across our three primary segments,” Umpleby said.

In July the company provided an outlook range for full-year 2017 sales and revenues of $42 billion to $44 billion. It now expects full-year sales and revenues of about $44 billion.

On that assumption it has increased its full-year profit per share outlook to $4.60, up markedly from its early expectation of $3.50.

“We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services,” Umpleby said.

Caterpillar does face some slightly higher than expected restructuring costs – $1.3 billion as opposed to the $1.2 billion it had previously forecast.

In the mining market Caterpillar’s sales increase was largely due to the favourable impact of changes in dealer inventories and higher end user demand for aftermarket parts.

In the Resource Industries segment Caterpillar’s third quarter sales were up 36% year-on-year to $1.9 billion.

Dealer inventories were about flat in the third quarter of 2017, compared with a decrease in the third quarter of 2016.

Dealer deliveries for new equipment increased slightly.

The good news from Caterpillar’s side is that mining is increasing thanks to higher commodity prices and commodity consumption.

That leads to the sorts of things Big Yellow likes, such as the growing need for maintenance and rebuild activities.

Resource Industries’ profit was $226 million in the third quarter, a massive improvement on the $77 million loss it posted at the same time last year.

On the staffing front, full-time employment was at about 96,700 at the end of the third quarter of 2017 – about what it was at the end of the third quarter of 2016. What is interesting though is that Caterpillar’s flexible workforce increased by about 6500 thanks to higher production volumes.

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