Caterpillar Inc. said Tuesday that it agreed to buy back $1.5
billion of its shares from Citibank in an accelerated
stock-repurchase transaction.
The Peoria, Ill.-based maker of engines and heavy equipment said
in its earnings announcement last week that it would repurchase
$1.5 billion in shares during the third quarter of this year.
Chairman and chief executive Doug Oberhelman said the buyback
from Citibank brings Caterpillar's share repurchases to about $2
billion this year.
The company also plans to build its own line of dump trucks at a
plant in Texas and wind down an existing arrangement it has with
engine maker Navistar International Corp. to build the trucks. The
plan was previously reported by The Wall Street Journal.
Last week, Caterpillar reported its second-quarter profit fell
29% and said demand for mining equipment remains "severely
depressed" while sales of equipment used in construction and oil
exploration have also begun falling.
However, the company also left its profit forecast for the full
year unchanged and said the cost cuts it already made have allowed
it to keep its balance sheet strong enough to buy back more shares
and raise dividends.
On Tuesday, Caterpillar said that through the end of the second
quarter, the company has repurchased about $3 billion of its shares
under a $10 billion stock-buyback plan authorized in January 2014.
The buyback plan is set to expire at the end of 2018.
In an effort to boost truck sales, Caterpillar expects to begin
assembling its own trucks at its plant in Victoria, Texas, in the
first half of next year. The move could help Caterpillar more
effectively leverage its reputation with the construction industry
for high-quality machinery, because customers will know it is
making the trucks. Building the trucks also would add work for the
Texas plant at a time of falling demand for the construction
excavators it was set up to manufacture.
Bringing the truck family into Caterpillar is expected to add
roughly 200 jobs at the Texas plant, which opened in 2012 to
assemble excavators that had been built in Japan and imported to
North America. The plant will continue to produce hydraulic
excavators, the company said in a news release Tuesday.
The Caterpillar-Navistar partnership was devised in 2009 with
ambitious goals to market Caterpillar-branded trucks in several
overseas markets through Caterpillar dealers. But the
Navistar-built, Caterpillar-branded trucks haven't been a big hit
with truck buyers. Sales of the three truck models have averaged
about 1,000 total annually for the past three years.
Separately, Navistar said it would launch a new line of its own
trucks starting early next year, leveraging shared technology and
intellectual property from the venture with Caterpillar.
Both companies "will have the opportunity to leverage certain
joint intellectual property, collaborate with suppliers and utilize
licensing agreements moving forward," Navistar said in a news
release.
Navistar said it plans to release additional details about its
planned truck line in coming months.
Write to Bob Tita at robert.tita@wsj.com and Tess Stynes at
tess.stynes@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires