Caterpillar Sees Further Revenue Weakness--Update
January 28 2016 - 11:12AM
Dow Jones News
By Bob Tita
Caterpillar Inc. widened its anticipated sales decline for 2016
as the company swung to a fourth-quarter loss, hurt by expenses to
restructure operations as it deals with falling demand.
The maker of mining and construction equipment said depressed
prices for mined commodities, such as iron ore, lower oil prices
and weak economic conditions in developing countries are weighing
on sales of its bulldozers, excavators, giant dump trucks and
engines.
The Peoria, Ill.-based company now expects 2016 revenue to fall
by about 10% from 2015 to about $42 billion, which would be the
lowest level since 2010 and more than one-third below the company's
peak of $65.9 billion in 2012. The company in October predicted a
5% drop in revenue this year, but demand for equipment has
continued to deteriorate in recent months.
Fourth-quarter revenue came in lower than expected and was 23%
below the same period a year earlier, as equipment and engine sales
declined in all of the company's geographic markets. Caterpillar,
which is already planning to cut 10,000 jobs in the coming years,
said it would book $400 million in charges for restructuring
operations in 2016 to lower expenses after spending $908 million on
restructuring in 2015.
Restructuring expenses wiped out the company's fourth-quarter
profit. But excluding the restructuring costs, earnings per share
topped expectations.
"Cost management, restructuring action and operational execution
are helping the company while sales and revenue remain under
pressure," Chairman and Chief Executive Doug Oberhelman said.
Conditions in the global mining industry remain Caterpillar's
biggest obstacle. After spending $8.8 billion in 2011 to acquire
mining equipment company Bucyrus International Inc. to take
advantage of booming demand for commodities, Caterpillar has been
struggling with lower commodity prices for the past three
years.
Caterpillar said it expects sales of mining equipment this year
to fall 15% to 20% from 2015. Fourth-quarter sales from resource
industry equipment dropped 23% from a year earlier to $1.8 billion.
The business recorded a $105 million loss during the quarter after
earning $25 million a year earlier.
The company predicts that construction equipment sales will
decline 5% to 10% this year, following an 18% decline in fourth
quarter to $3.6 billion. Profit from the unit dropped 39% to $220
million.
Caterpillar forecast earnings of $4 a share for 2016, excluding
the restructuring costs. Analysts were expecting $3.48 a share in
adjusted earnings. Lower pension and post-employment benefit costs,
due to an accounting change, are expected to boost profit.
For the fourth quarter ended Dec. 31, Caterpillar swung to a
loss of $87 million, or 15 cents a share, compared with a
prior-year profit of $757 million, or $1.23 a share.
Excluding restructuring costs, which totaled about 89 cents a
share, the company reported earnings of 74 cents a share, topping
analysts' forecast of 69 cents a share. Total revenue, which
includes Caterpillar's finance unit, tumbled 23% to $11.03 billion.
Analysts had forecast $11.4 billion in revenue.
Caterpillar stock was recently up 2.5% at $59.85.
Chelsey Dulaney contributed to this article
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
January 28, 2016 10:57 ET (15:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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