Caterpillar confident despite tough second quarter

Caterpillar has announced second-quarter revenues of US$ 10.3 billion, representing a 16% decrease from the same period a year ago.

The US equipment manufacturer said the decrease in its revenues was primarily due to lower sales volumes, resulting from continued weak commodity prices globally and economic weakness in developing countries.

It said that while sales for both new equipment and aftermarket parts declined in all segments, most of the decrease was for new equipment.

It added that sales declined in all regions.

The company’s construction sector recorded revenues of US$ 4.42 billion, which is a decrease of 8% from the second quarter of 2015.

The company also recorded an operating profit of US$ 785 million for the second quarter of 2016, which is a decrease of 41% compared to the same period a year ago.

Caterpillar said the reason for the decline was, again, due to lower sales volumes, including an “unfavourable mix of products”. It said that restructuring costs also affected its results.

The company’s construction sector recorded an operating profit of US$ 550 million, which is a 6% decrease from the second quarter of 2015.

Doug Oberhelman, chairman and CEO, said, “I’m pleased with our financial performance and focus on our long-term strategy given the difficult economic and industry environment we’re facing.

“Our goal when sales decrease is to lower costs so the decline in operating profit is no more than 25 to 30% of the decline in sales and revenues. For the quarter, our declining operating profit pull through was better than our target range.

He added that, together with its dealers, the company was having success managing through the downturn in industries like mining, and oil and gas, as well as in sluggish economic conditions in much of the developing world.

He said in what was likely to be the company’s fourth declining year for sales and revenues, it was proud of what it was accomplishing.

He said “Our machine market position has increased, including in China, product quality continues to be at high levels, and the safety in our facilities is world class.”

The company’s outlook for 2016 remains similar to what it predicted after the first quarter of 2016, with revenues expected to be between US$ 40 billion to US$ 42 billion.

Caterpillar added that its restructuring costs are now expected to be around US$ 700 million in 2016.