Caterpillar Inc. today announced third-quarter sales and revenues of $13.42 billion, an 18-percent decrease from $16.45 billion in the third quarter of 2012. Profit per share for the third quarter of 2013 was $1.45, down from third-quarter 2012 profit per share of $2.54.
The company has revised its 2013 outlook and now expects sales and revenues to be about $55 billion, with profit per share of about $5.50. The previous outlook for 2013 sales and revenues was a range of $56 to $58 billion with profit per share of about $6.50 at the middle of that range.
"This year has proven to be difficult, with expected sales and revenues nearly $11 billion lower than last year,” said Caterpillar chairman and CEO Doug Oberhelman. “That is a 17 percent decline from 2012, with about 75 percent of the drop from Resource Industries, which is principally mining. We expect Resource Industries to be down close to 40 percent for the full year and Power Systems' and Construction Industries' sales to each be down about 5 percent."
Not only is mining down from 2012, the demand for equipment has been difficult to forecast, the company said. Orders for new mining equipment began to drop significantly in mid-2012 and have continued at very low levels. As a result of weak orders and feedback from end users, the sales and revenues outlook provided in January of 2013 included a decline in mining sales. At that time, based on strong mine production for many commodities, the company's outlook expected that order rates would improve later in 2013.
"Unfortunately, order rates have not picked up much despite continuing strong commodity production,” Oberhelman said. “That has caused us to ratchet down our sales and revenues outlook as we have moved through 2013."
Revenue in the Construction segment in the third quarter was $4.55 billion, a 7-percent decrease from revenue of $4.9 billion in the same period a year ago.
The magnitude of the decline in sales in 2013 has resulted in substantial actions to lower production, costs and employment. Actions already taken include many temporary plant shutdowns, a reduction of more than 13,000 of our global workforce throughout the past year, temporary layoffs for thousands of salaried and management employees, reductions in program spending, substantially lowered incentive pay, lower capital expenditures and implementation of general austerity measures across the company.
Although it has been a challenging year for sales and profit, it has been a positive year for cash flow. In the third quarter, the Machinery and Power Systems operating cash flow was $2.1 billion, and the company is expecting 2013 to be its second-best year in history for cash flow and not far from the all-time record. Strong cash flow has enabled the company to improve its balance sheet, repurchase $2 billion in Caterpillar stock, raise the quarterly dividend by 15 percent and improve the debt-to-capital ratio.
"With $11 billion coming off the top line, it has been a painful year and has required wide ranging and substantial actions across the company,” Oberhelman said. “Year-to-date, excluding the impact of inventory absorption, we've lowered costs about $700 million and reduced capital expenditures by about $400 million. We've continued to improve our operational performance this year, and it's unfortunate that the improvements we've made have been far overshadowed by the sales decline in mining. Our year-to-date sales in China are up, including an increase of almost 30 percent in the third quarter of 2013.”
Caterpillar expects better world growth in 2014, however, significant risks and uncertainties remain that could temper global economic growth. The company is holding its outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5 percent range. The company expects sales growth in Construction Industries, relatively flat sales in Power Systems and a decline in Resource Industries' sales.
"There are encouraging signs, but there is also a good deal of uncertainty worldwide as we look ahead to 2014, and our preliminary outlook reflects that uncertainty,” Oberhelman added. “Despite prospects for improved economic growth and continued strong mine production around the world, we won't be increasing our expectations for Resource Industries until mining orders improve. We can't change the economy or industry demand, but we've taken many actions to align our costs with the environment we're in currently. While we've done much already, we're not finished and expect to take deeper actions to improve our cost structure and balance sheet. We're not seeing bright spots in mining yet, but the turnaround will happen at some point, and when it does, we'll be ready to respond."
Peoria, Ill.-based Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.