In the face of lowered demand Caterpillar is focusing on cost controls and efficiency measures
In the face of lowered demand, Caterpillar is focusing on cost controls and efficiency measures.

Sales and Profits Decline Double Digits for Caterpillar in Q2

Caterpillar posted profit per share of $1.16 for the second quarter of 2015, compared to $1.57 per share in the second quarter of 2014, a 35-percent decrease. Second quarter sales and revenues totaled $12.3 billion, compared to $14.2 billion a year ago, a 13.4-percent plunge.

“Our Caterpillar team continues its track record of solid operational performance in the face of difficult conditions in several of the key industries we serve,” said Caterpillar chairman and CEO Doug Oberhelman. “Because we serve cyclical industries, we focus intently on operational execution and cost control. This is particularly important when sales decline; our goal when sales decline is to manage costs so the decline in operating profit is less than 30 percent of the decline in sales and revenues. We did much better than that in the second quarter.”

Oberhelman said Caterpillar is focusing on efforts such as lean management and investing in new technologies, innovation and data analytics. He added that the economic and industry conditions expected at the beginning of 2015 are occurring with world economic growth about as expected, severe weakness in mining, lower construction-related sales in China and Brazil, and a decline in orders for oil-related applications.

The company is expecting about $49 billion in sales in 2015, about $1 billion lower than its previously announced outlook.

“We originally set the $50 billion sales and revenues estimate in January, and our expectations haven’t changed much since then,” he said. “However, currency impacts from a stronger U.S. dollar are causing sales in many countries to translate into fewer dollars than we initially expected. While economic conditions in the United States are modestly positive, the global economy remains relatively stagnant.”

Oberhelman said many of the key industries the company serves remain weak and the company isn’t seeing sustained signs of improvement.

“Continuing economic weakness in China and Brazil, as well as uncertainty in the Eurozone and over Greece hasn’t helped confidence. Prices for commodities like coal, iron ore and oil are not signaling an improvement in the short term.”

Caterpillar announced its intention to repurchase about $1.5 billion of Caterpillar common stock during the third quarter of 2015, in addition to the $500 million repurchased already in the first half of 2015.

“Repurchasing stock is one way we return capital to stockholders, and our healthy balance sheet and strong cash flow are helping us do that despite weakness in the cyclical industries we serve,” Oberhelman said.

Sales declined in all regions for Caterpillar. Asia/Pacific sales dropped 22 percent; Latin American 26 percent; and sales in Europe, Africa and the Middle East dropped 12 percent, primarily because of unfavorable impact of currency, as sales in euros translated into fewer U.S. dollars. Sales in North America slid 7 percent, primarily because of lower end-user demand for rail applications and construction equipment.

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