Caterpillar Inc. reports second quarter earnings well below expectations and forecasts 2002 profits about 15% below year-earlier levels.
In a July 16 report, the Peoria, Ill.-based heavy equipment maker says customers' investment delays are slowing sales in the general construction, mining and electric power generation markets. Caterpillar's overall second-quarter profit of $200 million, or 58¢ a share, is down from $271 million, or 78¢ a share, for the same period 2001. Revenue fell to $5.29 billion from $5.49 billion.
"While overall economic indicators have been positive, the anticipated recovery in capital spending has yet to materialize," says Chairman and CEO Glen Barton. He credits Caterpillar's broad, global diversity for keeping it profitable. Globally, machine sales in the heavy construction and quarry and aggregate sectors were solid, but flat or falling sales in the general construction and power generation market offset them. Only in Latin America were sales generally strong, including the electric generation market. In other regions that sector is sagging as excess generation capacity and lower peak power rates encourage purchase delays. Mining is also weak, leading to significantly reduced production at large engine and machine facilities. Consequent manufacturing inefficiencies further sapped company profits.
"They had been looking at 2002 as a recovery year, but now say the second half isn't going to be all that robust," says Daniel R. Di Senso, a Standard & Poor's analyst who tracks the company. "They're doing the right things. Inventories are down and when the rebuild comes they are going to have to refill the pipeline."