A slowdown in sales of higher margin mining equipment has seen profits tumble for the world’s largest maker of bulldozers, excavators and other heavy machinery.
Releasing its full year financial results for 2013, Illinois-based earth moving equipment manufacturer Caterpillar Inc. says a slump in mining equipment sales saw its overall level of profit decline from $US5.681 billion in calendar 2012 to $US3.789 billion last year – albeit with profit over the fourth quarter ($US1.003 billion) being up a healthy 44 per cent year on year.
On an earnings per share basis (diluted), profit fell from $US8.48 to $US5.75 over the calendar year.
Like other makers of heavy machinery, Caterpillar has been impacted by a slowdown in mining investment as resource sector clients pull back on capital expenditure.
As a result of that slowdown, Caterpillar has slashed its workforce (currently standing at 133,354 full time equivalent employees) by almost 10,000 over the past 12 months as the value of sales to resource industry customers plummeted 48 per cent year-on-year on a quarterly basis to come in $3.019 billion during the final quarter of last year. Declines were felt by all markets, especially Latin America, EAME and the Asia Pacific.
The company’s Australian operations have not been immune. Last November, Caterpillar announced up to 200 workers in Tasmania would be let go amid a restructuring of its underground mining equipment production operations at its Burnie plant in that state.
More positively, however, a lift in building activity across most parts of the world saw sales of construction equipment rise 20 per cent to $4.851 billion (quarterly figures, year-on-year comparison), whilst sales of power systems ($5.565 billion) were up by five per cent.
Overall, Caterpillar’s sales fell 10 per cent from $16.075 billion to $14.402 billion, with profits falling by more than sales due to the relatively weak performance of the relatively high margin mining business.
Caterpillar chairman and chief executive officer Doug Oberhelman said the challenges over the past year did not come as a total surprise.
“As we look back on 2013, it was a year overshadowed by a substantial decline in sales of relatively high margin mining products,” Oberhelman said. “We expected there would be a decline in mining sales in 2013, and it turned out to be worse than we anticipated.”
The company expects sales to remain stagnant next year as the impact of the resource investment slowdown continues to offset further improvements in construction sector revenues.