Caterpillar profits drop 45% on weak mining sales
Heavyweight machinery maker and bellwether of the global economy Caterpillar (NYSE:CAT), reported Monday a 45% drop in first-quarter earnings as weak global mining and construction demand hit particularly hard its mining business.
The world’s biggest maker of earthmoving equipment posted a net income of $880 million, or $1.31 per share, in the three months to March 31, down from $1.59 billion, or $2.37 per share during the same period of 2012. Revenues also fell sharply, dropping 17.3% to $13.2 billion.
The Illinois-based company said its outlook for two of its three business segments — construction industries and power systems — is similar to the former outlook. However, it warned conditions in the mining unit "have decreased significantly."
The revised forecast now sees a sales decline of about 50% from 2012 for traditional CAT machines used in mining. The company’s revenues in resources, which include mining, came in at $3.7 billion in the most recent quarter, down from $4.8 billion in the year-earlier period.
The poor results come on the heels of two massive layoffs at US-based plants. On April 1 CAT let go of 250 to 300 workers at its South Milwaukee plant, its heavy equipment production line it acquired from Bucyrus. A few days later, it sacked 460 workers at is Decatur, Illinois factory citing weakness in the mining sector in both opportunities.
Today’s report became the second tough quarter in a row the company disappointed with its results. The previous quarter saw a 55% drop in earnings in the three months to December.
The news had an impact on the company’s stock. Shares fell 0.72% to $79.85 in pre-market trading, meaning that in the last 12 months they have slid 20%.
Caterpillar said it would take advantage of its depressed stock price to undertake stock repurchases for the first time since 2008. The company will resume stock repurchases in the second quarter and expects repurchases of about $1 billion.