Caterpillar Inc. last week announced a third-quarter profit of $0.64 per share, down $0.75 per share from the third quarter of 2008. Sales and revenues of $7.3 billion were down 44 percent from $12.98 billion in the third quarter of 2008.
“We are pleased with this quarter’s profit given the severe economic environment and with our sales well below end-user demand as dealers continue to aggressively draw down inventories,” said chairman and CEO Jim Owens. “During the quarter, our primary focus continued to be on trough management and operational execution. We lowered production as dealers continued to cut inventories, we reduced costs, maintained positive price realization, lowered inventory, delivered positive operating cash flow and improved our financial position. I’m confident that Team Caterpillar, supported by our strong dealers and suppliers, can leverage our comprehensive lineup of products and services to improve our leadership position as we move from recession to growth.”
Third-quarter profit of $404 million was down $464 million from $868 million in the third quarter of 2008. The decline was primarily the result of significantly lower sales volume. The negative impact of lower volume was partially offset by lower costs, a favorable effective tax rate, favorable price realization and pre-tax LIFO inventory decrement benefits of $120 million or $0.16 per share. Manufacturing costs, selling, general and administrative and research and development expenses were all significantly lower than a year ago. The favorable effective tax rate included $129 million of benefits related to prior year tax returns. Utilizing the Caterpillar Production System with 6 Sigma, the company has reduced inventory by about $2 billion since the end of 2008 and expects continued reduction through the remainder of the year.
“We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s,” Owens said. “We are seeing encouraging signs that indicate a recovery may be underway. However, the world economy is still facing significant challenges. There is uncertainty about the timing and strength of recovery.”
Caterpillar expects 2009 sales and revenues of $32 to $33 billion. The 2009 profit outlook range has improved to $1.10 to $1.30 per share compared to the previous range of $0.40 to $1.50 per share.
The preliminary outlook for 2010 sales and revenues is an increase of 10 to 25 percent from the midpoint of the 2009 outlook range, in part driven by the end of dealer inventory reductions, which significantly impacted sales in 2009.
“While 2010 will still be a difficult year, we expect improvement in our top line from the lows of 2009, and it’s critical that we manage on the way up as well as we did in the face of declining volume,” Owens said. “As a result, we’ve already started planning for an upturn. When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared.”
In related company news, Cat Financial reported third-quarter revenues of $676 million, a decrease of $84 million, or 11 percent, compared with the third quarter of 2008. Third-quarter profit was $76 million, a $42 million, or 36-percent decrease from the third quarter of 2008.
The decrease in revenues was principally due to a $77 million impact from a decrease in earning assets (finance receivables and operating leases at constant interest rates) and a $23 million impact from returned or repossessed equipment, partially offset by a $20 million impact from higher interest rates on new and existing finance receivables.
New retail financing was $1.8 billion, a decrease of $2.6 billion, or 59 percent, from the third quarter of 2008. The decrease occurred across all Cat Financial operating segments.
“Despite the challenging economic conditions, capital markets have improved and our access to liquidity and our liquidity position remain strong,” said Kent Adams, Cat Financial president and vice president of Caterpillar Inc. “As customers continue to report challenging times, past dues and losses have increased to historically high levels, but remain within our expectations. We are also continuing to realize the benefits of the cost reduction actions implemented in the first quarter.”
Cat Financial, a wholly owned subsidiary of Caterpillar Inc., provides a wide range of financing alternatives to customers and Caterpillar dealers for Caterpillar machinery and engines, Solar gas turbines and other equipment and marine vessels.
Headquartered in Peoria, Ill., Caterpillar Inc. had 2008 sales and revenues of $51.32 billion.