Caterpillar Reports Dip in First-quarter 2010 Sales and Revenues, Grows Profit

Caterpillar Inc. last week reported a first-quarter profit of $0.36 per share, up $0.55 per share from a loss of $0.19 per share in the first quarter of 2009. Excluding a tax charge of $90 million related to the recently signed U.S. health care legislation, profit in the first quarter of 2010 was $0.50 per share. The loss of $0.19 per share in the first quarter of 2009 included $558 million of employee redundancy costs. Excluding redundancy costs, profit in the first quarter of 2009 was $0.39 per share. First-quarter sales and revenues of $8.238 billion were down from $9.225 billion in the first quarter of 2009.

“Economic conditions are definitely improving, particularly in the world’s developing economies,” said chairman and CEO Jim Owens. “Industry activity and orders are significantly higher than last year and are at record levels in some areas. As a result, we are hard at work ramping up production to meet increasing demand from customers. Despite the recession in 2009, we continued to invest in our facilities throughout the world, and those investments will position us for success as global growth continues. We are also seeing strong order activity related to mining and energy, and that should be very positive for our U.S. exports as the year unfolds.”

First-quarter profit was $233 million compared with a loss of $112 million in the first quarter of 2009. The improvement in profit was a result of lower manufacturing costs, the absence of redundancy costs and favorable price realization. The improvements were partially offset by the impact of lower sales volume and higher taxes, including the $90 million charge related to the recently signed U.S. health care legislation.

“We are very encouraged by our performance in the first quarter,” Owens said. “We focused on cost management and deployment of the Caterpillar Production System — factory efficiency improved, margins improved and our Machinery business returned to profitability. In addition, cash flow was positive, and we strengthened our balance sheet with continued improvement in our debt-to-capital ratio. As a result, we are well positioned to invest for growth where needed.”

Caterpillar is increasing its outlook for 2010 by raising the sales and revenues range to $38 to $42 billion. The revised 2010 profit outlook is a range of $2.50 to $3.25 per share.

“The main driver behind our improved outlook is robust growth in Asia/Pacific and Latin America and continued improvement in mining and energy globally,” Owens said. “We are increasing production schedules and expect sales to improve as we move through 2010. We expect to continue to add employees around the world to support growth and in the United States to support growing exports.”

Cat Financial, a wholly owned subsidiary of Caterpillar, reported first-quarter revenues of $631 million, a decrease of $50 million, or 7 percent, compared with the first quarter of 2009. First-quarter profit after tax was $53 million, a $2 million increase over the first quarter of 2009.

The decrease in revenues was principally due to a $71 million impact from lower earning assets (finance receivables and operating leases at constant interest rates) and an $11 million unfavorable impact from returned or repossessed equipment, which were partially offset by the absence of a $22 million write-down on retained interests related to the securitized asset portfolio that occurred in the first quarter of 2009 and a $20 million favorable impact from higher interest rates on new and existing finance receivables.

New retail financing was $1.8 billion, an increase of $241 million, or 15 percent from first quarter of 2009. The increase primarily related to improvement in our North America and Asia-Pacific operating segments.

“During the first quarter, Cat Financial’s overall portfolio performance continued to reflect challenges associated with the global economic environment,” said Kent Adams, Cat Financial president and vice president of Caterpillar Inc. “More recently, however, we’ve been encouraged by signs of improving economic conditions and expect that portfolio performance will gradually improve over the balance of the year.”

Caterpillar Inc., Peoria, Ill., had 2009 sales and revenues of $32.40 billion. It is a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Cat Financial has offices and subsidiaries located throughout the Americas, Asia, Australia and Europe, with headquarters in Nashville, Tenn.