With North American construction strong and lower oil prices holding back Caterpillar’s revenues, the company still performed reasonably well in 2014, according to fourth quarter and full year results released by the world’s largest construction equipment maker.
Caterpillar posted revenue of $14.24 billion in the fourth quarter compared to $14.4 billion in the fourth quarter of 2013, a slight year-over-year decrease. For the full year, revenue was $55.184 billion compared to $55.656 billion in 2013, a less than 1 percent decline.
On the plus side profit per share was $5.88 per share, compared to profit per share of $5.75 in 2013.
"Overall, we had many positives and a better year in 2014 than 2013," said Caterpillar chairman and CEO Doug Oberhelman. "Our emphasis on cost management, operational execution and cash flow helped us deliver better profit per share than both 2013 and the 2014 outlook we provided at the start of the year. At the mid-point of our original 2014 outlook, we anticipated sales and revenues of $56 billion and profit of $5.30 per share, or $5.85 per share excluding restructuring costs. We ended the year with sales and revenues within 2 percent of $56 billion and delivered much better profit per share. In addition to improved profit, Machinery, Energy & Transportation operating cash flow was higher than we expected and the third best year in our history,"
Overhelman added that 2014 was strong for Caterpillar’s Energy & Transportation division with record sales and profit. Sales were also up and profit improved substantially in Construction Industries.
“The increase in Construction Industries' sales was primarily in North America and was partially offset by sales declines in other regions,” he said. “While our construction sales were up in 2014, the industry is still well below prior peaks in every major region due to relatively weak economic growth for most of the world. Prices for key mined commodities, particularly copper, coal and iron ore, declined in 2014. Weakening commodity prices, along with improved mine productivity, led to lower sales for Resource Industries. We haven't seen evidence of an upturn in equipment orders yet—and sales of mining equipment remain depressed.”
Caterpillar said it expects world economic growth to only improve modestly in 2015. The relatively slow growth in the world economy and continued weakness in commodity prices—particularly oil, copper, coal and iron ore—are expected to be negative for its sales. The company said it expects sales and revenues in 2015 to be about $50 billion.
"The recent dramatic decline in the price of oil is the most significant reason for the year-over-year decline in our sales and revenues outlook,” Oberhelman said. “Current oil prices are a significant headwind for Energy & Transportation and negative for our construction business in the oil-producing regions of the world. In addition, with lower prices for copper, coal and iron ore, we've reduced our expectations for sales of mining equipment. We've also lowered our expectations for construction equipment sales in China. While our market position in China has improved, 2015 expectations for the construction industry in China are lower.
"While we are, without a doubt, facing a tough year in 2015, we're driving cost management through additional restructuring actions and continued operational improvements gained from our focus on Lean Management. While 2015 will be difficult, the work we've done to improve our cost structure, market position and quality will position us for better results when the world economy and the key industries we serve improve."
