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Caterpillar's weak dealer sales point to gloomy earnings

Oct, 23 2013


Caterpillar Inc on Tuesday released dealer sales for September that showed continued weak demand for its machinery and engine products, suggesting that its third-quarter earnings report on Wednesday might also fall short of expectations.

Caterpillar
Caterpillar on Tuesday reported continued weakness in dealer sales during September, foreshadowing similar 
disappointment in its third-quarter results. (Reuters file photo / July 23, 2013)

The Peoria-based company, the world's largest maker of construction and mining equipment, said global dealer sales of its yellow earthmoving machines were down 9 percent year-over-year in September.

While negative, that represented a modest improvement over August, when dealers reported that global equipment sales were down 10 percent from a year earlier.

The slowdown in equipment sales continued to be particularly acute in the Asia Pacific region, where sales tumbled 24 percent in September.

But for a second month in a row, the weakness spread to Latin America, a region that had been a bright spot for the company until recently.

One highlight in September was North America, where equipment sales rose for a second month in a row, a reflection of the nascent rebound in public spending on infrastructure projects as well as the wobbly but ongoing recovery in residential and nonresidential construction, according to the U.S. Census Bureau.

Caterpillar said global dealer sales of its gas turbines and diesel engines and generators, meanwhile, were down 2 percent year over year in September.

In August, those sales of so-called power systems were down 6 percent.

In July, Caterpillar reported disappointing earnings and slashed its outlook for 2013, blaming steeper-than-expected inventory reductions by dealers and a downturn in the global mining industry.

At the time, the Peoria, Illinois-based company, which had already reduced its worldwide workforce by 8 percent over the past year, warned the cost-paring would continue in the second half - though it did not provide any details.

Caterpillar is expected to update investors on its restructuring program when it reports early on Wednesday.

Mining equipment is Caterpillar's most profitable product category. But sales to the sector have been hurt in recent quarters because miners, facing investor backlash over unpopular takeovers, budget overruns and falling metal prices, have slashed capital spending, slowed the development on some projects and shelved others entirely.

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