Global construction market recovers

April 26, 2017

Caterpillar shares rose more than 6 per cent on Tuesday after it raised its forecast for 2017 sales and revenues because of what it said were signs of recovery in the global mining industry, especially in Asian markets.

Caterpillar, viewed as a bellwether for the health of commodities, energy and construction markets worldwide, also raised its forecast for full-year sales to $38bn-$41bn, up from $36bn-$39bn forecast in January.

A recovery in the mining industry is also boosting business at Volvo's construction equipment unit, after years of tough market conditions.

Caterpillar reported stronger than expected first-quarter sales of $9.8bn, up from $9.5bn in the year earlier quarter ended March 31.

In its first quarterly earnings statement since federal agents raided three of its offices last month, Caterpillar said most of that strength came from resource industries.

Overall sales were up 12% in its Asia Pacific region too, due to stronger construction equipment sales in China “resulting from increased infrastructure and residential investment”.

"There are encouraging signs, with promising quoting activity in many of the markets we serve and retail sales to users turning positive for both machines and Energy and Transportation for the first time in several years," said chief executive Jim Umpleby in a statement.

But he warned: “While we are raising the full-year outlook for sales and revenues, there continues to be uncertainty across the globe, potential for volatility in commodity prices, and weakness in key markets."

On Monday, Caterpillar had reported stronger than expected global machine retail sales for the first quarter, up 1% for the three months to the end of March, the first increase in more than four years.

Volvo Construction confirms this trend reporting Tuesday reporting a sharp increase in first-quarter net profit that exceeded analyst expectations, boosted by a rise in truck orders and a rebound in its construction equipment unit.

Volvo said net profit for the period ended March was $533.7m, up 25% on the same period a year earlier. Sales in the period rose 8%.

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