Global construction equipment manufacturer
Caterpillar also reported fourth-quarter 2014 sales of $14.244 billion, again slightly down at 1% from $14.402 billion in the fourth quarter of 2013.
The results and a continued weak to modest improvement has dampened Caterpillar’s expectation of increased sales for 2015, likely to be around $50 billion.
“Overall, we had many positives and a better year in 2014 than 2013,” said Caterpillar chairman and chief executive Doug Oberhelman. “We ended the year with sales and revenues within 2% of $56 billion and delivered much better profit per share. In addition to improved profit, machinery, energy & transportation [division] operating cash flow was higher than we expected and the third best year in our history.”
Sales were also up and profit improved substantially in the construction industries division, primarily in North America, but was partially offset by sales declines in other regions.
While 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, the statement said.
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 the resource industries division.
“We haven’t seen evidence of an upturn in equipment orders yet and sales of mining equipment remain depressed,” Oberhelman said. “We are disappointed that we missed our profit outlook in the fourth quarter. That said, 2014 overall was a successful year as we continued to execute on the things we can control. Our balance sheet is strong and we repurchased $4.2 billion of stock in 2014 and raised the quarterly dividend by 17%.”
Caterpillar said it expects the world economic growth to improve only modestly in 2015. This and continued weakness in commodity prices, particularly oil, copper, coal and iron ore, are expected to be negative for Caterpillars sales.
“We expect sales and revenues in 2015 to be about $50 billion,” he said. “Over the past two years, we have undertaken restructuring activities designed to lower our long-term cost structure. Additional restructuring actions are anticipated in our outlook for 2015. In total, we expect the cost of these restructuring actions in 2015 to be about $150 million or about $0.15 per share. Our profit outlook for 2015 is about $4.60 per share, or $4.75 per share excluding restructuring costs.
The 1% dip in fourth quarter sales was primarily due to currency impacts from weakening of the euro and Japanese yen, the statement noted. The impacts from sales volume, price realisation and financial products’ revenues were not significant. While sales for new equipment were slightly lower, aftermarket parts sales were slightly higher than the fourth quarter of 2013.
While the overall sales change was not significant, sales in North America improved and were about offset by declines in Asia/Pacific and Latin America. In North America, sales increased 10 percent due to higher demand primarily for transportation and oil and gas applications, and the favourable impact of changes in dealer inventories.
Asia/Pacific sales declined 16% primarily due to lower demand for construction equipment and the unfavourable impact of changes in dealer inventories. Sales decreased 14% in Latin America primarily due to lower end-user demand for construction and mining equipment, partially offset by the favourable impact of changes in dealer inventories. Sales in EAME (Europe, Africa, Middle East) were about flat as increases in deliveries to end-users were about offset by the unfavourable impact of changes in dealer inventories and the impact of currency as our sales in euros translated into fewer US dollars.
By segment, sales decreases in construction industries and resource industries were about offset by increased sales in energy & transportation. Construction industries’ sales decreased 9% primarily due to lower dealer deliveries to end users.
Resource Industries’ sales declined 10% primarily due to lower end-user demand for mining equipment, partially offset by the favourable impact of changes in dealer inventories. However, energy & transportation’s sales increased 11% primarily due to higher demand for oil and gas, transportation and power generation applications, partially offset by the unfavourable impact of changes in dealer inventories. Financial products segment revenues were about flat.
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