Caterpillar provides year-end outlook

Andrew Macklin
January 28, 2016
By
January 28, 2016 - Caterpillar Inc. announced 2015 fourth-quarter sales and revenues of $11.0 billion, down from $14.2 billion in the fourth quarter of 2014.

"Cost management, restructuring actions and operational execution are helping the company while sales and revenues remain under pressure from weak commodity prices and slowing economic growth in developing countries," said Caterpillar chairman and chief executive officer Doug Oberhelman. "We took tough but necessary restructuring actions in 2015 – and they were significant. I am proud that our team stayed focused on our customers in this difficult environment. Our balance sheet is strong; our product quality remained at high levels; we gained market position for machines for the fifth year in a row; inventory levels have declined and are well positioned as we look forward to 2016; and our safety levels are world class. We are benefiting now and expect to even more in the future when markets rebound,"

Overall, sales and revenues for 2015 were nearly 15 per cent lower than 2014 and 29 per cent off the 2012 peak. The two most significant reasons for the decline from 2014 were weakening economic growth and substantially lower commodity prices. The impact of weak economic growth was most pronounced in developing countries, such as China and Brazil. Lower oil prices had a substantial negative impact on the portion of Energy & Transportation that supports oil drilling and well servicing, where new order rates in 2015 were down close to 90 per cent from 2014.

"We anticipated about $5 billion of the $8 billion sales and revenues decline in our January 2015 outlook as we started the year. Actual sales and revenues were about $3 billion below that $50 billion outlook because of steeper than expected declines in oil prices, a stronger U.S. dollar, weaker construction equipment sales and lower than expected mining-related sales in Resource Industries," added Oberhelman.

2016 Outlook
The outlook for 2016 sales and revenues does not anticipate improvement in world economic growth or commodity prices. Sales and revenues are expected to be in a range of $40 to $44 billion – a mid-point of $42 billion. The mid-point of the range reflects a decline of about $3.5 billion from last October's preliminary outlook for 2016 sales and revenues and a year-over-year decline of about 10 per cent. The decrease from last October's preliminary outlook is largely a result of continued declines in commodity prices and economic weakness in developing countries.

Sales in Energy & Transportation are expected to decline about 10 to 15 per cent from 2015. Much of the decline is a result of low oil prices. Sales declined during the second half of 2015 as orders from the backlog were shipped and new order levels were weak. That impact, along with the further decline in oil prices, is the primary reasons for the expected decline in Energy & Transportation's 2016 sales. In addition, continuing weakness in economic conditions in much of the world is expected to be negative for sales of power generation equipment, industrial engines, marine and rail.

Sales in Resource Industries are expected to be down about 15 to 20 per cent from 2015 as a result of continuing reductions in mining-related commodity prices and difficult financial conditions for many mining customers around the world.

Sales in Construction Industries are expected to decline about 5 to 10 per cent from 2015. In the United States, improving labor market conditions and relatively stable economic growth should continue to support the wider economy and construction. However, we expect weakness in developing countries and lower activity in oil- producing regions to persist.

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