October 22, 2015 – The struggles continue for Caterpillar, who announced a $2.5 billion decline in sales and revenue year-to-year in its third quarter financial results. But measures that were taken by the company to cut costs in the wake of struggling mining and oil and gas markets paint a bright long-term future for the company.
Profit per share was $0.62 for the third quarter of 2015, a decrease from $1.63 per share in the third quarter of 2014. Excluding restructuring costs, profit per share was $0.75, down from $1.72 per share in the third quarter of 2014. Third-quarter 2015 sales and revenues were $11.0 billion, down from $13.5 billion in the third quarter of 2014.
“The environment remains extremely challenging for most of the key industries we serve, with sales and revenues down 19 percent from the third quarter last year,” said Caterpillar chairman and chief executive officer Doug Oberhelman. “Improving how we operate is our focus amidst the continued weakness in mining and oil and gas. We’re tackling costs, and our year-to-date decremental profit pull through has been better than our target. We’re also focusing on our global market position, and it continues to improve even in challenging end markets. Our product quality is in great shape, and our safety record is among the best of any industrial company today.”
The additional restructuring actions announced recently are substantial, but necessary to manage through this downturn and keep the company strong for the long term. The actions are expected to lower operating costs by about $1.5 billion annually once fully implemented, with about $750 million of that expected in 2016.
The 2015 outlook for sales and revenues is about $48 billion, and that is unchanged from the outlook that was included with the September 24 announcement of new restructuring actions.
The outlook for profit per share is about $3.70, or $4.60 excluding restructuring costs. The expectation for 2015 restructuring costs has increased significantly, from about $250 million to about $800 million, and is a result of the additional restructuring actions.
The previous outlook for profit per share was provided in late July along with second-quarter 2015 financial results. At that time, the outlook for profit per share was $4.70, or $5.00 excluding restructuring costs and was based on sales and revenues of about $49 billion.
Preliminary 2016 Sales and Revenues Outlook
Sales and revenues for 2016 are expected to be about five per cent below 2015. We expect Construction Industries’ sales to be flat to down five per cent with some improvement in developed countries offset by declining sales in developing countries. Energy & Transportation’s sales are expected to be down five-to-ten per cent as a result of continuing weakness in oil and gas coupled with a weaker order backlog than in 2015. Mining is expected to be down again, resulting in a decline in Resource Industries’ sales of about 10 per cent.
The preliminary outlook reflects weak economic growth in the United States and Europe with U.S. construction activity impacted by low infrastructure investment and continued headwinds from oil and gas. It also reflects a slowing China, Brazil in recession and continuing weakness in commodity prices.
“Managing through cyclicality has been critical to Caterpillar’s success for the past 90 years; it’s nothing new for us or our customers. When world growth improves, the key industries we serve – construction, mining, energy and rail – will be needed to support that growth. We’re confident in the long-term success of the industries we’re in, and together with our customers, we’ll weather today’s challenging market conditions,” Oberhelman said.
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