UPDATE: Caterpillar Cuts '09 Profit, Sales Forecast
April 21 2009 - 9:43AM
Dow Jones News
Caterpillar Inc. (CAT) cut is full-year sales and profit
forecasts Tuesday and admitted it had underestimated the severity
of the global economic downturn.
The world's largest maker of construction equipment had seen
sales soar during the extended commodity boom, but is cutting
production and underscored the uncertainty over a recovery as its
2009 sales forecast carries a range of plus or minus 10%.
The U.S. group, which beat expectations in reporting a
first-quarter loss, said the "overall economic environment has
deteriorated" despite government stimulus efforts and a relatively
bullish stance on commodity prices.
Its share slipped 0.2% to $30.27 in early trade.
Caterpillar also trimmed its forecast for global GDP growth this
year from flat to a fall of at least 1.3%. It added that tight
credit conditions could delay a recovery for at least a quarter,
though its finance arm is fully funded for 2009 after successfully
issuing debt.
"A great deal of uncertainty exists in the global economy,
making it extremely difficult to know how our customers will
respond during the remainder of 2009," said chairman and CEO Jim
Owens in a statement.
Its profit forecast was halved to $1.25 a share on mid-range
revenue of $35 billion. In January, Caterpillar said it expected to
earn $2.50 a share on sales of about $40 billion.
A net loss of $112 million, or 19 cents a share, in the March
quarter compared with year-earlier income of $922 million, or $1.45
a share. Excluding $558 million in costs for employee layoffs and
plant closings, the company would have posted a 39-cent profit.
Sales in the quarter fell by 22% to $9.23 billion.
The company easily topped Wall Street analysts' expectation of 4
cents per share of earnings on revenue of $8.54 billion.
Caterpillar expects total restructuring costs this year to reach
$700 million. It is shedding about 25,000 jobs as it closes plants,
shortens work weeks and implements other cost-cutting
initiatives.
Caterpillar predicted the U.S. economic stimulus program is
having little effect on sales, concluding the $70 billion
designated for infrastructure construction is not enough to offset
the declines seen in private-sector construction spending.
It was more optimistic about overseas initiatives, notably in
China.
The infrastructure and commodities boom powered Caterpillar for
roughly five years, helping it more than double its annual revenue
from 2002 to 2007, but collapsed late last year.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
(Tess Stynes contributed to this report)