Cat, production--Cat boosts outlook based on quarterly results

Prompting a more optimistic forecast for 2010 as a whole, increased production helped fuel a 91-percent year-over-year hike in second-quarter profit for construction equipment manufacturing giant Caterpillar.

“We’ve been highly focused on three things this year – significantly increasing production in response to higher demand from our customers particularly in developing economies, aggressively managing costs and driving better cash flow,” chief executive officer Doug Oberhelman said in the July 22 results release. “You can see the results in our second quarter – sales and revenues increased substantially, operating profit as a percent of sales more than doubled, and machinery and engines operating cash flow and our debt-to-capital ratio strengthened.”

Sales and revenues of $10.409 billion were up 31 percent from the second quarter of 2009. This included a 55-percent increase in machinery sales, to $6.733 billion. North American machinery sales of $2.478 billion represent a 43-percent increase over the previous year.

Based on the results, publicly-traded Caterpillar announced it is improving its outlook for 2010 by raising the sales and revenues range and increasing profit expectations. Sales and revenues are now expected to be in a range of $39 to $42 billion, with a midpoint of $40.5 billion. The increased 2010 profit outlook is a range of $3.15 to $3.85 per share, with a midpoint of $3.50 per share. The previous sales and revenues outlook was a range of $38 to $42 billion, and the previous profit outlook range was $2.50 to $3.25 per share.

“It reflects an increase in sales and revenues, and a more significant increase in profit – a result of our continuing focus on cost management and profit improvement,” says Oberhelman. “While there are significant economic concerns around the world that we are watching closely, orders have continued to outpace our shipments, and we expect to increase production in the second half of the year.

“We continue to be very positive about the longer-term prospects for many of the industries we serve, like mining, energy, infrastructure, electric power and rail.”

Initiatives announced this year by Caterpillar to increase capacity and expand product lineup include:

-- A new excavator facility in the United States.
-- An agreement to acquire Electro-Motive Diesel, which has the largest installed base of diesel-electric locomotives in the world.
-- A multi-year investment of nearly $700 million supporting mining customers, including a full line of mining shovels and capacity expansion for mining trucks made in the U.S. and India.
-- A 400-percent increase in excavator production capacity over the next several years in Xuzhou, China.
-- A new facility for small wheel loader and backhoe loader manufacturing in Brazil.

Caterpillar’s worldwide employment at the end of the second quarter was 97,487 including the addition of about 3,650 people year-to-date, primarily due to increases in production, the company says. About 1,250 of the additional employees are based in the U.S.

“Our employees, dealers and suppliers are doing a great job ramping up to support customers,” says Oberhelman.

Source: Equipmentworld.com