2nd UPDATE: Caterpillar Cuts '09 Profit, Sales Forecast
April 21 2009 - 1:08PM
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 the company is
cutting production and it underscored the uncertainty over a
recovery as its 2009 sales forecast carries a range of plus or
minus 10%.
The U.S. company, 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.
"This will likely be the worst year for global GDP growth in
over 50 years," said chairman and CEO Jim Owens during a conference
call with analysts. "We modeled for a worldwide recession, but not
one quite as severe as we've seen."
Caterpillar trimmed its forecast for global GDP growth this year
from flat to a decline of at least 1.3%. The company 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.
Caterpillar halved its 2009 earnings forecast 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.
The company reported 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 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. But its
downward revision to its 2009 guidance disappointed some
analysts.
"They said they built the business so we don't have these
extreme troughs any more," said John Kearney, an analyst with
Morningstar Inc. "That just doesn't seem to be playing out."
First-quarter machinery sales fell 29% to $5.34 billion, and
engine sales slipped 8% to $3.16 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.
The company expects to lower inventory by about $3 billion this
year.
Owens said the company's board is discussing whether a
stock-dividend reduction is needed to preserve cash but added that
no decision has been reached. 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.
"There's much more focus on hard infrastructure," Owens
said.
Caterpillar's stock was recently up 1.44% at $30.92 a share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
(Tess Stynes contributed to this report)