Caterpillar Cuts Forecast on Decline in Sales to Mining

Caterpillar Inc. (CAT), the largest maker of mining equipment, posted disappointing first-quarter earnings, cut its 2013 forecast and lowered “significantly” its outlook for demand from commodities producers.

Profit in 2013 will be about $7 a share, compared with a January projection of $7 to $9, the Peoria, Illinois-based Caterpillar said today in a statement. Sales will be $57 billion to $61 billion, compared with an earlier forecast of $60 billion to $68 billion. The shares rose after Caterpillar said it will resume its stock buyback program and Chairman and Chief Executive Officer Doug Oberhelman said the worst in mining may almost be over.

The earnings miss was due to “slower global growth than initially expected, principally driven by a weaker mining outlook,” Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the shares, said in an interview today.

Caterpillar dealers reduced inventories amid a decline in mining capital expenditures, which will drop 20 percent globally in 2013 from last year’s peak, according to an April 11 JPMorgan Chase & Co. report. BHP Billiton Ltd., the world’s largest miner, and its competitors are cutting costs as demand and prices for metals decline and stockpiles increase amid reduced demand from China, the largest user.

Photographer: Daniel Acker/Bloomberg

Caterpillar Inc. machinery sits on display at a Patten Industries Inc. dealership in Elmhurst, Illinois. Close

Caterpillar Inc. machinery sits on display at a Patten Industries Inc. dealership in Elmhurst, Illinois.

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Photographer: Daniel Acker/Bloomberg

Caterpillar Inc. machinery sits on display at a Patten Industries Inc. dealership in Elmhurst, Illinois.

Buyback Resumes

Caterpillar rose 0.5 percent to $80.80 at 10 a.m. in New York. The company said it will start buying back stock in the second quarter and spend about $1 billion.

“We’re close to the floor in mining,” Oberhelman told CNBC today in an interview.

“We remain very positive on the mining industry for the longterm but it’s clear 2013 is going be a challenge for our mining business,” Chief Financial Officer Brad Halverson said in a video on the company’s website today.

The shares have declined 10 percent this year through April 19, the worst performer in the 30-company Dow Jones Industrial Average.

First-quarter net income fell to $880 million, or $1.31 a share, from $1.59 billion, or $2.37, a year earlier. The average of 20 estimates was for profit of $1.38 a share. Sales declined to $13.2 billion from $16 billion, less than the average estimate of $13.7 billion, as dealers ordered less to cut inventories.

ERA Deal

Caterpillar’s sales to resources customers have become a bigger share of revenue, accounting for 32 percent of total equipment sales in 2012, after Chairman and Chief Executive Officer Doug Oberhelman bought mining equipment makers Bucyrus International Inc. in 2011 and ERA Mining Machinery Ltd. in China last year. Slumping mining orders have spurred the company to slow production and announce layoffs in factories such as a plant in Decatur, Illinois.

The lower 2013 outlook reflects a sales decline of about 50 percent from last year for traditional Caterpillar machines used in mining and a drop of about 15 percent for sales of machines from the Bucyrus acquisition, Oberhelman said in the statement today.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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