Machinery volumes to decline as Caterpillar’s sales fall by 23%

Industrial manufacturer Caterpillar is shipping out a lot less machinery as a result of the pandemic. Third-quarter sales have fallen by 23% to USD 9.9 billion, compared to USD 12.8 billion in the third quarter of 2019. The decline was driven by lower end-user demand for both equipment and services.

The company’s operating profit was slashed in half from just over USD 2 billion last year to USD 985 million now. The decline was felt in al four of Caterpillar’s verticals, consisting of Construction Industries, Resource Industries, Energy & Transportation and Financial Products.

Within the Construction business, sales also fell by 23% to USD 4.1 billion as a result of lower sales volume and unfavourable price realisation. Although cost improvements cushioned the decline a little, the operating profit still decreased by 38% to USD 585 million. Especially in North America and the EMEA region, sales fell as a result of lower end-user demand. In Latin America, the decrease was driven by changes in dealer inventories and currencies, while in the Asia Pacific region those same reasons led to a small increase in sales, despite unfavourable pricing.

Energy & Transportation also took a big hit as demand for engines and aftermarket parts fell in all four business segments, including Oil & Gas, Power Generation, Industrial and Transportation. In Oil & Gas lower demand in North America had a big impact, while in Transportation, the decline was mostly felt in the rail and marine applications.

Resources Industries saw its sales decrease by half a billion dollars to USD 1.8 billion. Profit decreased by 46% to USD 167 million as lower end-user demand led to lower sales volume and contracts being secured at lower prices.

For the fourth quarter, Caterpillar expects less of an end-user decline compared to the previous quarter and the profit margins to improve.

“I’m proud of our global team’s performance as we continue to safely navigate the pandemic while remaining firmly committed to serving our customers”, said Caterpillar Chairman and CEO Jim Umpleby. “Our third-quarter results largely aligned with our expectations, and we’re encouraged by positive signs in certain industries and geographies. We’re executing our strategy and are ready to respond quickly to changing market conditions.”

Author: Adnan Bajic

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