Caterpillar sees no signs of mining improvement
With sales and operations at the ends of the earth, few companies are in a better position to take the pulse of the global economy and the resource sector in particular than Caterpillar.
The world's number one heavy equipment manufacturer has been hit hard by the decline in mining and construction – sales are down more than $20 billion from its peak just four years ago after a drop of over $8 billion last year.
Caterpillar said in September it would cut as many as 10,000 jobs in a three-year restructuring program.
Peoria, Illinois-based Caterpillar expects another 10% decline in revenue in 2016 to around $42 billion, but executives still can't predict a bottom for the industry.
Asked why the company is again forecasting reduced resource industries sales in 2016, Chairman and CEO Doug Oberhelman said this in a statement:
Mining companies are continuing to cut capital expenditures in response to lower commodity prices and difficult financial conditions for many of them. As a result, machine quoting activity remains at a very low level.
In addition, some machines remain parked, which continues to negatively impact aftermarket sales. We would expect to see parked machines brought back into service and machine rebuild activity pick up as early indicators of a potential upturn – unfortunately, we have not seen these signs of improvement yet.
Shares in Caterpillar (NYSE:CAT) jumped 4.7% in New York after the release of the financials with 13.6 million shares changing hands, nearly double usual volumes and making it one of the big winners on the day. Perhaps sentiment on resource markets have now deteriorated to such an extent that even predictions of a double digit decline in sales is taken as a positive. The $34 billion company remains down 28% compared to this time last year though.