Cat sales up but profits flat - 20000 job cuts planned
By Chris Sleight26 January 2009
Caterpillar had record sales of US$ 51.3 billion last year, a +14.5% increase on 2007. However its net profits were unchanged at US$ 3.56 billion, due to a difficult fourth quarter.
Chairman and CEO Jim Owens said, "Through the first three quarters we experienced booming demand from key global industries, notably mining and energy, and most emerging economies. Then we were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices."
The company's sales in the fourth quarter were up just +6.4% compared to the same period in 2007, and operating profits fell -64% from US$ 1.26 billion in Q4 2007 to US$ 457 million for the final three months of last year. This took Cat's net profit margin for the year down to 7.4%, from 8.4% in 2007.
Cat saw strongest growth in the Asia Pacific region last year, with machinery sales up +42% to US$ 5.71 billion. There was also strong growth in Latin America, where it sold US$ 4.11 billion of equipment last year, a +30% increase on 2008.
Growth was more subdued in the Europe, Africa and Middle East (EAME) region, with machinery sales up +7% to US$ 9.22 billion. In Cat's largest market, North America, machinery sales were almost flat with 2007 at US$ 12.8 billion.
2009 sales down -15% to -30%
Caterpillar says it expects, "A very weak year for the world economy," in 2009. It expects sales to be between US$ 36 billion and US$ 44 billion, which is to say anything from a -15% to a -30% fall on 2008. At the mid-point of US$ 40 billion sales it expects profits per share of US$ 2.50, excluding redundancy costs, down -57% on the 2008 figure of US$ 5.83 per share.
20000 jobs to go
The company also said it expected to lay-off as many as 20000 workers over the course of this year. These will include 4000 voluntary and involuntary redundancies of permanent staff, the termination of 8000 jobs for contract and temporary staff and cutting some 7500 management and support jobs.At the end of last year Caterpillar employed nearly 113000 people world-wide, so the redundancy plan equates to about a -17.5% cut in staff.