Caterpillar sees uncertain 2013 after tough 4Q


Share
Posted Online: Jan. 28, 2013, 7:43 pm
Comment on this story | Print this story | Email this story
MINNEAPOLIS (AP) — Caterpillar said on Monday that its 2013 profit could shrink if the world's economy doesn't pick up in the second half of the year, as mining companies and builders remain cautious about buying new gear.

The cloudy outlook for the year came as Caterpillar reported a fourth-quarter profit less than half as big as a year ago because of a deal in China that went bad and slower growth around most of the world.

Caterpillar Inc. is the largest maker of construction and mining equipment, so its performance rises and falls with the world's economy. It tries to predict where the economy is headed so it knows how many excavators, bulldozers, and mining trucks to build.

If recent economic improvements continue, this could be a record year for Caterpillar, its executives said. But if this year is a replay of the last two, where growth and confidence declined in the second half, "2013 could be a tough year," said Doug Oberhelman, chairman and CEO.

Caterpillar started 2012 expecting the U.S. economy to grow at least 3 percent but economists estimate annual growth was a little more than 2 percent. In April, the company was still forecasting 8.5 percent growth in China, but the world's second-largest economy expanded by 7.8 percent last year, its weakest annual performance since the 1990s.

Caterpillar dialed back production in the second half of 2012, which hurt fourth-quarter revenue and profits. Caterpillar and its dealers have both been trying to sell off inventory. Reduced production will continue at least through the first quarter, the company said.

For this year, Caterpillar expects revenue of $60 billion to $68 billion, with a profit of $7 to $9 per share. Analysts had been expecting a profit of $8.54 per share on revenue of $64.58 billion.

Caterpillar said there's a wide range in its outlook because of the high level of uncertainty in the world. It expects relatively weak growth in the U.S. economy. Growth in China will improve, but not back to the levels seen in 2010 or 2011, Caterpillar said. It expects Europe to continue to struggle.

It said first quarter revenue and profits will be "significantly lower" than the same period last year.

In the quarter ended Dec. 31, Caterpillar earned $697 million, or $1.04 per share, down from a profit of $1.55 billion, or $2.32 per share a year earlier.

The most recent quarter included a non-cash charge of 87 cents per share to write down the purchase of Zhengzhou Siwei.

Not counting the write-down and a $300 million tax benefit, Caterpillar would have earned $1.46 per share. Analysts surveyed by FactSet had been expecting a profit of $1.69 per share.

Revenue fell 7 percent to $16.08 billion as sales fell everywhere except Latin America.

Revenue from construction equipment fell 25 percent. But sales of mining gear — now Caterpillar's single largest category by revenue — grew 14 percent on improvements in all regions except North America, where coal mining is in decline.

Caterpillar's $653 million purchase of Siwei in June gave it a new business — roofing supports for mines — in China, the world's largest coal producer.

But on Jan. 18, Caterpillar said it had found "deliberate, multi-year, coordinated accounting misconduct" in the accounting at Siwei, and said it will write down its investment in the company by $580 million. It also said it dismissed several senior managers at the company.

Oberhelman said on a conference call that new Caterpillar managers tried to reconcile Siwei's inventory with what was on the books. They found a significant discrepancy, he said, prompting a deeper investigation.

"What we discovered was deliberate, multiyear, coordinated accounting misconduct at Siwei," he said. "It was executed by several senior managers at Siwei for the purpose of inflating sales, understating costs, and over-reporting profit, and it included fabricated documentation designed to cover their tracks."

He said Caterpillar is "considering all options to recover our losses and hold those responsible accountable for their wrongdoing." He said the company wouldn't comment further on "pending or contemplated litigation."

Asked why the physical inventory at Siwei wasn't checked before the deal closed, Caterpillar Chief Financial Officer Brad Halverson said in an interview that such a check wouldn't normally be done as part of the process of evaluating a company. "We did our normal due diligence process," he said.

For all of 2012, the company's profits rose 15 percent to $5.68 billion, or $8.48 per share, up from $4.93 billion, or $7.40 per share, in 2011. Revenue rose 10 percent to $65.88 billion, from $60.14 billion.

Shares of the Peoria, Ill.-based company rose $1.87, or 2 percent, to close at $97.45 Monday.



















 



Local events heading








  Today is Monday, Sept. 22, the 265th day of 2014. There are 100 days left in the year.

1864 -- 150 years ago: The board of education has granted Thursday as a holiday for the children, with the expectation that parents who desire to have their children attend the Scott County Fair will do so on that day and save irregularity the rest of the week.
1889 -- 125 years ago: The guard fence around the new cement walk at the Harper House has been removed. The blocks are diamond shape, alternating in black and white.
1914 -- 100 years ago: The Rev. R.B. Williams, former pastor of the First Methodist Church, Rock Island, was named superintendent of the Rock Island District.
1939 -- 75 years ago: Abnormally high temperatures and lack of rainfall in Illinois during the past week have speeded maturing of corn and soybean crops.
1964 -- 50 years ago: Installation of a new television system in St. Anthony's Hospital, which includes a closed circuit channel as well as the three regular Quad-Cities channels, has been completed and now is in operation.
1989 -- 25 years ago: When the new Moline High School was built in 1958, along with it were plans to construct a football field in the bowl near 34th Street on the campus. Wednesday afternoon, more than 30 years later, the Moline Board of Education Athletic Board sent the ball rolling toward the possible construction of that field by asking superintendent Richard Hennigan to take to the board of education a proposal to hire a consultant.






(More History)