Illinois-based producer Caterpillar reported a Q1 profit just above half the size of its previous corresponding period result, earning $880 million or $1.31 a share, down 45% from $1.58 billion in Q1 2012.

But Caterpillar chairman and chief executive officer Doug Oberhelman said the cut should not come as a surprise.

“In our year-end 2012 financial release, we said the first quarter of 2013 would be challenging and it certainly was,” he said.

Sales in the same quarter fell 17% to $13.21 billion from $15.98 billion a year earlier.

“As expected, inventory changes were a major factor,” Oberhelman said.

“Caterpillar and our dealers usually add inventory in the first quarter to prepare for higher end-user demand in the spring and summer.

“In the first quarter of 2012 we added about $2 billion to inventory but this year we cut inventory by about a half billion dollars.

“In the first quarter of 2012, Cat dealers added machine inventory of about $875 million and this year they reduced machine inventory by about $700 million.

“Those are significant year-to-year swings and, coupled with moderating end-user demand, resulted in sales and revenues being down 17 per cent.”

Caterpillar cut its full-year forecast for 2013 to reflect a decline in demand for heavy equipment from its mining clients.

The company said it expected revenue this year of $57-61 billion, compared with an earlier forecast of $60-68 billion.

Oberhelman said the company had taken action to align production costs and capital, most recently seen in it shedding about 800 jobs over the last month.

But it wasn’t all bad news from the equipment manufacturer, with Oberhelman stating that the global economy seems to be stabilising and the company expects slow growth for 2013.

“As we began 2013, we were concerned about economic growth in the United States and China and are pleased with the relative stability we have seen so far this year,” Oberhelman said.

“In the United States, we are encouraged by progress so far and are becoming more optimistic on the housing sector in particular.

“In China, first quarter economic growth was slightly less than many expected but in our view remains consistent with slow growth in the world economy.

“In fact, our sales in China were higher in the first quarter of 2013 than they were in the first quarter of 2012 and machine inventories in China have declined substantially from a year ago.”

Oberhelman said the company planned to repurchase stock next quarter and expected buybacks of about $1 billion.

"The recent decline in the Caterpillar stock price combined with balance sheet strength and positive cash flow has provided an opportune time to resume the stock repurchase program," he said.

Investors may have held fast to the silver lining offered, lifting the company’s shares during Monday’s trading session.