MARKETS

Cat slashes resources industries outlook by 20%

CATERPILLAR expects its resource industries division sales to be down about 20% from 2013, despit...

Lou Caruana
Cat slashes resources industries outlook by 20%

The previous outlook expected a decline of about 10%, the company said after releasing its first-quarter 2014 sales and revenue result - of $US13.241 billion and profit of $922 million.

“The decline in expectations is a result of continued low order rates for mining equipment. The company expects mining orders will begin to improve at some point, but not likely in time to increase Resource Industries’ sales in 2014,” the company said.

“While the outlook reflects continued short-term weakness in Caterpillar’s mining-related sales, the company remains positive on the long-term prospects for the mining industry.”

Caterpillar CEO Doug Oberhelman said the change in the profit outlook was a result of a very solid performance in the first quarter, while also recognising the uncertainty in a number of areas of its business and the continued risk that geo-political events could negatively impact global GDP growth.

“China is one example of both the potential and uncertainty we face,” he said.

“During my visit a few weeks ago, it was evident the Chinese construction industry is facing challenges; however, I was pleased with how Caterpillar is performing compared to our competitors.

“I came away optimistic about how we are executing our China strategy as we implement our proven business model along with our dealers and suppliers who continue to invest in China.

“At the same time, Chinese leaders are in the midst of transitioning the world’s second largest economy to a longer-term, more sustainable growth model while maintaining social stability. This is an enormous task that carries risks for the world economy. In addition, we are very concerned about the situation in Ukraine and Russia.”

Oberhelman said the global economy remained fragile, and as such, one or two setbacks could create substantial downside risk for the global economic recovery.

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