Resource Industries sales were $US2.24 billion ($A2.38 billion) in the second quarter of 2014, an $894 million drop from the second quarter of 2013.

Unsurprisingly, resources industries’ profit was down $391 million year on year with $133 million for the second quarter 2014 compared to $524 million in the previous corresponding period.

Sales declined in all geographic regions primarily due to lower end user demand. That was partially offset by favourable changes in dealer inventories.

While dealers continued to reduce machinery inventories worldwide during the second quarter of 2014, the reductions were less significant than in the second quarter of 2013.

Although prices of most mined commodities have remained above investment thresholds, customers in all geographic regions reduced spending across the board.

Caterpillar executives believe the miners are increasing productivity at existing mines rather than investing in expansions or new mining openings.

That will mean a lower demand for the company’s mining products.

This thinking was borne out with new orders for mining equipment continuing to be weak in the quarter.

Aftermarket part sales declined in the Asia-Pacific and East Africa Middle East market segments and were about flat in Latin America and North America.

“We believe some companies are continuing to delay maintenance and rebuild activities,” Caterpillar said in its second quarter results statement.

The profit decrease the company experienced was mostly due to lower sales volumes and the absence of a $135 million gain related to the settlement with previous owners of Caterpillar China (Zhengzhou) Ltd, partially offset by an improvement in manufacturing costs.

The manufacturing costs improvement was primarily driven by favourable changes in cost absorption as inventory remained about flat during the second quarter of 2014. In the corresponding 2013 quarter there was a decrease in inventory.

Material costs were also favourable.

These improvements were partially offset by increased warranty expense.

Sales, general and administration and research and development expenses for the resources industries segment were about flat as cost cutting measures offset higher incentive compensation expenses.

While the resources side of the business was down, the overall Caterpillar business reported a second quarter 2014 profit of $1.57 a share, an increase from $1.45 a share in the second quarter of 2013.

The second quarter of 2014 included a negative impact of 12c a share from previously announced restructuring activities.

Caterpillar chairman and CEO Dough Oberhelman said he was pleased with the second quarter results, particularly the profit improvement.

“We increased the bottom line, despite a weak quarter for our resource industries segment, which is principally mining,” he said.

“Three key things are contributing to the continuing strength of our financial results – the diversity of our businesses, substantial success in operational improvements through the execution of our strategy and the strength of our cash flow and balance sheet.

“We understand that we don’t control the economy or the timing of a turnaround in mining.

“That’s why we’ve been so focused on executing our strategy and improving our operational performance, which have helped us control costs with year to do date manufacturing costs and other expenses improving nearly $500 million.

“We’ve also improved our balance sheet and cash flow over the past few years and that’s contributed to our ability to return value to stockholders – including today’s announcement that we intend to repurchase $2.5 billion of Capterillar stock in the third quarter.”

Caterpillar’s outlook for 2014 sales and revenues has been narrowed to $54-$56 billion. The previous outlook was $53.2-$58.8 billion.

The company is improving its 2014 profit per share outlook. Excluding restructuring costs, which are expected to be about $400 million, the profit per share outlook is $6.20, up 10c from the $6.10 the company previously forecast.

“After a sizeable drop in sales and revenues for 2013, our ongoing forecasting process has, since the third quarter of last year, pegged 2014 as a roughly flat year for sales,” Oberhelman said.

“That’s still the case. There have been plusses and minuses but they’ve been relatively muted in the context of our total sales and revenue.

“While we’d certainly like to see improvement in economies around the world and, more specifically, the mining industry, the stability we’ve seen this year has helped.

“Even though sales and revenues are relatively flat compared to last year, we’ve improved the bottom line with better execution and continued focus on costs.”