Caterpillar Flags Signs of Recovery Amid Slack Demand
30 January 2021 - 12:32AM
Dow Jones News
By Austen Hufford
A construction slowdown during the coronavirus pandemic is
hurting demand for Caterpillar Inc.'s heavy machinery, but the
manufacturer said dealers and customers expect a turnaround this
year.
The Deerfield, Ill., company said Friday that revenue fell 15%
in its fourth quarter due to lower volumes and less demand from
customers and dealers. Revenue declined in each of Caterpillar's
main businesses: construction, mining, and energy and
transportation.
Andrew Bonfield, Caterpillar's financial chief, said in an
interview that while a rebound in home construction was boosting
purchases for some machinery, spending cuts by local and state
governments was weighing on road construction.
"People in an uncertain time are just not necessarily
sanctioning new projects," Mr. Bonfield said.
Still, Caterpillar said it sees signs of a turnaround. Its order
backlog increased in its fourth quarter compared with the previous
three months and a year earlier as dealers ordered new machines
ahead of the traditionally busy spring season. For the current
first quarter Caterpillar said it expects stronger sales of
construction equipment in particular.
"Customers are starting to feel a bit more confident," Mr.
Bonfield said.
Shares rose 0.8% to $185.86 in premarket trading.
Lower demand for Caterpillar machinery in the latest quarter is
a contrast to consumer-focused manufacturers, who have struggled to
keep up with large orders from customers at home buying new boats
and kitchen appliances.
Caterpillar said its service and parts revenue fell to $16
billion in 2020, down from $18 billion in 2019, showing how the
pandemic is making it more difficult for companies to stick by
preset strategies. The company has been trying to generate more
recurring revenue from services tied to digitally enabled
equipment.
In all, revenue in the quarter fell 15% to $11.26 billion from
the quarter a year before. Profit declined 29% to $780 million.
(END) Dow Jones Newswires
January 29, 2021 08:17 ET (13:17 GMT)
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