As a result of the dropping sales, Cat carries out a number of cost reduction measures
Caterpillar has announced a large drop in Q3 sales for 2013, with sales tumbling to $13.423 billion, down from $16.445 billion in the previous year’s Q3.
The sales drop is largely due to decreased purchasing of new machinery by the mining sector worldwide, as the cyclical market experiences depressed demand and low prices, in part due to the slowdown in China.
“This year has proven to be difficult, with expected sales and revenues nearly $11 billion lower than last year. That is a 17% decline from 2012, with about 75% of the drop from Resource Industries, which is principally mining,” said company chairman and CEO Doug Oberhelman.
“We expect resource industries to be down close to 40% for the full year and power Systems’ and construction industries’ sales to each be down about 5%.”
The drop in purchasing activity by the mining industry is hitting Caterpillar’s bottom line hard, since the mining products are lower volume, higher margin.
As a result of the dropping sales, the company has carried out a number of cost reduction measures, said Oberhelman, including many temporary plant shutdowns, a reduction of more than 13,000 of its global workforce, temporary layoffs for thousands of salaried and management employees, reductions in program spending, substantially lowered incentive pay, lower capital expenditures and implementation of general austerity measures across the company.
“Year-to-date, excluding the impact of inventory absorption, we’ve lowered costs about $700 million and reduced capital expenditures by about $400 million,” he said.
“We’ve continued to improve our operational performance this year, and it’s unfortunate that the improvements we’ve made have been far overshadowed by the sales decline in mining. Safety levels in our factories continue to improve, and product quality is better — we see it in our metrics and are hearing it from dealers and customers.”
Nevertheless, other companies may be faring worse, believes Oberhelman.
The company expects total year revenue for 2013 to be $55 billion, still easily the largest sales volume in the construction machinery industry.