Strong demand in China, US to push Caterpillar sales $6bn higher

Caterpillar Inc, the world’s largest maker of construction, generating and mining equipment, has announced strong results for the third quarter as a result of higher demand from China and North America, and the company said it is on track for its first annual sales increase for five years.

Sales rose more than $2bn compared with the same period in 2016, from $9.2bn to $11.4bn, and management said it expects to reach a full year revenue of about $44bn, which would be $6bn higher than 2016 revenues. These fell 18% from the previous year, from $47bn to $38bn.

The result confirms the direction of the company’s performance following a strong second quarter, which reported a $1bn increase in sales.

The third-quarter result was driven by sales of construction equipment, which rose nearly 37% to $4.9bn, thanks in part to price rises supported by stronger demand. In terms of regions, year-on-year revenue rose 27% in North America and 16% in China and 15% in the rest of the Asia Pacific.

Sales also increased 24% in Latin America due to "stabilising economic conditions in several countries". In the first quarter of last year, the company suffered a 43% fall in revenue from this region, led by Brazil, where business "basically tanked", according to a comment at the time by Bradley Halverson, the firm’s chief financial officer.

Jim Umpleby, Caterpillar’s chief executive, said: "Higher sales volume and our team’s focus on cost discipline resulted in improved profit margins across our three primary segments.

"As a result of our team’s strong performance, we are raising our 2017 profit outlook. We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services."

The company expects to incur about $1.3bn of restructuring costs in 2017, a slight increase from the previous outlook of about $1.2bn.

The company’s shares rose 7% on the news, which analysts interpreted as a sign that the whole construction, energy and mining markets were enjoying rude health. In North America, the recover is being helped by a recovery in the housing market and higher spending by oil and gas companies.

Image: A Caterpillar D6 bulldozer, first made in 1935 (Creative Commons)

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