Caterpillar Says Strong Dollar Adding to Its Woes -- WSJ

By Andrew Tangel 

Caterpillar Inc. trimmed its sales outlook on Thursday and said revenue slid in 2016 for the fourth year in a row, providing evidence that a prolonged slump in mining and construction is still unfolding.

The Peoria, Ill.-based heavy-equipment giant said the recent strengthening of the U.S. dollar could drag down sales this year, after revenue fell 18% in 2016 to $38.5 billion.

Caterpillar's losses deepened in the fourth quarter. The company reported a loss of $1.2 billion, or $2 a share, compared with a year-earlier loss of $94 million, or 16 cents a share. Revenue fell to $9.6 billion from $11 billion.

"We continue to execute in a challenging economic environment and are focused on improving operating margins, profitability and shareholder returns," Caterpillar Chief Executive Jim Umpleby said. "While we see signs of positive activity in some of our key end markets, the overall economic environment remains challenging."

The manufacturer's troubles were compounded by higher-than-expected restructuring costs, losses related to pension and retirement benefits and a $595 million impairment tied to its 2011 billion acquisition of mining-equipment maker Bucyrus International Inc.

Excluding those items, the company said it earned 83 cents a share, flat with a year ago and above the 66 cents expected by analysts polled by Thomson Reuters. Analysts had expected revenue of $9.8 billion.

Caterpillar's shares closed down about 1% to $97.22 in regular trading.

The dollar's rise since President Donald Trump's election in November could spell trouble for manufacturers such as Caterpillar that depend on exports. A stronger dollar makes American products more expensive overseas, and foreign sales less valuable.

Caterpillar said the dollar's climb is one reason it lowered its revenue outlook for the year to a range of between $36 billion and $39 billion.

The midpoint would be lower than the approximately $38 billion it telegraphed in December, and potentially mark a fifth-straight year of declining revenue for the world's largest mining and construction equipment maker.

Caterpillar said it expects earnings per-share of about $2.30 this year, or $2.90 excluding estimated restructuring costs of about $500 million.

Caterpillar's restructuring also weighed on its global workforce, which it has cut recently. By the end of 2016, the company counted 106,400 employees, down from 118,700 a year ago. Most of the reductions were made in the U.S.

Caterpillar executives were optimistic about Mr. Trump's proposed boost to infrastructure spending, which could lead to increased sales of the company's construction equipment.

They also expressed support for the administration's aims of reducing corporate taxes and regulations and of securing fair trade deals.

"As we look at what's happening in the conversation in Washington, both within the administration and Congress, there's a number of things that we're very encouraged by," Mr. Umpleby said.

Joshua Jamerson contributed to this article.

Write to Andrew Tangel at [e-mail]

(END) Dow Jones Newswires

January 27, 2017 02:47 ET (07:47 GMT)

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