ConDig (25-Apr-17). Profit at Caterpillar Inc fell 29% in the first quarter as a 3% rise in revenue at the construction and mining equipment manufacturer was offset by a $77 million increase in restructuring costs.
Net income was $192 million in the quarter ended March 31 compared with $271 million in the same period last year.
It comes as Caterpillar reported restructuring costs of $752 million in the first quarter, driven predominately by the announced closure of the company’s facility in Gosselies, Belgium.
Sales and revenues increased to $9.8 billion in the first quarter compared with $9.5 billion in the year-ago period.
Caterpillar raised its full-year 2017 sales and revenues forecast to a range of $38-$41 billion from a previous guidance of $36-$39 billion amid a stronger than expected start to the year.
But it also lowered its profit per share outlook to $2.10 at the midpoint of sales or $3.75 excluding restructuring costs, compared with a previous forecast of $2.30 per share.
It expects higher restructuring costs for the year, totaling about $1.25 billion, amid ongoing manufacturing facility consolidations.
“There are encouraging signs, with promising quoting activity in many of the markets we serve and retail sales to users turning positive for both machines and energy and transportation for the first time in several years,” said Caterpillar chief executive officer Jim Umpleby.
“While we are raising the full-year outlook for sales and revenues, there continues to be uncertainty across the globe, potential for volatility in commodity prices, and weakness in key markets.”
In the group’s construction industries division, sales were $4.091 billion in the first quarter compared with $4.043 billion a year earlier. The rise was driven by favorable price realization, but this was partially offset by slightly lower volume.
Sales dropped in the North America region of the construction industries division to $1.91 billion from $2 billion due to changes in dealer inventories and lower end-user demand.
Although residential and non-residential building construction activity improved, Caterpillar said demand for new construction equipment has remained low due to end users’ utilization of existing used equipment and weak infrastructure development.
Caterpillar announced recently that it will be relocating from its home in Peoria, Illinois, to a new headquarters in the Chicago area.
Some analysts believe that companies like Caterpillar could receive a shot in the arm if plans by President Donald Trump to boost infrastructure spending and breath life into the coal industry are fully realized.