CHICAGO, July 23 (Reuters) - Caterpillar Inc rode the boom markets in China, Brazil and piggybacked the oil industry to rich profits, but the world’s biggest construction and mining equipment company effectively declared the good times over on Thursday, warning of an extended period of retrenchment.
Facing slowdowns in developing markets, a static oil industry and a strong U.S. dollar suppressing overseas earnings, Caterpillar said it was pruning operations and cutting costs to adapt.
“We’re getting more efficient, we are not taking out capacity that we’ll need when the business turns around,” Chief Financial Officer Brad Halverson told Reuters in an interview. He said the company had recently closed or reduced production at 20 facilities around the world.
Caterpillar has already cut 20,000 full-time employees worldwide since 2012, more than 10 percent of its global workforce. Executives would not say Thursday if more job cuts are on the way this year. The company has cut about 4,800 employees over the past year.
The Peoria, Illinois-based company stuck to its full year profit forecast of $5 a share on Thursday, but cut its revenue forecast by $1 billion, signaling it intends to rely on cost-cutting to meet its goals.
Caterpillar executives blamed the expected decline in construction revenue on reduced residential building activity in China and Brazil, soft sales related to oil and gas construction in the United States and the strong U.S. dollar undercutting the value of sales in Europe.
Chief Executive Doug Oberhelman told analysts Thursday that in mining, a key sector for Caterpillar, it had seen no expansion, “and won’t for the foreseeable future.”
He said it was struggling to raise prices across the board to offset the hit to its revenues and profits from the stronger dollar.
Asked if revenue could rise next year, Caterpillar vice resident Mike DeWalt said that would depend on what happens in the global economy: “We’re on the edge right now of what’s needed for growth.”
If Caterpillar’s forecast of lower sales for the second half of 2015 prove accurate, it will be the first time since the 1930s that Caterpillar has suffered three straight years of decline, Halverson said.
“Their competitors are facing the same issues - China is very weak, any kind of capital goods-orientated business in Brazil is facing massive headwinds,” said Kwame Webb, analyst at Morningstar. (Reporting By Meredith Davis; Editing by Bill Rigby)