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Caterpillar crawls onward on earnings, but warns over China

US-based mining and construction equipment manufacturer Caterpillar has posted a 5 per cent rise in first-quarter earnings, but has raised uncertainty on the outlook for sales in China and further pain in the resources sector.
Nanjing Night Net

While a pick-up in sales of construction equipment globally helped Caterpillar raise its 2014 forecast, the company warned a mining equipment sales slump was hurting.

The comments by the maker of the giant mining trucks are likely to be felt in Australia, where Kerry Stokes’ Seven Group has the plum distribution franchise for Caterpillar both here and in China. Seven Group’s Westrac franchise ranks as one of Caterpillar’s top five global dealers in terms of sales.

A downturn in heavy equipment used in mining hit Caterpillar last year; its profit fell about 33 per cent to $US3.79 billion. Mining generates higher profits for Caterpillar than many other parts of its business.

In its latest earnings update Caterpillar said it continued to see low order rates for mining equipment and warned that sales were likely to be down 20 per cent over the year. Previously Caterpillar had tipped sales in this area were likely to be down 10 per cent.

”2014 is shaping up to be another very tough year for mining,” Caterpillar chief executive Doug Oberhelman said. He noted that sales of large mining trucks were down 80 per cent from the peak year of 2012. Many miners outside the boom industry of iron ore have scaled back, with much of the pain being felt among contract miners.

As sales of large tractors and mining loaders slumped last year, Caterpillar shut plants and cut jobs. But strong results in construction and power systems have helped make up for the shortfall in mining.

”The company expects mining orders will begin to improve at some point, but not likely in time to increase Resource Industries’ sales in 2014,” Caterpillar said in a statement announcing its earnings.

Caterpillar said it earned $US922 million ($996.1 million) in the quarter to the end of March. That compares with $US880 million last year. Total revenue was nearly flat at $US13.24 billion.

Mr Oberhelman described the Chinese market as both a ”potential and an uncertainty”. He noted China was in the midst of a transition in its economy from fast growth to a model of longer-term more sustainable growth while maintaining social stability. ”This is an enormous risk to the world economy.”

With wires

This story Administrator ready to work first appeared on Nanjing Night Net.

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