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Cat Reduced Inventory $2 Billion in Fourth Quarter

Posted on January 28, 2013

An interesting note in Caterpillar’s announcement of record 2012 sales and revenues was a $2 billion reduction in inventories in the fourth quarter of 2012. "I'm extremely pleased with our performance on reducing inventory $2 billion in the fourth quarter. As the world economy began to soften at mid-year, we increased our focus on reducing inventory. Cat dealers also worked to lower their inventories, and, as a result, reduced their order rates during the second half of 2012," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

"The result was a substantial reduction in our production levels and inventory. The reductions had a significantly negative impact on fourth-quarter sales and profit. The $2 billion inventory reduction in the fourth quarter was a remarkable effort, but we're not done. Reduced production levels are likely to continue at least through the first quarter of 2013 until inventories and dealer order rates move back in line with end-user demand," Oberhelman said.

On the other hand, Cat said the second half of this year could be better. "If the recent improvement in economic indicators continues, 2013 could be another record year for Caterpillar," Oberhelman said. "We expect the first half of 2013 will be weaker than the first half of 2012, with better growth in the second half. However, if, like the last two years, growth and confidence decline in the second half, 2013 could be a tough year."

"The range of our 2013 outlook reflects the level of uncertainty we see in the world today. We're encouraged by recent improvements in economic indicators, but remain cautious. While we expect some improvement in the U.S. economy, growth is expected to be relatively weak. We believe China's economy will continue to improve, but not to the growth rates of 2010 and 2011. We also remain concerned about Europe and expect economies in that region will continue to struggle in 2013," said Oberhelman.

Caterpillar announced revenues of $65.875 billion, an increase of 10 percent from $60.138 billion in 2011. The outlook for 2013 is sales and revenues in a range of $60 to $68 billion and profit per share of $7.00 to $9.00.

 

 

 

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