PEORIA, Illinois (AP) — Second-quarter earnings at Caterpillar fell 43 percent as dealers cut inventories more than the company expected. The world’s largest maker of construction and mining equipment cut its profit and revenue outlook for the year.
Caterpillar reported earnings of $960 million, or $1.45 per share, compared with $1.7 billion, or $2.54 per share a year ago. Revenue slid 15.8 percent to $14.63 billion.
That’s well short of Wall Street’s expectations. Analysts surveyed by FactSet had expected a profit of $1.69 per share on revenue of $15.09 billion.
The Peoria, Illinois, company said dealers cut inventories by $1 billion as the global mining industry slowed due to reduced growth in China.
Commodity prices have fallen as well, forcing miners to cut back on orders.
Shares of Caterpillar Inc. fell 1.3 percent, or $1.12, to $84.40 in premarket in premarket trading.
Caterpillar also said it had currency translation and hedging losses during the quarter.
CEO Doug Oberhelman predicted improved profits during the second half of the year as the company takes further cost-cutting measures.
But Caterpillar still cut its full-year profit outlook from about $7 per share to $6.50. Revenue is now expected to come in between $56 billion and $58 billion, down from previous guidance of $57 billion to $61 billion.
Dealers, Oberhelman said, used inventory from Caterpillar’s product distribution during the quarter rather than stocking their own businesses. Company inventory also dropped by $1.2 billion.
“With the sharp reduction in dealer inventory and the decline in mining, 2013 is turning out to be a tough year,” Oberhelman said in a statement.
Dealers are positioned to cut inventory even further, and the company expects it to fall by $1.5 billion to $2 billion in the second half, Oberhelman said.
“That means we are underselling end-user demand this year, and it sets us up for better sales in 2014,” he said.
He said the company already has temporarily closed factories and had rolling layoffs. “We’ve taken significant action already, and we will be taking additional cost reduction measures in the second half of 2013,” he said.
Caterpillar cut its global full-time work force by more than 10,000 people compared with the second quarter of last year. The company had 122,402 employees at the end of June. The temporary work force also dropped by 9,633 during the quarter.
Profits fell in each of Caterpillar’s big divisions. Operating profit fell 61 percent to $550 million in resource industries, which includes mining. It was down 47 percent to $362 million for construction equipment, and down 3 percent to $955 million in power systems, which makes items including large electrical generators and locomotive engines.
The company also said it repurchased $1 billion worth of stock in the second quarter, and based on strong cash flow, it expects to buy another $1 billion worth in the third quarter.
Caterpillar Inc. said Tuesday that global sales of its heavy equipment fell 8 percent for the three-month period that ended in June, hurt by a steep drop in demand from Asia.
That followed a 7 percent decrease for the three months that ended in May and a 9 percent slide for the three months that ended in April, the company said in a Securities and Exchange Commission filing.
Sales in Caterpillar’s Asia region dropped 21 percent in the most recent period, while North American sales fell 10 percent.
The only region to post an increase was Latin America, where sales rose 9 percent.
The figures are based on unit sales as reported by Caterpillar’s dealers.
The global mining industry is slowing as commodity prices drop, hurting Caterpillar.
The June numbers show a “gradual bottoming process, albeit a bit slower than many had hoped,” said Jefferies analyst Stephen Volkmann.