Category Archives: Local Business

Some good news in Caterpillar’s first-quarter earnings report, which came out Thursday … but mining continues to struggle.

From the Reuters story …

Caterpillar said it expected its sales to the global construction industry to increase 10 percent from 2013, up from a previously anticipated rise of about 5 percent.

But it cautioned that 2014 would be “another very tough year” for mining, another key market, and that its outlook reflected an anticipated drop of about 80 percent in sales of large mining trucks from the company’s peak year in 2012.

Adam Fleck, an analyst at Morningstar, said he was pleasantly surprised by the company’s “very solid cost control in construction in particular,” where operating margins continued to grow and “were at their highest quarterly level in several quarters”, even though they were typically more compressed than in the mining equipment category.

Fleck said the weakness in mining “wasn’t terribly surprising” and added that because that once-critical business accounted for just 17 percent of sales and 12 percent of operating profit in the first quarter, any continued weakness in the sector was “more of a headline risk than a true economic one.”

The better-than-expected report was tinged with caution. Chief Executive Officer Doug Oberhelman said the Peoria, Illinois-based company was watching several regions closely. Having visited China recently, he said the construction industry there was facing challenges.

Caterpillar was also concerned about the situation in Ukraine and Russia, he added.

The news followed stories this week of mixed dealer data and of reduced 2013 compensation for the CEO.

Of course, we’ll continue to watch the Caterpillar news closely, especially that from the mining front, given our (and Oak Creek’s) position as the center of Cat’s global mining operations.

With that in mind, I had a really positive meeting with several local Caterpillar officials on Friday, as part of my ongoing efforts to introduce myself to local elected official and business owners.

I look forward to keeping lines of communication open … and I have Caterpillar’s commitment to do the same. Having a strong partnership with our largest employer is a priority for me as mayor.

Profits were up significantly for Caterpillar in the fourth quarter of 2013, and the company on Monday issued a positive earnings forecast for the new year … but there wasn’t a lot of positivity in the sector South Milwaukeeans watch closest.

Here is MarketWatch coverage. From it:

Oberhelman said the company sees some signs of improvement in the global economy, which should bode well for sales in its construction and power systems businesses. However, despite expectations that mining production will continue to rise, the company sees mining companies further reducing capital spending this year.

“As a result, we’re expecting sales in resource industries to decline modestly,” he said. “ We’ve already taken a number of restructuring actions to help improve our financial results and expect to take additional actions in 2014.”

Reduced spending by mining companies has taken a toll on sales of mining equipment, while Caterpillar’s sales of construction equipment have benefited from a recovery of home building in the U.S. The heavy-equipment maker has been closing plants that make mining equipment and laying off workers to reflect a sharp drop in demand in the sector.

Of course, I always worry about the “additional actions in 2014.” The Reuters story included this …

He characterized the moves as “tough decisions necessary to better position us down the road when economic conditions improve and our sales rebound.”

I guess we’ll have to wait and see what “tough decisions” are to come. Let’s pray the worst is over.

Also, check out coverage from the Chicago Tribune and Wall Street Journal.