Heavy equipment maker Caterpillar on Wednesday reported a 66 per cent decline in second quarter profit to $371 million from $1.11 billion in the April-June period of 2008 due to lower sales and costs incurred to cut staff.
Sales and revenue for the Peoria based company in the US were also down 41 per cent to $7.97 billion from $13.62 billion in the second quarter of 2008. The company incurred redundancy costs related to reducing employment to the tune of $85 million.
''Our 2009 sales have been hurt by weak end-user demand and significant reductions in dealer inventory. In fact, dealers have reduced their machine inventories by about $1.5 billion through the first half of the year and could reach close to $3 billion by the year-end," chairman and chief executive of the world's largest maker of construction and mining equipment, Jim Owens said in a statement.
Machinery sales in the Asia-Pacific region decreased 25 per cent to $353 million during the quarter as economies throughout the region were weaker than a year earlier, causing dealers to report lower deliveries to end users.
Citing tight economic policies maintained by India's Reserve Bank through most of last year, Caterpillar said the move led to slow growth in industrial production.
The company's engine sales in the region also decreased 26 per cent to $194 million. Sales of electric power engines decreased 26 per cent due to cancelled and delayed projects in China and India.
However, Caterpillar said it is seeing signs of global economic conditions stabilising. "There is still a great deal of economic uncertainty in the world, but we are seeing signs of stabilisation that we hope will set the foundation for an eventual recovery. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs that they are beginning to work," Owens said.
The company is updating its outlook for 2009 by tightening the sales and revenues range and improving profit expectations. For sales and revenues, the range has been tightened to $32 billion-$36 billion.
The company's 2009 profit expectations are between $1.15 and $2.25 per share, up from the earlier forecast of 1.25 dollar per share. Cost-cutting measures by the company include elimination of more than 22,000 jobs.