MINNEAPOLIS Caterpillar's (CAT) fourth-quarter profit was cut in half by a deal in China that went bad and by slower growth around most of the world. It said results for this year depend on how the global economy behaves in the second half.
Caterpillar makes construction and mining equipment as well as power generators, so its performance rises and falls with the world's economy. Predicting where that's headed is a tricky business at the moment.
Doug Oberhelman, chairman and CEO, said in a prepared statement Monday that if a recent improvement in economic indicators continues, 2013 could be a record year for Caterpillar. But if this year is a replay of the last two, where growth and confidence declined in the second half, "2013 could be a tough year," he said.
Caterpillar dialed back production in the second half of 2012, which hurt fourth-quarter revenue and profits. Caterpillar and its dealers have both been trying to sell off inventory. Reduced production will continue at least through the first quarter, the company said.
Still, adjusted fourth-quarter profit and revenue were better than analysts expected. Caterpillar earned $697 million, or $1.04 per share. That was down from a profit of $1.55 billion, or $2.32 per share a year earlier.
The most recent quarter included a non-cash charge of 87 cents per share to write down the purchase of Zhengzhou Siwei. Not counting that, analysts surveyed by FactSet had been expecting a profit of $1.70 per share.
Caterpillar's $653 million purchase of Siwei last year gave it a new business - roofing supports for mines - in a country where mining is growing quickly. But on Jan. 18, Caterpillar said it had found "deliberate, multi-year, coordinated accounting misconduct" in the accounting at Siwei, and said it will write down its investment in the company by $580 million. It also said it dismissed several senior managers at the company.
Revenue fell 7 percent to $16.08 billion as dealers reduced inventory. Sales fell everywhere except Latin America.
Revenue from construction equipment fell 25 percent. But sales of mining gear - now Caterpillar's single largest category by revenue - grew 14 percent on improvements everywhere in the world except in North America, where coal mining is in decline.
For this year, Caterpillar expects revenue of $60 billion to $68 billion, with a profit of $7 to $9 per share. Analysts had been expecting a profit of $8.54 per share on revenue of $64.58 billion.
Caterpillar said there's a wide range in its outlook because of the high level of uncertainty in the world. It expects relatively weak growth in the U.S. economy. Growth in China will improve, but not back to the levels seen in 2010 or 2011, Caterpillar said. It expects Europe to continue to struggle.
For all of 2012, the company's profits rose 15 percent to $5.68 billion, or $8.48 per share, up from $4.93 billion, or $7.40 per share, in 2011. Revenue rose 10 percent to $65.88 billion, from $60.14 billion.
Shares of the Peoria, Ill.-based company rose $1.44 to $97.02 in morning trading.