Caterpillar CEO: Were Seeing Slowing Across The Board

Caterpillar CEO: Were Seeing Slowing Across The Board

Caterpillar Inc. (NYSE:CAT) Chairman & CEO Douglas Oberhelman spoke with FOX Business Network’s (FBN) Maria Bartiromo regarding strong second quarter earnings, the state of their CAPEX and predicted growth in emerging markets. When asked about second quarter earnings Oberhelman said, “our second quarter was really strong,” and “we’re really happy and proud of that.” On the status of Caterpillar’s capital expenditure (CAPEX), Oberhelman said, “we’re in a wonderful position where we don’t need to spend a lot of CAPEX right now,” and, “we’ve got lots of room in this economy.” He went on to discuss their rail business, saying “the rail business is a great one,” and, “It’s one of the great acquisitions we’ve made.” Oberhelman also said that  the recent geopolitical issues, “don’t help us in our confidence that things are going to grow. And we’re looking at a pretty slow overall world growth number.”

Caterpillar CEO on Caterpillar’s second quarter earnings:

“Our second quarter was really strong.  Year over year on a slight downtick on the top by about 3 percent less sales and revenues.  Our bottom line profit per share was up 14 percent if we exclude the restructuring charges that we’re undergoing right now.  Even with the restructuring charges, it was up 8 percent.  We’re really happy and proud of that here as well.  I think the one of the things we’re seeing, though, is kind of a flat sales environment now for what will be a year and a half.  If you look at second half 2013, first half 2014, and second half ‘14 ,they all look fairly similar top to bottom.  And, in fact, we tightened the range for 2014 to about a $55 billion top line from $55.7 last year, so a very tight range, flat — we call it flat on flat around here, which it is.  It makes it a little tougher to operate, but it gives us opportunity to find all kinds of ways to be more efficient and we’re getting that done and really proud of our team for the way we’re performing through all of this.”

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Caterpillar CEO on the growth environment:

“They have, and we’ve seen that.  Certainly, in the Chinese economy started off great in 2014.  Our industry was doing very, very well.  We’ve seen, you know, some slowing from that really into the second quarter and we expect a little bit more of that through the second half of the year, so it looks like we could be flat again in ‘14 over ‘13 inside China.  Brazil is slowing down a little bit.  We’re seeing that kind of across the board. A lot of that is being offset by better growth in the U.S.  I wouldn’t say that the U.S. is the great growth engine in a diesel kind of way that we enjoy here at Caterpillar, but certainly it’s purring along.  And Europe is even doing a little bit better for us, as flat and tough as it’s been there. Look at what’s going on in the world right now and all the geopolitical instances.  This morning, again, another plane situation, or two of them actually, Taiwan and Algeria.  A lot of uncertainty out there and things that just that we — none of us can control I think don’t help us in our confidence that things are going to grow.  And we’re looking at a pretty slow overall world growth number.  We’ve taken our developing country number now down to 4-1/2 or a little bit below for this year, which is as slow as it’s been in a number of years.  The U.S. can’t seem to get much past 2 percent, so we’re really seeing a slow growth environment which then is vulnerable to a lot of these geopolitical shocks I think that we see almost every day now.”

Caterpillar CEO on their CAPEX:

“Our CAPEX for the second half will continue to grow a little bit.  Our CAPEX numbers the last couple of years have been somewhat slower than they were coming out of the recession.  We invested quite a bit in capacity coming out of recession.  We’re well positioned now to grow as mining returns, as construction returns around the world.  Remember, we’re still not up to our 2006 peak in construction around the world.  So we’ve got lots of room in this economy, in the world economy, to grow and it will happen over time, slower than any of us would like.”

Caterpillar CEO on the rail business as an emerging market:

“The rail business is a great one, specifically the locomotive business.  It’s one of the great acquisitions we’ve made, I think, in the history of the company.  We’re having a great year this year, absolutely super performance by them and lots of pre-order going in to what will be Tier 4 engines, technology, into ‘15 and ’16.  So I’m quite happy with that and certainly the changes we’ve made, cost reductions, we’ve relocated some of the manufacturing; it really paid off as we’re seeing quite a boom in that business this year.”

Caterpillar CEO on Caterpillar’s growth moving forward:

“Our growth year over year is basically flat, down about $700 million from last year.  Our CAPEX is probably going to be end up about flat from last year, as well.  We’re in a wonderful position where we don’t need to spend a lot of CAPEX right now because we did some of that earlier in the recovery period, which has allowed our balance sheet to really strengthen.  We’re at tremendous, tremendous debt to equity ratio right now.  We just announced today a $2.5 billion buyback.  That’s on top of about $1.7 that we did earlier this year and $2 billion last year. So, in the last year, a little bit more, year and a half, we’ve taken 10 percent of shares out of existence, which we’re quite happy with, and 15 percent dividend increase in 2013, a 17 percent increase this year.  So we’ve — shareholders have been I think rewarded nicely with some of the strategy planning we’ve done around that.”

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