MINNEAPOLIS — A slowdown in the mining business is digging a hole in Caterpillar's profits.
First-quarter profit shrank 45 percent. Caterpillar lowered its expectations for full year sales and profit because its mining business is slowing. Sales of Caterpillar-branded mining machines will drop by half this year, the company said on Monday.
Caterpillar, based in Peoria, Ill., said mining customers placed big orders for equipment last year, just as mining profits fell, so now those customers are cutting back. Dealers who would normally be stocking up on Caterpillar gear to get ready for a busy summer instead cut inventory during the first quarter.
Caterpillar has already started cutting costs. On April 5 it said it would lay off more than 460 employees at a mining truck plant in Decatur, Ill. Caterpillar also announced mining-related layoffs in Milwaukee and plans to cut 1,300 of 3,400 jobs at a plant near Brussels that makes excavators, loading vehicles, and engine parts. This year's capital spending — which covers big-ticket items like factories and computer systems — will fall below $3 billion, down from $3.4 billion last year.
"We're definitely in a down-cycle right now, but long-term it's a great business for us," Chairman and CEO Doug Oberhelman on a conference call.
The reduced outlook wasn't entirely unexpected and Oberhelman did note some bright spots. Sales in China rose compared to a year ago. And the company is "becoming more optimistic" on the U.S. housing sector. And the company announced it plans to buy back shares — about $1 billion worth — for the first time since 2008, following an 11 percent drop in the price this year.
That helped Caterpillar shares rise on Monday. They gained 94 cents to $81.37.
Caterpillar's net income dropped to $882 million, or $1.31 per share. Revenue fell 17 percent to $13.21 billion, from $15.98 billion a year ago. Both missed analyst expectations. Analysts surveyed by FactSet were expecting a profit of $1.36 per share on revenue of $13.79 billion.
It also cut its 2013 guidance. Caterpillar now expects to earn $7 per share, down from $7 to $9 previously. It forecast revenue of $57 billion to $61 billion, down from $60 billion to $68 billion. Analysts were expecting a 2013 profit of $7.67 per share on revenue of $62.48 billion.