February 20, 2014 / 7:39 PM / 4 years ago

What polar vortex? Caterpillar sales to builders surge despite chill

Feb 20 (Reuters) - Caterpillar Inc said on Thursday that sales of its construction equipment had surged in recent months, driven by an especially large jump in demand in North America, where a series of severe winter storms and arctic temperatures failed to keep builders out of dealer showrooms.

The Peoria, Illinois-based company, the world’s largest maker of earth-moving equipment used by builders and miners, said that worldwide retail sales to end users in the construction industry rose 9 percent in the three months ended Jan. 31, driven by a 12 percent increase in North America.

Those gains came even as the much of the United States experienced its worst winter in a generation, according to meteorologists, with temperatures across a vast area of the country running 6 to 10 degrees Fahrenheit (3.3 to 5.5 degrees Celsius) below normal for two-and-a-half straight months.

In recent weeks, a host of U.S. companies - including McDonald’s Corp, GNC Holdings Inc, La-Z-Boy Inc and Panera Bread Co - have blamed the bad weather for disappointing results or reduced earnings outlooks.

But the relentlessly cold weather, which also resulted in unexpected drops in retail sales, manufacturing output and housing starts in January, according to recent official reports, failed to put a chill into Caterpillar’s construction equipment business.

The good news, however, largely ended there for the company, which also makes railroad locomotives and power-generating engines and turbines.

Total worldwide sales of Caterpillar’s distinctive yellow tractors, graders, excavators and other earth-moving equipment fell 8 percent in the three months ended Jan. 31, pulled down by continued weak demand from mining customers.

Global dealer sales to the mining industry tumbled 37 percent year-over-year in the rolling three-month period, with the largest declines in the Asia-Pacific region, where weak demand in Australia and other key markets sent sales plunging 53 percent.

When Caterpillar reported fourth-quarter earnings in January, it said it expected the mining business to remain tough this year as resource companies continue to come under pressure from investors to cut costs and retrench.

Sales to the mining sector had been one of Caterpillar’s most profitable businesses in recent years, prompting the company to double down through acquisitions.

But over the past year and a half, mining customers - facing a backlash over unpopular takeovers, budget overruns and falling metals prices - have postponed or canceled new equipment orders.

Caterpillar sells its machines through a worldwide network of more than 200 independent dealers. Each month, the company releases unaudited rolling three-month sales figures that those dealers voluntarily report to the company.

The company cautions that the data may be inaccurate or incomplete because it is not subject to internal controls over financial reporting. But historically, the unaudited figures have provided a reliable glimpse of end user demand for products well ahead of the company’s official quarterly financial reports.

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