By Mengjie (Jessie) Jiang
Caterpillar Inc. reported large fourth-quarter and full-year losses on Thursday due largely to three non-cash charges and higher-than-expected restructuring costs in the wake of global economic weakness.
In the quarter the world’s largest construction and equipment maker’s loss ballooned to $1.17 billion, or $2 per diluted share, from a year-earlier loss of $94 million, or 16 cents per diluted share. The consensus estimate was a profit of 51 cents per diluted share.
Revenue slumped 13 percent to $9.57 billion from $11.06 billion, below the estimate of $9.81 billion.
Caterpillar Chief Executive Officer Jim Umpleby stated in a press release that results for the quarter “reflect pressure in many of our end markets from weak economic conditions around the world.”
The company witnessed revenue declines in all regions except Asia/Pacific, which recorded a 10 percent increase. Europe Africa Middle East fared the worst with a 30 percent drop followed by North America with 16 percent.
The Peoria, Ill.-based company confronted weaker demand especially in its resource industries and Energy & Transportation segment, which declined 23 percent and 15 percent, respectively, mainly because of unfavorable commodity prices.
Caterpillar cut 12,300 jobs in 2016, including 7,700 in the United States, noting a restructuring programs and lower production volumes. The company is contemplating closing its production facilities in Aurora, Ill., a move that could affect 800 production positions.
Caterpillar booked $1.98 billion in charges that produced the net loss for the quarter, including $985 million in mark-to-market losses, $595 million in goodwill impairments and $395 million in restructuring costs.
The company said it is focusing on the right areas including controlling costs, maintaining a strong balance sheet and investing in key areas and is “seeing signs of positive activity in some of our key end markets,” but warned that sales of some large construction machines are likely to be down in 2017.
William Blair analyst Lawrence DeMaria said the Caterpillar’s end markets will remain weak in the short term. “There is still inventory overhang and there will be continued overall weakness from energy and oil-and-gas-related markets,” DeMaria said in a phone interview.
Caterpillar lowered its revenue outlook slightly to a range of $36 billion to $39 billion with a midpoint of $37.5 billion, citing the negative impact of the strong U.S. dollar.
For the full year, Caterpillar’s net loss was $67 million, or 11 cents per diluted share, compared with net income of $2.1 billion, or $3.50 per diluted share, in 2015. Revenue totaled $38.54 billion, a sharp 18 percent decrease from $47.01 billion.
Caterpillar stock closed at $97.22, down 93 cents, or 0.95 percent.