MINNEAPOLIS (AP) — Caterpillar said on Monday that its 2013 profit could shrink if the world's economy doesn't pick up in the second half of the year, as mining companies and builders remain cautious about buying new gear.
The cloudy outlook for the year came as Caterpillar reported a fourth-quarter profit less than half as big as a year ago because of a deal in China that went bad and slower growth around most of the world.
Caterpillar Inc. is the largest maker of construction and mining equipment, so its performance rises and falls with the world's economy. It tries to predict where the economy is headed so it knows how many excavators, bulldozers, and mining trucks to build.
If recent economic improvements continue, this could be a record year for Caterpillar, its executives said. 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," said Doug Oberhelman, chairman and CEO.
Caterpillar started 2012 expecting the U.S. economy to grow at least 3 percent but economists estimate annual growth was a little more than 2 percent. In April, the company was still forecasting 8.5 percent growth in China, but the world's second-largest economy expanded by 7.8 percent last year, its weakest annual performance since the 1990s.
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.
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.
It said first quarter revenue and profits will be "significantly lower" than the same period last year.
In the quarter ended Dec. 31, Caterpillar earned $697 million, or $1.04 per share, 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.