Caterpillar depression deepens

Courtesy of Zero Hedge comes the Caterpillar depression update:

This past year was a difficult one for many of the industries and customers we serve. Sales and revenues for 2015 were nearly 15 percent lower than 2014 and 29 percent off the 2012 peak. The two most significant reasons for the decline from 2014 were weakening economic growth and substantially lower commodity prices. The impact of weak economic growth was most pronounced in developing countries, such as China and Brazil. Lower oil prices had a substantial negative impact on the portion of Energy & Transportation that supports oil drilling and well servicing, where new order rates in 2015 were down close to 90 percent from 2014.

“We anticipated about $5 billion of the $8 billion sales and revenues decline in our January 2015 outlook as we started the year. Actual sales and revenues were about $3 billion below that $50 billion outlook because of steeper than expected declines in oil prices, a stronger U.S. dollar, weaker construction equipment sales and lower than expected mining-related sales in Resource Industries,” added Oberhelman.

…In Asia/Pacific, the sales decline was primarily due to lower sales in China and India and the unfavorable impact of currency. The most significant decline was in China, a result of continued weak residential and nonresidential construction activity. The unfavorable impact of currency was primarily due to the weaker Japanese yen and Australian dollar.

But where things get really messy was the company’s guidance which was absolutely obliterated, and saw CAT slashing its 2016 revenue projection cut from the $45.5 billion forecast as recently as last October to a range of $40-$44, or a $42 billion midpoint, a cut of nearly nearly 8 in just three months! This is what the company said:

The outlook for 2016 sales and revenues does not anticipate improvement in world economic growth or commodity prices. Sales and revenues are expected to be in a range of $40 to $44 billion – a mid-point of $42 billion. The mid-point of the range reflects a decline of about $3.5 billion from last October’s preliminary outlook for 2016 sales and revenues and a year-over-year decline of about 10 percent. The decrease from last October’s preliminary outlook is largely a result of continued declines in commodity prices and economic weakness in developing countries.

…Our outlook reflects struggling oil and other commodity markets, and continued economic weakness in developing countries. While the U.S. and European economies are showing signs of stability, the global economy remains under pressure. While we manage through these difficult economic times with substantial restructuring actions to lower costs, we are also preparing for the long term. We are continuing substantial investments in R&D and our digital capabilities. These investments will be positive for Caterpillar and our customers through connected fleets and jobsites and access to data and predictive analytics. Investing in the future is important to improving productivity and the bottom line – for Caterpillar and our customers over the long term. While it is tough to predict when an economic recovery will happen, the investments we are making and the actions we are taking to lower our cost structure and improve quality and our market position will help deliver better results when a recovery comes.

With all of that idle but brand new second hand equipment going for a song, you’ll be waiting a while for that.