Caterpillar Inc. slashed its outlook and said it would cut more jobs this year as the industrial giant continues to try to steady its business amid depressed demand from the oil and gas industries and increased global uncertainty.
The company now expects to earn $3.55 a share this year, excluding restructuring costs. Caterpillar in April cut its forecast for the year, predicting $3.70 a share without restructuring costs.
Like many U.S. manufacturers that do significant business abroad, the Peoria, Ill., based company has been hurt by the strong U.S. dollar that makes its equipment more expensive in foreign currencies. Brexit gave the dollar another lift, and uncertainty over the U.K.'s decision to leave the European Union has further reduced some firms' investment spending. Meanwhile, many customers connected to the energy industry remain under pressure and have significantly pulled in spending.
Fellow manufacturer 3M Co. also reported second-quarter results Tuesday. That company missed sales expectations and pulled in the high-end of its full-year guidance.
"We're cautious as we enter the second half of the year," said Caterpillar Chief Executive Doug Oberhelman. "We're not expecting an upturn in important industries like mining, oil and gas and rail to happen this year," he said. The company added that global growth isn't sufficient to drive improvement in most of its markets, with commodity prices stabilized but at low levels and turmoil from Brexit and Turkey adding to risks across Europe.
As such, Caterpillar said it would further reduce its ranks by an unspecified number that adds to previously announced layoffs of 10,000. As of June 30, the company employed about 113,000 workers. Caterpillar has also said it would shut or consolidate 20 plants by the end of the 2018. So far, Caterpillar has cut about 5,300 positions and announced the closing of a handful of smaller plants.
Rising restructuring costs will cut into earnings this year, while sales are also expected to be weaker than previously thought. Caterpillar now sees full-year revenue coming in between $40 and $40.5 billion versus its April forecast of $40 billion to $42 billion.
In the latest period, revenue fell across all segments, paced by a 31% drop across Latin America, where Brazilian and Mexican economies remain particular soft spots. Sales across North America fell 16%, largely because of the energy price collapse, while Caterpillar's Europe, Africa and Middle East and Asia Pacific businesses also posted double-digit declines.
In all for the June quarter, the company reported a profit of $550 million, or 93 cents a share, down from $802 million, or $1.31 a share, a year earlier. Excluding restructuring costs, earnings per share fell to $1.09 from $1.40.
Revenue slid 16% to $10.34 billion.
Analysts predicted 96 cents in adjusted per-share profit on $10.11 billion in revenue, according to Thomson Reuters.
Caterpillar shares, up 16% this year through Monday's close, declined 1.2% in premarket trading.
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