Caterpillar Inc. reported on Tuesday that its second-quarter profit fell 66 percent compared with the same period of last year, citing much lower sales volume and a huge amount of redundancy costs.
According to the report, the engineer and machinery giant earned 371 million U.S. dollars in the second three months of the year, down 735 million dollars from 1.106 billion dollars in the second quarter of 2008. Meanwhile, the profit per share was pegged at 60 cents, down 1.14 dollars per share from the last second quarter.
Caterpillar indicated the sharp decline was largely a result of lower sales and revenues, which fell 5.62 billion dollars, or 41 percent, to 7.98 billion from 13.6 billion one year ago.
The other factor to blame is 85 million dollars of redundancy costs related to reducing employees. The company emphasized that profit per share would increase to 72 cents per share excluding redundancy costs.
To deal with the economic turmoil, Caterpillar has undertaken dramatic cost-cutting measures, including cutting more than 22,000 job positions. As a result, the company employed 112,887 workers at the end of 2008 and 95,761 at the end of the second quarter.
"There is still a great deal of economic uncertainty in the world, but we are seeing signs of stabilization that we hope will set the foundation for an eventual recovery," said chairman and chief executive officer Jim Owens.
Owens specially pointed out the importance of the Chinese market. "We are seeing signs, particularly in China, that they are beginning to work," Owens noted.
Although the profit dropped dramatically, this result is much better than that in the first quarter, when Caterpillar posted its first quarterly loss in 17 years, also citing weak sales and the cost of laying off thousands of workers.
In its updating outlook for 2009, Caterpillar tightened the sales and revenues range and improved profit expectations.
For sales and revenues, the range has been narrowed to 32 billion dollars to 36 billion, compared with an earlier forecast of 31.5 billion dollars to 38.5 billion. The 2009 profit outlook is a range of 40 cents to 1.50 dollars per share including redundancy costs and 1.15 dollars to 2.25 dollars per share excluding redundancy costs.