Caterpillar Inc. reported a profit dip in fourth-quarter earnings this week, which reflected a $580 million write-down after the company uncovered that Chinese subsidiary Siwei was found to have engaged in “deliberate, multi-year coordinated accounting misconduct.”
A reduction in dealer inventory and wholesale shipments also negatively impacted fourth-quarter sales and profits, CEO Doug Oberhelman said in a statement.
“The $2 billion inventory reduction in the fourth quarter was a remarkable effort, but we're not done,” Oberhelman said in a statement. “Reduced production levels are likely to continue at least through the first quarter of 2013 until inventories and dealer order rates move back in line with end-user demand.”
Fourth-quarter 2012 profit was $697 million, compared with $1.547 billion in the same quarter a year earlier. Profit was $1.04 a share in the fourth quarter of 2012, compared with $2.32 a share in the prior year’s quarter. Fourth-quarter 2012 profit was negatively impacted by the previously announced goodwill impairment charge of $580 million, or 87 cents a share.
Fourth-quarter 2012 sales and revenue were $16.08 billion, down $1.17 billion from $17.24 billion in the fourth quarter of 2011.
The impact of changes in dealer new machine inventories lowered sales by about $1.4 billion as dealers reduced inventories about $600 million in the fourth quarter of 2012, compared with an increase of about $800 million in the fourth quarter of 2011.
Lower sales and revenues and the cost impact from sharply lower production and the $2 billion decline in Caterpillar inventory also had a negative impact on fourth-quarter profit. Those impacts were partially offset by a $300 million positive impact related to the settlement of prior-year tax returns.
The company reported record full-year sales and revenues of $65.88 billion, an increase of 10 percent from $60.14 billion in 2011.
Caterpillar’s outlook for 2013 is sales and revenues in a range of $60 billion to $68 billion and profit per share of $7 to $9.
Full-year 2012 profit per share of $8.48 was up a record 15 percent from $7.40 in 2011, including the impact of the previously announced goodwill impairment charge of 87 cents a share related to Siwei, the company reported.
The full-year profit was $5.681 billion, an increase of 15 percent from $4.928 billion in 2011 — a success during a weak U.S. economy, the economic troubles in Europe and a slowing in China, Oberhelman said.
“Considering the weak economy in the United States, along with much of Europe in recession and China slowing, we had a solid year,” he said.
“We’re encouraged by recent improvements in economic indicators, but remain cautious,” he said. “While we expect some improvement in the U.S. economy, growth is expected to be relatively weak. We believe China's economy will continue to improve, but not to the growth rates of 2010 and 2011. We also remain concerned about Europe and expect economies in that region will continue to struggle in 2013.”