Caterpillar 2Q17 Earnings Call Notes

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D. James Umpleby – Caterpillar, Inc.

Construction in China was a highlight

“A number of our markets remain challenged, but there were improvements in a few of our key markets this quarter. Construction in China and gas compression in North America were highlights. Mining and oil related activities have come off recent lows and we’re seeing improving demand for construction in most regions. ”

Amy A. Campbell – Caterpillar, Inc.

Expect inventory restocking in China

No, we think that there’s still dealer restocking to come. So if you look at dealer inventories in China, we probably typically target about 2.5 months of sales. China’s target for dealer inventory months of sale is a little lower than the rest of the world. They have less variety in the configurations they sell. We are about, quite a bit lower than that at the end of the second quarter, even though we did take dealer inventory up some. So we do expect to continue to be rebuilding dealer inventory levels through the back half of the year. But as I mentioned, certainly in China, the strong selling season for end users is in the first half.

Seeing healthy demand for mining equipment

” I think commodity prices right now are supportive. They need to stay supportive. If we were to see change materially, that could change the story. But where they are right now, we are seeing healthy demand for mining equipment”

Price pressure has been there

“I’d say the price pressure has been there, but we expect it to continue. And we expect, I’d say our competitors, as we continue to see the strong dollar work against us from a competitive standpoint to put additional price pressure in the back half of the year”

Infrastructure spend has really disappointed in the US

“I think if you go back to the chart on Construction Industries sales that’s in the presentation pack, I think what you’ll see is we have seen healthy growth and non-residential and residential spend, although we still think from a residential perspective we’re not keeping up with population growth in the U.S. But what has, I’d say, disappointed for the last several years has been a lack of growth in infrastructure investment, which is really, I think, the area that looks prime to need some more investment and some more growth.”