Caterpillar 3Q15 Earnings Call Notes

Expecting 2016 to be below 2015

“We think 2016 is going to be about 5% below 2015. Now this would be our fourth consecutive down year and that’s never happened to Caterpillar in the history of the company.”

Real devalued by 22% in 3Q

“There are not too many months you have a 22% devaluation in the currency anywhere in the world and that’s certainly what happened in Brazil, in the third quarter.”

Living with the backlash of the supercycle, but still amazed about the level of mining activity ongoing

“There’s no question that the China-driven commodity supercycle drove a lot of things up in the world the last decade or so. And now we’re living off the backlash of that. It’s kind of amazing to me that even with that, the amount of mining activity going on, that is ore, and overburdened being moved with the exception of coal is still running at a pretty high level around the world.”

There is population growth in the planet

“Long-term, I think all of you are aware the population growth in the planet, the demand for electricity, the demand for a lot of things including coal and, in fact, even the U.S. Government Commerce & Energy Department’s forecast fairly healthy energy growth over the next 20 years, 30 years including all aspects of energy supply.”

Gas has held up better

“Gas has held up a little bit better. Gas pipelines have been good. The expansion of compression has been good and, of course, a conversion of a lot of coal plants to natural gas has helped that demand. And while gas prices have come down quite a bit, they haven’t tanked as we’ve seen with the coal or oil, for that matter.”

We’ve seen North American construction slow down a bit as the year wears on

“construction regionally. North America, as we said, for next year flat to down a little bit. This year we’ve kind of seen it slow down a bit as the year wears on. Certainly residential is improving, their statistics and news the last few days have been even better. And non-res is building. What we need frankly is some heavy civil and highway.”

Brazil is in profound slowdown

“I was just in Brazil two weeks ago. It’s a profound slowdown there. I wouldn’t expect to see much of an upturn in – until 2016”

Europe is no longer all doom and gloom

“Europe, Africa, Middle East really a split set of stories. Europe is actually kind of stable and positive. You’ve seen that in some of our retail numbers. We just had a big – we had several of our officers in Europe with a big distributor meeting and the news is not – is no longer totally doom and gloom but there’s some stories. Our numbers don’t reflect all of that yet. But I’d say – and some of you have heard me say this, I think that Western Europe anyway including Scandinavia and Southern Europe is probably where the United States was two to three years ago, particularly with the QE now I think finally starting to kick in there.”

Mining has been a tough industry since 2012

“mining has really been a tough industry over – well, since mid-2012 actually when all the order levels started to decline. And there’s not been much in the way of good news.”

-5% is our base case for next year, assuming pretty stagnant environment

“We’re also not expecting much in the way of commodity prices. Kind of by and large – I’m not saying exactly where we are today, but by and large around the levels that we’re at today on commodities is pretty much what we’re thinking around next year. And that’s the same for currencies. We’re not expecting the dollar to get materially stronger or weaker.”