Caterpillar at Credit Suisse Conference Notes

Denise Johnson – Group President-Resources Industries

Increased optimism among mining customers

“As we talk to our mining customers, we clearly see that they have some increased optimism certainly with commodity prices improving their financial viability improving they do have an optimistic outlook moving forward. Yes this has not yet translated into any tangible machine sale increases for Caterpillar. At this point in time, the focus of our mining customers continues to be and maximizing the utilization of their existing assets, they are getting more productivity, improved levels of performance out of that existing fleet. Certainly, we have seen an increase in aftermarket part, a trend upwards through this year, and we expect that could continue beyond this year, certainly more rebuilds, very tight focus on maintaining the fleets at very high levels. Machine replacements, we do see coming over time. Certainly, the age of the fleet are getting older, but there certainly is a heavy focus, as I indicated earlier, on getting every, every available hour out of the existing fleet before a repurchase would occur.”

Integrating technology is the game changer for the future

“And certainly I would see the game changer for the future is going to be an integrating technology not only with the existing products that we have in the field, but also moving forward with solutions that allow technology to even provide additional levels of productivity beyond what we see today. And that would mean everything from longer cycles before repairing to continuing to improve productivity and up time in the fleets, and that’s why we’re looking very heavily to partner with our customers to do just that.”

We are not seeing orders at this point although there are things to be positive about

“while there are things out there to be positive about, we are not seeing orders at this point. We still expect the first half to be a little softer. It was acquirer uptick in the second half. And to make sure that we have our cost structure in place, so that we can deliver on expectations and hit those incremental targets that we’ve committed to”

Don’t see much more decline in dealer inventories

“So going back to dealer inventory I would say over the – dealer inventory overall are about at levels. We don’t see much more decline in dealer inventories overall. We’ve taken out over the last year and a half over $1 billion of inventory between dealer and Caterpillar in the Resource Industries. And so we see a translation of – there may be some pockets in Saudi Arabia for instance where we have some large tractors or in South America where we have some troubles. But there would be very small pockets of excess inventory overall.”

Amy Campbell

Higher prices for copper and iron ore should impact after market sales next year, but still don’t see an increase in new equipment

“the mining prices have gone up meaningfully since the third quarter release for both copper and iron ore specifically. And we believe this will impact aftermarket part sales next year. However, we still do not expect 2017 to see a significant increase for new equipment sales in mining.”

Construction has been strong in China

“Construction in China has been strong this year and our base cases for this to continue, so potential monetary of fiscal policy changes could quickly reverse course. Machine sales into many developing countries like Brazil are such low levels has been likely that they could get worse and while incremental infrastructure bill is a long overdue and would be good for Caterpillar, we would not expect much impact in 2017. So, now let’s focus on the concerns.”