Caterpillar at JP Morgan Conference

posted in: Notes | 0

Mike DeWalt –VP Finance Services

China change is logical

“From an economic standpoint, I think it’s our view what’s happening there is logical. They can’t drive an economy that big that fast on just fixed asset investment. I mean, the conversion to a bit more of a consumer-led economy overall have happened. It will have, as it’s been the last couple of years for our business, it will have fits and starts and a different impact overall.”

Demand has come down a lot over the last few years in China

“That said, it’s been pretty tough on our business. I mean demand has come down a lot over the last few years, particularly for construction and mining equipment. It seems to be stabilizing now. Our kind of view of China for this year is certainly not as much change as we’ve had over the last few years of a more stable environment, and we are out there looking for kind of short-term changes.”

February was a decent month but January was not so it’s still wait and see

“I know, month of February was a decent month for excavator sales but we’re trying not to get overly excited about that. You always have to consider the timing of the Chinese New Year. January was not a very good month. So I think it’s still wait-and-see.”

Inventory is in a normal range but sales forecast is lower so it needs to come down again

“I think our inventory in general at dealers and our finished inventory, you would say is kind of right in the overall normal range. But our sales forecast this year is down $5 billion from last year, and I think as a result of that, dealer inventory will need to step down a little bit to keep that ratio of inventory to sales in line. So, yes, I think this will be another year where we’ll under-sell end market demand a little bit.”

Currency is bad for our sales but neutral to profit

“currency, a frequently misunderstood subject with us, I can’t tell you how many times I hear the financial press, every time the dollar strengthens, it’s going to be a big disaster for us. And it impacts sales negatively but it’s usually, because of how we’ve diversified the cost base, it’s usually fairly neutral to profit. ”