In its just announced Q2 2018 results, Caterpillar reports that its Resource Industries’ division total sales were $2.526 billion, an increase of $690 million from the second quarter of 2017. “The increase was primarily due to higher demand for equipment across all regions. Commodity prices remained strong in the second quarter of 2018, and the company saw mining customers invest in current fleets and mine expansions, resulting in higher equipment sales.” However, the company believes mining customers have not yet commenced full-scale fleet replacements. Increased mine production and higher machine utilisation resulted in improved aftermarket parts sales. In addition, global economic growth contributed to stronger sales for heavy construction equipment. Favourable price realisation also contributed to increased sales.
Resource Industries’ profit was $411 million in the second quarter of 2018, compared with $99 million in the second quarter of 2017. The improvement was mostly due to higher sales volume and favorable price realisation. Manufacturing costs were favorable primarily due to lower warranty expense, partially offset by higher freight costs. The favorable warranty was mostly driven by the absence of a customer warranty program that occurred in the second quarter of 2017.
“Caterpillar delivered record second-quarter profit per share,” said Caterpillar CEO Jim Umpleby. “Our team is doing a great job executing our strategy for profitable growth, focusing on operational excellence, expanded offerings and services. Based on outstanding results in the first half of the year and continued strength in many of our end markets, Caterpillar is again raising our profit outlook for 2018. We remain focused on operational excellence, cost discipline and investing for long-term profitable growth.”
Caterpillar sells to mining through dealers and so dealers increasing stock is indicative of expected market performance. In the investor Q&A Caterpillar said across the whole company “dealer machine and engine inventories increased about $100 million in the second quarter of 2018, compared to a decrease of about $300 million in the second quarter of 2017. During the first six months of 2018, dealer machine and engine inventories increased about $1.3 billion, compared to a decrease of about $100 million in the first six months of 2017.
