Caterpillar earnings disappoint on weak China sales, higher costs

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CHICAGO: Caterpillar Inc's earnings on Wednesday missed Wall Street's estimates, hurt by a combination of weak sales in China and higher ...

CHICAGO: Caterpillar Inc's earnings on Wednesday missed Wall Street's estimates, hurt by a combination of weak sales in China and higher production and restructuring costs, sending its shares lower.

Caterpillar said while some of its customers are turning more circumspect in making large capital expenditures, overall demand remains positive. The world's second-largest economy accounts for up to 15per cent of Caterpillar's construction equipment sales. It is facing competition from local Chinese players trying to chip away at its market share through aggressive pricing.sentifi.comProfit in the June quarter suffered because of US$110 million in restructuring costs, as well as a US$328 million increase in manufacturing costs due to higher raw material prices, including a US$70 million tariff bill.

Chastised by the sales slump, the company has been spending money on expanding its services and parts business, which has higher margins and is less cyclical. It is aiming to increase services revenue to US$28 billion by 2026, up from US$18 billion in 2018 and double what it was in 2016.

 

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