Weak Mining Industry Blamed in Disappointing Caterpillar Profits

Caterpillar (NYSE:CAT) posted disappointing first-quarter profits on Monday, cutting its full-year forecast. Though expected, the heavy equipment supplier pointed to weakness in the mining industry as the cause.

“In our year-end 2012 financial release, we said the first quarter of 2013 would be challenging, and it certainly was,” Chairman and CEO Doug Oberhelman said in Caterpillar‘s release. The company earned $880 million in the first quarter of 2013, compared to $1.586 million for the same period in 2012.

Caterpillar operates in three main sectors: construction, energy and resources — which is predominately mining companies. While Caterpillar’s expectations for construction industries and power systems remain relatively the same as previously stated, the company has lowered its expectations for the mining industry. The mining industry is more profitable to the company than construction and industrial customers,

In contrast to several other big US companies, such as General Electric (NYSE:GE) and Textron (NYSE:TXT), Caterpillar shares have rallied despite the disappointing news. According to Reuters, “[p]art of the answer was that its announcement was not a surprise. The company has warned repeatedly in recent months that demand from mining customers was deteriorating.”

On a call with analysts, Oberhelman commented that the “current drop-off in mining orders was as much a function of the changing focus of its mining customers as it was a function of concerns about global growth.”

Overall, Caterpillar is fairly optimistic on the wold economy, and predicts that there will be modest enough growth to fuel demand for industrial commodities and rekindle demand for the company’s machinery.

The mining industry accounts for a higher percentage of Caterpillar’s profits than construction and industrial customers.