On April 28, Caterpillar Inc. reported that sales at the company had caused revenues to drop 21% from a year ago to $10.6 billion. Lower end-user demand drove Caterpillar’s sinking sales even as dealers increased machine and engine inventories by about $100 million over the quarter.
First quarter profit per share at Caterpillar was $1.98, compared to $3.25 a year ago. The company’s operating profit margin was 13.2% for the first quarter, a drop of 3.2 points from 16.2% in Q1 2019. Enterprising cash flow for the first quarter of 2020 was $1.13 billion, and Caterpillar is currently trying to increase sources of liquidity by issuing 10- and 30-year bonds. In order to reduce costs, the company says it will reduce discretionary expenses and suspend base salary increases and short-term incentive payments.
According to Caterpillar, many state and local governments imposing stay-at-home orders listed the company as an essential activity. The Illinois-based manufacturer produces farm equipment like tractors and combines. Caterpillar did suspend production briefly at some plants to adjust to weak customer demand, government regulations, and supply chain issues, but the company notes that as of the middle of April roughly 75% of its plants are operating.
In order to keep its employees safe, Caterpillar factories currently operating have enacted social distancing practices and increased cleaning schedules. The company says they will continue to monitor the situation and suspend production “if warranted by business conditions.”
Citing uncertainty, the farm equipment company declined to issue a financial outlook for 2020. Caterpillar CEO Jim Umpleby, looking ahead, said his company had taken “decisive actions” to execute a strategy to emerge from the pandemic “as an even stronger company.”