UPDATE 2-CAT cuts outlook on lower sales, plans more cost cuts
July 24 (Reuters) - Caterpillar Inc on Wednesday reported a 43.5 percent drop in quarterly profit and cut its outlook for the year, saying its dealers were still reducing inventories and demand was weak from the mining industry.
The world's largest maker of mining and construction equipment reported second-quarter earnings fell to $960 million, or $1.45 a share, from $1.70 billion, or $2.54 a share, a year earlier. Analysts expected earnings of $1.70 per share.
Shares of Caterpillar were down 1.4 percent at $84.35 in trading before the market opened.
Caterpillar, which also makes locomotives, gas turbines and diesel engines and generators, said sales fell nearly 16 percent to $14.62 billion.
It expected to report a full-year profit of about $6.50 a share, down from a previous estimate of $7.
The company forecast full-year sales at $56 billion to $58 billion, down from its previous estimate of $57 billion to $61 billion.
The company said the disappointing results, and the reduced forecast, reflected $1 billion in dealer machine inventory reductions during the quarter, as well as a $1.2 billion decline in its own inventories. Together, it said, the actions were "significantly negative to profit."
In a statement, Doug Oberhelman, its chairman and chief executive, warned the inventory cuts were likely to continue in the second half, adding the company would "be taking additional cost reduction measures."
Analysts and investors have worried that Caterpillar's emphasis in recent years on increasing its penetration in the global mining business may be a short-term problem for results if the slowdown in China reduces incremental demand for mined commodities.
Already, many mining customers have been postponing or canceling orders for its mining equipment and the Peoria-based company has been forced to lay off hundreds of workers at its mining equipment plants in Decatur, Illinois and Milwaukee.
Rising interest rates, meanwhile, have raised concerns the nascent recovery in the construction market, another key area for Caterpillar, could be derailed.
But in its results on Wednesday, Caterpillar said business in China improved in the quarter and builder demand for its earth-moving machines was up, even though the overall construction equipment industry was down.