Caterpillar affirms 2011 outlook, predicts growth

The Associated Press
Wednesday, March 23, 2011; 6:07 PM

-- Caterpillar affirmed its 2011 profit outlook Wednesday and offered a rosy forecast for the years ahead because growth in the world's population and expansion of its cities will create demand for its mining and construction equipment.

Company officials sounded optimistic as they met with analysts at the ConExpo-ConAgg trade show for the construction industry in Las Vegas. Caterpillar also announced Wednesday that it is considering selling part of its logistics subsidiary, so it can focus on its core business of making yellow-and-black mining and construction equipment.

"With the opportunities we see around the world, we have a very bright future," CEO Doug Oberhelman said. "We also have a strong financial position and a strategy that focuses on helping our customers win."

Oberhelman said Latin American economies are booming right now, and Asian countries like China have strong long-term growth prospects.

Steve Wunning, who oversees Caterpillar's mining equipment division, told analysts he can't think of a better business to be in right now because of the demographic trends. As population grows, more infrastructure will be needed, and as the economy improves, more natural resources will be mined.

Caterpillar officials say the key to the company's success over the next several years will be developing enough manufacturing capacity to meet demand while still controlling costs. The company has announced expansion projects at several of its U.S. plants and in China and Brazil. Plus, Caterpillar plans to build new plants in Victoria, Texas, and Winston-Salem, North Carolina.

The Peoria, Ill., based company predicts a 2011 profit of nearly $6 per share on more than $50 billion in sales.

Caterpillar officials say the company is also on track to meet its 2012 goals of profit per share between $8 and $10 on revenue between $55 billion to $60 billion.

And those profit projections for this year and next year don't include Caterpillar's most-recently announced acquisitions of Bucyrus International, locomotive maker Electro-Motive Diesel, Inc. and German engine maker Motoren-Werke Mannheim.

Caterpillar's $7.6 billion buyout of mining equipment maker Bucyrus is expected to close in mid-2011. Caterpillar officials said last fall that they expected to issue up to $2 billion in stock to help finance the $92 per share purchase price.

Chief Financial Officer Ed Rapp said Wednesday that Caterpillar should now be able to significantly reduce the amount of stock it has to issue to finance the Bucyrus deal because the fourth quarter was better than expected and year-end pension adjustments were favorable.

Caterpillar also expects to take on about $1 billion debt in the Bucyrus deal, which will significantly expand its line of mining equipment.

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