Caterpillar Inc. reported a 43 percent plunge in profit and a 16 percent drop in revenue, as dealers reduced their inventory by about $1 billion in the second quarter.
Profit plummeted from $1.7 billion in second-quarter 2012 to $960 million in second-quarter 2013, while revenue dropped from $17.4 billion to $14.6 billion year-over-year.
"During the second quarter, dealers increased their utilization of inventory from our product-distribution centers, which allows them to meet customer demand with less inventory," Caterpillar CEO Doug Oberhelman said in a news release.
Machine dealers "are positioned to reduce inventory even further," Oberhelman noted, which has prompted Peoria, Ill.-based Caterpillar to lower its profit and revenue expectations for 2013.
"With the sharp reduction in dealer inventory and the decline in mining, 2013 is turning out to be a tough year and we've already taken action to reduce costs," Oberhelman said.
"During the first half of the year, we've had temporary factory shutdowns, rolling layoffs throughout much of the company, reductions in our flexible workforce and we've reduced discretionary and program costs."
From the end of second-quarter 2012 to the end of second-quarter 2013, Caterpillar shed 10,423 full-time employees and 9,633 flexible employees, although the company noted that 6,572 of those job losses came from divestitures.
"While we've taken significant action already, we will be taking additional cost-reduction measures in the second half of 2013," Oberhelman said.
There is some silver lining. The expected $3.5 billion reduction in dealer inventory in 2013 "means that we are underselling end-user demand this year, and it sets us up for better sales in 2014," Oberhelman asserted.
Oberhelman also praised the company for making strides in its efforts to cut operational costs, and noted that "end-user demand for Cat machines [is] outpacing the industry overall."
"In addition, our business in China improved—our sales and end-user demand for Cat machines were up in the quarter while the overall construction-equipment industry was down," Oberhelman said.
"Cash flow was outstanding, and coupled with our strong balance sheet, puts us in a position to repurchase more Caterpillar stock this year.
"I am confident we are positioned to improve results in the second half of 2013."