Shares of heavy-equipment manufacturer Caterpillar (CAT) are down sharply after the company said today it's reducing its revenue outlook for the year and certainly will cut as several as 5,000 jobs between now and the end of 2016 in a cost-cutting move amid tough states in its electricity, exploration and construction companies.
Caterpillar also warned that 2018 which could climb to more than 10,000 through sales and drop can earnings in 2016 for a record fourth straight year.
In a sign the international economic slowdown is hurting revenue of its machines, for example concrete pavers backhoes, excavators and gas mining shovels, the company said it'd cut end of 2016. the 4,000 to 5,000 jobs by This year nearly all of those job losses will happen, the company stated.
Additionally, it cut at its 2015 sales and revenue predictions to $1 billion lower than its earlier outlook, or about $4-8 billion. Caterpillar says the layoffs and restructuring will assist trimming yearly running expenses by $1.5 billion when the cuts are whole. The business stated revenue and income in 2016 may be 5% less than in 2013.
"We are confronting a convergence of tough market conditions in key regions and industry sectors - namely in exploration and energy," Doug Oberhelman, Caterpillar's Chairman and CEO said in a statement. "While we have previously made substantial changes as these market states have emerged, we are taking also more critical actions now. We-don't make these decisions lightly, but I am confident these added steps will better place Caterpillar to deliver solid outcomes when demand improves."
In another cost cutting move, the business also mentioned this year it'll offer a "voluntary pension improvement plan" for qualifying workers.
The company had warned of headwinds in its second-quarter earnings statement released back in mid-July. At that time, Caterpillar recognized the headwinds from "ongoing economic weakness" in China. In the 2nd quarter, sales in the Asia/ Pacific region dropped 2-2%, due mainly to lower need for construction and mining equipment, the company said in its earnings release at the moment.
The sharp drop in key businesses, including exploration and oil and gas, together with the company's responsibility to manage through difficult times when demand is not hard, was mentioned as a key to making the cost-cutting moves.
"Several of the key industries we serve - including mining, oil and gas, building and railing - possess a very long history of significant cyclicality. While they may be the appropriate businesses to to stay for the long-term, we need to handle through what can be significant and sometimes prolonged downturns," included Oberhelman.
Caterpillar also stated it plans on close an estimated 20 manufacturing plants, or slightly more than 10% of its square footage that was manufacturing. The closures will likely be targeted mostly on a handful of key companies: energy, source industries and construction and transport system.