Caterpillar Achieves Record Profitability

PEORIA, Ill. – Caterpillar reported Wednesday first-quarter sales and revenues of $8.34 billion and record profit of $581 million, or $1.63 per share. Sales and revenues were up 29 percent and profit was up 38 percent compared to the first quarter of 2004.

"These record results are further evidence of the strength of the many global markets we serve and of our ability to successfully meet this continuing strong market demand," says Chairman and Chief Executive Officer Jim Owens. "Thanks to the commitment of team Caterpillar – our employees, dealers and suppliers around the world – we are working diligently to improve our performance while meeting customer needs. Our operating margins in the first quarter were the best since the first half of 2004 when material cost pressures began to accelerate. We have an unwavering commitment to fulfilling customer demand while improving operating margins through price realization, which more than offsets material cost increases, and enhanced manufacturing efficiencies."

Q1 PERFORMANCE. Sales and revenues of $8.34 billion were up $1.86 billion, or 29 percent, compared to $6.48 billion in the first quarter of 2004. The increase in sales and revenues was driven by $1.44 billion of higher machinery and engines volume, $250 million of increased price realization, a $102 million favorable impact of Currency on sales due primarily to the strengthening euro and British pound and $72 million of higher Financial Products revenues. Profit of $581 million or $1.63 per share was up $161 million, or 38 percent, compared to $420 million or $1.19 per share in the first quarter of 2004.  

The main contributors to the profit increase were higher sales volume of $521 million and higher price realization of $250 million. Partially offsetting these favorable items were $489 million of higher core operating costs and $48 million of higher retirement benefits.

"We remain squarely focused on responding to customer needs and improving operating performance, and we are on track to meet our long-term financial targets," Owens says. "We're well positioned for growth and will continue to build on our record results, utilizing the power of 6 Sigma across the value chain to further increase supply chain efficiencies and performance. While we still face selected industry-wide issues associated with material availability, our suppliers have responded and material availability is improving steadily."

2005 OUTLOOK. Caterpillar is raising its outlook for sales and revenues and profit per share. The company expects 2005 sales and revenues to be up 16 to 18 percent and profit per share to be up 35 to 40 percent from 2004.
   
"As 2005 unfolds, we are encouraged by the fundamental strength of the key markets we serve," Owens says.  "Mining companies will continue to add capacity to meet anticipated growth in demand for the next several years.  In addition, global demand for energy, including coal as well as oil and gas, and large infrastructure projects are growing.  Likewise, commercial construction and housing in most countries will create even further demand for our products and services. This positions Team Caterpillar to deliver results beyond our initial expectations for the year."