PEORIA, Ill. – Caterpillar this week reported record 2004 sales and revenue of $30.25 billion and record profit of $2.03 billion, or $5.75 per share, up 85 percent from a year ago. The company also reported a record fourth quarter with sales and revenue of $8.57 billion and profit of $551 million, or $1.55 per share, up 58 percent from last year’s fourth quarter.
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“Without question, 2004 was one of the most remarkable years in our proud history,” said Chairman and Chief Executive Officer Jim Owens. “In 1997, with sales and revenues less than $19 billion, we set the goal of becoming a $30 billion company by the middle of this decade. While many thought it was overly ambitious, today we're able to celebrate that tremendous accomplishment ahead of schedule.
“We owe thanks for these record results to everyone who makes up Team Caterpillar – our employees, dealers and suppliers,” Owens continued. “Throughout the year, the team effectively responded to an unprecedented recovery in nearly every market we serve and enhanced our long-term strategic position by meeting record customer demand and building substantial field population.”
2004 sales and revenue were $30.25 billion, up $7.49 billion or 33 percent compared to $22.76 billion in 2003. The increase was driven by $6.26 billion of higher machinery and engines volume, a $515 million favorable impact of currency on sales due primarily to the strengthening euro and British pound, $512 million of increased price realization and $200 million of higher financial products revenue.
| HIGHER STEEL PRICES SAID TO IMPACT CATERPILLAR |
Higher steel costs are squeezing profit margins at Caterpillar, but the head of the heavy-equipment maker said Friday that he expects steel prices to moderate and even decline in the second half of 2005. But if steel prices don't ease, Caterpillar will be forced to raise its own prices again, Chief Executive James Owens said on the sidelines of the World Economic Forum. "We think they're going to plateau out," Owens said. "Even steel and steel casting, some of these prices will moderate and go down a bit in the second half of this year." The Peoria, Illinois-based company reported solid gains in fourth-quarter profits and revenue on Thursday, helped by rising demand for its trucks and engines. But the increased costs for raw materials squeezed margins and disappointed Wall Street. Its shares dropped 5 percent Thursday. Owens expects a stabilization of steel prices later in 2005 because he anticipates a slowdown in global economic growth this year and an expansion of steel production capacity in China. These factors should alleviate pressures on world markets for steel. "It's a difficult thing to forecast," Owens said. "If it doesn't happen, we'll probably have another price increase at midyear to try to recover materials costs." Several analysts have expressed disappointment that Caterpillar didn't raise prices enough to better offset rising costs. – Associated Press |
Profit of $2.03 billion or $5.75 per share was up $936 million or 85 percent compared to $1.10 billion or $3.13 per share in 2003. The main contributors to the profit increase were higher sales volume of $1.81 billion, higher price realization of $512 million and the absence of $153 million of non-conformance penalties that were recorded in 2003. Partially offsetting these favorable items were $1.11 billion of higher core operating costs (about half of which was due to sharply higher steel-related and expediting costs), a $157 million impact of currency on profit and $139 million of higher retirement benefits.
“We’re clearly pleased to have reached this important $30 billion milestone, but we have not yet delivered bottom line performance in line with our own expectations,” Owens added. “While we remain committed to satisfying our customers, we're disappointed with our cost structure, particularly steel- related costs and supply chain inefficiencies due to lack of material availability. That, coupled with a record order backlog which delayed price realization, caused incremental margins to lag in 2004.”
2004 delivered solid improvement in cash flow and the company ended the year with an even stronger financial position. After providing continued funding for growth opportunities and new product development, the company was able to make significant contributions to pension plans, increase dividends to shareholders and repurchase Caterpillar shares. Pension plans remain well funded due to solid investment returns and over $600 million in contributions for the second year in a row. The company has increased its dividend in 10 of the last 11 years and repurchased almost 7 million shares during 2004. This financial strength positions Caterpillar very well for the future.
“This year's opportunities certainly presented us with significant challenges. However, I'm pleased we were still able to deliver record profits and increased return on sales,” Owens said. “We will continue to meet customer requirements and strengthen our long-term market position. While significant cost pressures are common during periods of explosive growth, we're focusing the expertise of hundreds of 6 Sigma teams to aggressively address these issues and improve our cost structure in 2005. We'll continue to build on the value of 6 Sigma and the opportunities unleashed by an engaged global team to set new records this year, create long-term value for our customers and deliver exceptional returns to our shareholders.”
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