148 annotations
Page 5 of 8
Although our backlog decline is expected, it still remains elevated as a percentage of revenues compared to historic levels.
(No comment added)
Transcript
2023 Q3
16 Jan 24
we ended the quarter with a healthy backlog of $28.1 billion
(No comment added)
Transcript
2023 Q3
16 Jan 24
Dealers and customers can wait longer to place orders, which has led to a moderation in order rates as expected.
(No comment added)
Transcript
2023 Q3
16 Jan 24
In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers.
We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth.
esources
Transcript
2023 Q3
29 Nov 23
This positive operating performance increases our expectation for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin and ME&T free cash flow reflects healthy customer demand and our strong operating performance.
me& t fcf
Transcript
2023 Q3
29 Nov 23
In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated due to the changeover to Cat engines that we previously discussed, and for excavation in anticipation of dealers reducing their inventories in the fourth quarter.
construction weaker -- engines trabsition/dealer inventory
Transcript
2023 Q3
29 Nov 23
There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries.
comm real estate
Transcript
2023 Q1
7 Jul 23
We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects.
noresi cons
Transcript
2023 Q1
7 Jul 23
Hey, good morning, everybody. Good morning. I just wanted to follow up on that last question. On this – there’s been a lot of questions and answers about the supply chain. But can you just maybe share what your partners are telling you about 2023? I understand you may want to handicap what they’re telling you, but are they directionally telling you things are going to get better in the first half? Is it second half? Are you getting any indications to the supply chain that things should be moving in the right direction for next year? Thank you.
Jim Umpleby
Yes. Honestly, it is a mixed bag. Caterpillar, as you know, has a very diverse product line, and we have a very diverse group of suppliers, thousands of suppliers around the world, and there isn’t one answer there.
So we continue to see semiconductor availability challenges are impacting things like engine control modules, which have an impact on many of our products.
So that’s still a challenge even though, certainly, we follow what happens in the semiconductor industry, and we’ve read about some of the improvements for the ones that we use. And again, those that go into ECMs, that’s still a bit of a challenge. My sense is that – so many suppliers that are struggling now are quite reluctant to make any kind of predictions because many people have made predictions since we’ve gone into the situation that have proved to be wrong about improvement.
So again, what we’re doing is working with them as closely as we can to help them get as much supply out as they can. And as we mentioned earlier, to try to mitigate the impact of those shortages in our factories and that’s really our focus.
not much colour on supply chain visibility
Transcript
2022 Q3
21 Nov 22
It’s not just how the process works. It is actually labor related. And part of that is obviously in an environment where we still see strong demand signals.
supply chain etc
Transcript
2022 Q3
21 Nov 22
So we’ve demonstrated the ability to take action when we need to take action. Having said that, as we sit here today, we continue to see healthy demand across most of our end markets. I mean we have strong orders.
Our dealer inventory remains towards the low end of the typical range.
So again, we have demonstrated the ability to have a flexible cost structure and direct quickly when we need to. Think about 2020 a year when COVID hit, we had a pandemic induced significant decline in our sales. We still met our margin targets that year.
flexible cost structure
Transcript
2022 Q3
21 Nov 22
We have talked about some softening there, but one of the things to keep in mind is, of course, that residential only represents about 25% of CI sales and the rest is non-residential. And non-residential remains more resilient due to – for a whole variety of subjects and certainly, they’re more reasoning to rate increases, just to do capital planning cycles. Think about all the investments that are being made by governments around infrastructure, so that helps as well. But honestly, I don’t have a good answer for your question in terms of how this compares to previous slowing in residential. Again, there’s lots of predictions as to how that will play over the next few years. But again, demand for our products in CI at a macro level still remains quite robust.
resi vs non resi
Transcript
2022 Q3
21 Nov 22
any move to further renewables is benefits us and particularly in our mining business, again as a result of the increased need for commodities in order to help with that transition.
So ultimately, that does have benefits. Because the other thing just to remind you is there are some infrastructure initiatives in Europe which are obviously helping to keep some level of demand going
renewabkes and infra spending help
Transcript
2022 Q3
21 Nov 22
If we step back and think about it from a global macro perspective, certainly, the increased investment in oil and gas benefits our business and that’s been driven by a whole variety of issues. The situation in Europe is only one of them. But as an example, if in fact the U.S. looks to export more LNG as an example, Caterpillar participates across a wide portion of that natural gas value chain where engines are used for drilling, our engines, reset engines drive ship compressors for gas gathering.
We’re very involved at the well servicing side now with our acquisition from where oil and gas, we play a larger portion there.
Our solar gas turbines driving our [indiscernible] natural gas compressors compress gas down the pipelines.
So as an example, there is a drive for more LNG. Again, that that would benefit our business.
So again, a lot – there are a lot of factors there that are driving, of course, the dynamics in the oil and gas business. But our participation there, again, I believe, stands to benefit from just the increased investment that most believe will happen over the next few years.
LNG demand
Transcript
2022 Q3
21 Nov 22
So given the lingering manufacturing inefficiencies that you’re still experiencing, I’m curious how you’re planning process for 2023 is comparing or is going to compare to your process for 2022, really thinking about the supply chain that you’ve had another year of lessons learned. I’m curious what you think you can do differently for 2023 to further enhance your production capacity and flow?
Jim Umpleby
We’re working closely with our suppliers and as I think all companies are doing, thinking about our supply chain, and certainly, resilience is very important. And of course, given the capital-intensive nature of our business and our suppliers, it isn’t easily to make changes quickly, but we are working closely with our suppliers trying to ensure that we have second sources and as many cases.
what are you doing about supply chain?
Transcript
2022 Q3
21 Nov 22
And in a moderate inflationary environment, which we saw for many years, sales increases typically are led by higher volumes and the benefit of the operating leverage associated with those higher volumes helps us achieve our progressive margins. In the environment where we are in today, where a relatively larger portion of the sales increase is due to price realization. There’s less operating leverage, which makes the delivery of those progressive margins more challenging to achieve.
price realization not so much volume
Transcript
2022 Q3
21 Nov 22
But maybe we just circle back on the point about material and freight. Especially on the freight side, we've seen more real time, some fairly significant declines there. Obviously that doesn't impact you the next day, but what kind of lagged relationship would there be or should we expect? Again, just as we think about some fairly significant declines here in recent months, especially on the freight side and when that potentially begins to impact Cat. Thank you.
Jim Umpleby
Yes, Tim, thanks. I mean, actually, the biggest single factor that we are focused on rather than actually just pricing a freight at the moment is actually utilization of freight, because one of the challenges has been actually the amount of freight we've had to use in order to get components around to actually build machines. That's been probably the bigger driver of some of the increase that we've seen.
The second part is, yes, you are correct. Freight and spot rates are coming down. We tend to contract normally six to 12 months in advance.
So we have not yet seen the benefit of those lower rates. And those lower rates are some things we are favorable on, for example, roll on, roll off. We're actually favorable to the current market, but obviously container freight is coming down as well.
So we’re seeing some favorability on that in the spot market. Obviously, we’ll expect some of that to flow through as we move into 2023.
not yet seen the benefit of lower freight rates yet
Transcript
2022 Q3
21 Nov 22
Well, certainly, as we mentioned, we do see our customers displaying capital discipline.
However, we do see as I mentioned in my prepared remarks, a lot of strength in oil and gas. I mean, reciprocating engines is an area of strength.
Solar turbines, their order rates have improved quite substantially, which should help us in 2023.
So one of these to keep in mind, of course, is that customers need to maintain oil and gas production to maintain a certain level of production requires continued investment to just to maintain a flat level of production.
And so, again, we are certainly encouraged by the signs that we see in terms of the order rates that are coming and based on the conversations we're having with customers. We feel good about our prospects there.
o & g investment needs to continue
Transcript
2022 Q3
21 Nov 22
And David, as we consistently said this year, it is an unusual year from a shape of earnings perspective, because normally as you know, we start the year very strong from a margin perspective and margins move downwards as we go through the year. This year that is actually inverting the other way.
So obviously that is part of that which we'll have to come back to when we talk about 2023, how the shape of that year will look as a result of those changes in market dynamics.
So – and I'll remind you that obviously the fourth quarter is our highest – normally our highest quarter from a revenues perspective. That's consistently been the way for Caterpillar.
margin progression different this year
Transcript
2022 Q3
21 Nov 22
And David, as we consistently said this year, it is an unusual year from a shape of earnings perspective, because normally as you know, we start the year very strong from a margin perspective and margins move downwards as we go through the year. This year that is actually inverting the other way.
So obviously that is part of that which we'll have to come back to when we talk about 2023, how the shape of that year will look as a result of those changes in market dynamics.
So – and I'll remind you that obviously the fourth quarter is our highest – normally our highest quarter from a revenues perspective. That's consistently been the way for Caterpillar.
margin progression different this year
Transcript
2022 Q3
21 Nov 22