Caterpillar dealer inventories down from 2015 with more “substantial” reductions coming

Updated Oct 28, 2016

Caterpillar 313F L GC excavatorAside from lower oil prices and sagging demand for mining equipment around the globe, sales of Caterpillar heavy equipment have also been negatively impacted by lower dealer inventories.

In a statement on dealer inventories accompanying its third quarter earnings—which included reduced expectations for fiscal year 2016 sales—the company says dealer inventories in the third quarter of 2016 fell even further than they did in the same quarter of 2015, with more inventory reductions planned for the fourth quarter.

Cat reports that dealer machine and engine inventories fell about $700 million in Q3, compared to a decrease of $600 million in Q3 2015. So far this fiscal year, Cat has reduced dealer inventories about $800 million.

The company says it expects that dealers “will make substantial inventory reductions during the fourth quarter, resulting in lower year-end inventories in 2016, compared to 2015.”

In addition, the company reports that its order backlog at the end of the third quarter stood at $11.6 billion, down about $150 million from the end of the second quarter. However, year-over-year, the backlog is down about $2.1 billion with decreases across all segments.

On Tuesday Caterpillar reported Q3 sales of $9.16 billion, a decrease of 16 percent over Q3 2015. Profit was down 48 percent to $481 million. The company expects total sales and revenues for 2016 to end up at $39 billion, a 17 percent decline from 2015. That outlook is down slightly from the range of $40 billion to $40.5 billion the company forecasted in its Q2 earnings report.