Caterpillar will raise prices for equipment and engines 1 percent to 5 percent in late spring due to rising costs for steel and other raw materials, Reuters reported. Demand for Caterpillar’s products has increased dramatically during the past year due to the economic recovery and the bonus depreciation tax provision that expired at the end of last year. Those sales haven’t translated into profits as quickly as investors had hoped, however, because of higher raw material costs and production bottlenecks.
The company raised prices 3 percent in July and another 3 percent in January. In 2004, Caterpillar’s sales and revenues topped $30 billion for the first time, and its profit was $2.03 billion. “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,” Caterpillar Chief Executive Jim Owens said in a press release announcing the company’s 2004 fourth quarter results. “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.” Those challenges, coupled with a record order backlog, caused incremental margins to lag in 2004, he continued.
Price increases will vary based on product line and marketing division, with most occurring in late April and May, the company said.