Issue link: https://read.dmtmag.com/i/1245531
I DA U N I V E R S A L M ay -J u n e 2 0 2 0 23 TRENDS AND TIDBITS Story continued on page 25 Demand for heavy machinery is a meaningful indicator of trends in regional and global construction. Caterpillar and Komatsu are important players in the sector, with market capital- izations of approximately $74.2 billion and $20.4 billion respec- tively, as of Feb. 11. Recently, both compa- nies reported quarterly results and provided insight on their businesses for all of 2019. For investors, their management teams also presented outlooks for 2020, based on expectations for infrastructure development and potential demand for construc- tion equipment in global markets. Financial results reported by Caterpillar and Komatsu show a signifi cant decrease in sales and lower profi tability compared to the previous year. e decline in sales started in the second half of 2019 and is likely to continue in 2020, as indicated in published manage- ment guidance. Both Caterpillar and Komatsu witnessed a weakening of demand for heavy equipment in North America. At the same time, demand for construction equipment in Asia went down for Komatsu and remained fl at for Caterpillar. e negative impact of the coronavirus on the Chinese and global economies is likely to undermine the already weak demand for heavy equipment in Asia. Based on the results for the last quarter of 2019 and the outlooks reported by Caterpillar and Komatsu, the health check for global construction indicates a further weakening of the industry, at least for this year. Caterpillar Caterpillar's fi nancials for 2019 show slowdowns in sales volumes, primarily in the compa- ny's construction and energy and transportation segments. e full-year results were hit by a weak fourth quarter. In the last quarter, Caterpil- lar's sales and revenues dropped eight percent year-over-year. e company's sales and profi t in the construction segment were down by 12 percent and 22 percent, respectively, relative to Q4 2018. is came on the back of negative trends in dealer inventories and unfavorable prices. Sales were lower in North America and EAME (Europe, Africa and Middle East), remained fl at in the Asia/Pacifi c region, and were higher in Latin America, as a result of strong infrastructure and residential construction activity. e company's Q3 sales were also down, by six percent year- over-year. e negative sales and revenue dynamics in Q3 and Q4 came a er relatively strong results in the previous two quarters. e company's sales were up three percent and fi ve percent in Q2 and Q1, respectively. Caterpillar's sales and revenues for all of 2019 dropped by approximately two percent, or $0.9 billion year-over-year. According to the company, this resulted from lower heavy machinery and equipment purchases by dealers, even though end-user demand went up by two percent. In its full-year 2020 outlook, Caterpillar's management provided conservative guidance, projecting a decrease in the company's sales and profi tability. "We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inven- tories," said Jim Umpleby, CEO Global Market Scan: Heavy machinery demand, pullback point to global construction weakness