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Caterpillar says China sales slow as demand dented in Asia

Aug. 2, 2022 Updated Tue., Aug. 2, 2022 at 9:57 a.m.

Caterpillar Inc. backhoe excavators are displayed for sale at a dealership in Louisville, Ky., on Jan. 27, 2020.   (Bloomberg )
Caterpillar Inc. backhoe excavators are displayed for sale at a dealership in Louisville, Ky., on Jan. 27, 2020.  (Bloomberg )
By Joe Deaux Bloomberg

Caterpillar Inc., one of the world’s biggest maker of construction equipment, is facing a slowdown in China while grappling with the impacts of higher costs to make its iconic yellow machines.

Caterpillar, often viewed as an economic bellwether, said Tuesday in its second-quarter report that construction equipment sales fell in Asia Pacific, citing lower revenue from end users in China.

The company brought in $13.5 billion in revenue from machinery, energy and transportation, missing analysts’ estimates.

Shares of the Deerfield, Illinois-based company fell 4% to $187.07 at 9:30 a.m. Tuesday in New York.

Caterpillar’s results come as the producer grapples with headwinds including supply-chain troubles and surging power costs across Europe as well as Covid-related shutdowns and property woes in China.

China’s real estate crisis has ballooned this year, engulfing developers to banks and forcing Beijing to temper its growth ambitions in a potential blow for steelmakers and miners.

“It’s pretty broadly obvious that China remains quite weak, and that’s a headwind for everybody, including CAT,” Stephen Volkmann, an analyst at Jefferies, said in a phone interview.

“We’ve seen a lot of companies talk about shutdowns in China, Covid-related lockdowns – the China economic data has come in weaker.”

Caterpillar has previously said that China represents about 5% to 10% of its total business sales.

The US equipment maker also said “unfavorable manufacturing costs largely reflected higher material and freight costs.”

Adding to Caterpillar’s trouble is surging inflation across the globe.

Rising freight and material costs have had an impact on profit margins, according to the statement.

The company said it continues to have success raising prices on equipment to offset those costs, though.

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