Caterpillar, Inc. announced the fifth straight year of record sales and revenues and the fourth consecutive year of record profit. For 2007, sales and revenues were $44.958 billion, up eight percent, and profit per share was $5.37, up four percent from 2006. The company also reported record fourth-quarter sales and revenues of $12.144 billion, 10 percent higher than the fourth quarter of 2006, and profit per share of $1.50, up 14 percent from a year ago.
“Our broad global footprint has enabled us to benefit from strong economic growth outside the United States, as global markets for mining, energy and infrastructure development are booming,” said Chairman and Chief Executive Officer Jim Owens. “I’m very pleased with our overall eight percent growth in sales and revenues in a year when end markets in the United States were so weak. When you consider that North America dealers took machine inventories down $1.1 billion in 2007, our sales story is even more impressive.”
For the year, sales and revenues increased $3.441 to $1.241 billion from higher sales volume, including $775 million from the acquisition of Progress Rail, $932 million from improved price realization, $890 million from the effects of currency and $348 million from higher Financial Products revenues. 2007 profit reflected price realization and higher sales volume offset by higher core operating costs. Machinery and engines operating cash flow of $5.446 billion was up 18 percent from 2006, and was an all-time record. As a result of record machinery and engines operating cash flows over the past three years, our financial position remained very strong with a year-end debt-to-capital ratio from machinery and engines of 31.2 percent.
For the fourth quarter, sales and revenues increased $1.141 billion to $392 million from improved price realization, $334 million from the effects of currency, $306 million from higher sales volume and $109 million from higher financial products revenues. Fourth-quarter profit increased $93 million. The increase was due to improved price realization and higher volume, partially offset by higher core operating costs.
In 2008, the company expects another record year with sales and revenues increasing five to 10 percent, and profit per share increasing five to 15 percent from 2007.
“It’s gratifying to be able to maintain an outlook for 2008 that reflects continued growth and all-time records for sales and revenues and profit at a time when we’re expecting recessionary conditions to persist in key markets we serve in the United States. We’re starting 2008 with a very strong order backlog, particularly for larger products like industrial gas turbines, large reciprocating engines and mining trucks,” Owens commented. “While we expect anemic growth in the U.S. economy, we continue to see positive conditions for our sales in most of the rest of the world.
“In 2008, we’ll be stepping up research and development (R&D) for new products and capital investment to increase capacity around the world. We expect the world’s robust investment in infrastructure to continue well into the next decade, and we’ll need more capacity to serve our customers. Our internal focus will be on continuing our global deployment of the Caterpillar Production System (CPS) with 6 Sigma. While we’ll face challenges in 2008, I’m confident Team Caterpillar will continue to drive us toward our 2010 goals.”
Caterpillar Financial Services Corporation reported record revenues of $2.998 billion for 2007, an increase of $235 million, or nine percent, compared with 2006.
Of the increase in revenues, $128 million resulted from the impact of higher interest rates on new and existing finance receivables, and $91 million resulted from the impact of continued growth of finance receivables and operating leases (earning assets). In addition, various other net revenue items increased $16 million.
On a pre-tax basis, profit was up $40 million, or six percent, compared with 2006. The increase was principally due to an increase of $76 million in margin (wholesale, retail finance, operating lease and associated fee revenues less interest expense depreciation on assets leased to others) and a $16 million increase in other net revenues. Of the increase in margin, $42 million was due to an improvement in net yield on average earning assets, and $34 million resulted from the growth in average earning assets over 2006 of $882 million. These increases were offset by a $29 million increase in provision expense, an $18 million increase in operating expenses and a $5 million increase in various other expenses.
New retail financing was a record $14.07 billion, an increase of $1.9 billion, or 16 percent, from 2006. The increase was the result of increased new retail financing, primarily in our Europe, Diversified and Asia-Pacific operating segments.
Past dues over 30 days at December 31, 2007 were 2.36 percent compared to 1.71 percent at December 31, 2006, due primarily to the softening of the U.S. housing industry. Write-offs, net of recoveries, for the year ended December 31, 2007 were $68.2 million (0.31 percent of average net retail finance receivables) compared to $46.9 million (0.24 percent of average net retail finance receivables) for the year ended December 31, 2006.
Caterpillar, Inc. Vice President and Cat Financial President Kent M. Adams said, “Although past dues and write-offs have increased from 2006, by historical standards our portfolio continues to perform well. This solid portfolio performance, combined with the growth driven by our global presence, has enabled us to deliver record profit despite the downturn experienced in the global credit markets and the weaker U.S. housing industry.” IBI