Caterpillar sees US tariff hit of up to $US15b this year
The heavy-equipment maker said Tuesday after reporting earnings that it expects to face net incremental tariffs of $US1.3 billion to $US1.5 billion ($23.1b) this year — including as much as $US500 million in its third quarter — though its new CEO said the company will be able to offset the impact.
Caterpillar's outlook is important because it is one of the world's biggest makers of machinery for mining and construction.
The US manufacturer's second-quarter results already reflect the effect of tariffs, with costs coming in at the top end of its estimated range disclosed in April.
'We're going to mitigate the impact of tariffs,' chief executive Joe Creed, who succeeded Jim Umpleby in May, said on an earnings call. 'Exactly which levers we're going to pull, we're looking for a little more clarity before we reach into those.'
Shares of Caterpillar, which had proved resilient this year with a 20 per cent gain, fell 1.2 per cent as of 10.44am in New York.
Caterpillar said it now expects full-year adjusted operating profit to fall in the bottom of its annual target range, even with higher annual sales.
Baird analysts calculated that tariffs will equate to a 300 basis point drag on margins, up from its previous expectation of 200 basis points, according to a note to clients after the earnings release.
The tariff outlook came after Caterpillar posted adjusted earnings of $US4.72 a share in the second quarter, falling short of the $US4.88 median estimate of analysts polled by Bloomberg.
The Irving, Texas-based company said total sales slipped in both construction and resource industries in the quarter, while its energy and transportation unit had higher sales.
Operating profit for its machinery, energy and transportation segments fell 24 per cent from the year-earlier period mainly due to unfavorable manufacturing costs largely reflecting the impact of the higher duties.
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