Caterpillar Inc. (CAT), devoted to its long-term vision of becoming a leader in the mining industry, announced plans to build a mining truck facility in Indonesia besides increasing capacity at its large mining truck facility and large track-type tractor unit in the United States to the tune of $790 million.
Caterpillar will open a new mining truck plant in Batam, Indonesia for a total investment of $150 million. The facility will cater to mining customers across Asia Pacific. The facility is expected to be operational in 2012 for truck bodies, with the first trucks produced in the third quarter of 2013.
This marks Caterpillar’s second manufacturing operation in Indonesia following an existing production facility located in Cileungsi, West Java, which is focused on producing excavators and skidders. The company has also approved plans to triple excavator production at the Cileungsi location.
The current investments in East Asia follow a string of such capital outlays meant to tap the growing Asian market. Caterpillar continues to make significant investments in China announcing a wide range of new facilities, with as many as nine new units currently under construction.
During the past three decades, Caterpillar has grown from a single sales office in Beijing to 16 locations for manufacturing, 4 research and development facilities, 3 logistics and parts centers and other offices. Besides, Caterpillar had previously announced the construction of two new manufacturing operations in Thailand.
The company has also made a bid to acquire China based underground coal mining equipment manufacturer ERA Mining Machinery Limited with an eye on the mining industry in China.
Not neglecting the domestic base, Caterpillar announced expansion plans at its existing manufacturing facilities in Decatur, Illinois, and East Peoria, Illinois. The company plans to invest nearly $300 million to increase capacity for large mining trucks produced in Decatur and about $340 million for production of large track-type tractors in East Peoria, which are used in mining applications across the globe.
The company expects the expansion at Decatur to be completed by 2016 and the East Peoria extension by 2015. Once completed, Caterpillar’s worldwide large truck manufacturing volume will nearly triple its current capacity while large track-type tractor production capabilities will double in East Peoria.
Caterpillar is riding the wave of heightened construction and mining activity in the developing markets, triggered by the demand for coal, copper and iron ore. The company expects demand to continue expanding over the next decade. The recent Bucyrus acquisition has positioned Caterpillar as the leading global mining original equipment manufacturer.
Shares of Caterpillar presently retain a Zacks #3 Rank (short-term Hold recommendation). We also reiterate our long-term Neutral rating.
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base.
Caterpillar operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).
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