Caterpillar Inc. (CAT) recently announced its intention to open a new facility in Xuzhou, Jiangsu Province of China. The construction will commence in 2011, while the main facility construction is scheduled for mid-2012. The facility is being established to manufacture undercarriage components and track assemblies, which are utilized for Cat hydraulic excavators.
This new facility is the company’s strategic move to continue expanding in the Asia Pacific region. This new facility along with a joint venture with AsiaTrak Ltd. positions Caterpillar to meet the long-term demands of the customers in that region.
The facility will cover around 18,000 square-meters (193,750 square-feet) in the Xuzhou Economic Development Zone and is expected to employ 400 people at full capacity. The facility is also expected to fetch other benefits for Caterpillar including, cost savings, being located adjacent to Caterpillar Xuzhou Ltd – a hydraulic excavator facility.
Caterpillar recently posted a robust 44% increase in profit to $1.02 billion in the second quarter of the year from $707 million in the year-earlier quarter. Excluding $204 million of expenses related to the acquisition of Bucyrus, earnings per share surged 58% to $1.72 from $1.09 a year ago. However, the company failed to meet the Zacks Consensus Estimate of $1.77.
Sales in the quarter rose 37% to $14.23 billion from $10.41 billion a year ago driven by higher customer demand. However, it was lower than the Zacks Consensus Estimate of $13.48 billion.
The sales growth was led by continued economic growth and improvement from the low levels of machine demand in the second quarter of 2010. However, the disaster in Japan had a negative impact of $200 million on sales.
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.
The company operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and VolvoAB (VOLVY) but is way ahead of its peers. The company currently retains a Zacks #3 Rank on the stock, which translates into a short-term rating of Hold.
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