The world's largest construction and mining machinery maker Caterpillar Inc. (CAT) announced that it will build a proving ground and a large wheel loader manufacturing facility in the city in Tongzhou, Jiangsu province. The proving ground is an expansion of Caterpillar's research and development efforts in China and will help develop machinery for Caterpillar in China and the Asia-Pacific region.
The large wheel loader manufacturing facility will produce a new model for wheel loaders being developed at Caterpillar's Wuxi research and development center, also in Jiangsu. Its wheel loader products will be sold in China and other growing markets, such as India, Indonesia, the Middle East and Africa.
The site in Tongzhou is located close to several of Caterpillar's existing manufacturing facilities in China, and it is also near the majority of the company's supply bases. The company currently has 16 manufacturing facilities, three research and development centers, six branch offices and three logistics and parts centers in China.
The large wheel loaders in the new plant will give customers a new option that has been designed to suit the needs and requirements for mining application in China and other emerging markets.
The proving ground is expected to be operational in the third quarter of 2012. Production at the wheel loader facility is scheduled to begin in the fourth quarter of next year.
Caterpillar 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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