Caterpillar Inc. has demonstrated the ability to deliver solid financial results during an economic downturn, thanks in part to a growing and profitable engine business, company chairman & CEO Glen Barton said this week.
Barton spoke Wednesday to about 70 financial analysts attending a briefing near one of the company's electric power generator packaging facilities in Griffin, GA. He credited Caterpillar's diversification efforts with strengthening the company's financial performance – particularly in engines, financial services and logistics.
"Our diversification has been the story of the decade," Barton said. "We're less reliant on machine sales because of significant growth in our engine, logistics and financial services businesses.”
For example, Barton pointed out that non-machine sales grew from 27% of total sales and revenues 10 years ago to more than 40% in 2000.
“We're a dramatically different company – much better able to manage the economic uncertainties of today's global economy," Barton said.
In presentations to the analysts, the company highlighted Caterpillar's engine business, which is expected to generate nearly 45% of company sales by 2006, and account for 60% of sales growth in the next five years. The company added that electric power generation sales are expected to nearly triple by 2006.
The company, Barton said, has shown strengths in its diversification since its 1991 reorganization. For example, Cat Financial represented 7% of total sales and revenues in 2000 compared to 3% 10 years ago. Cat Logistics has maintained a 20% annual growth rate and is expected to double its revenue base by 2006. Also, new products and customer services have been introduced, including compact equipment and Cat Rental Stores.
"We're on track to achieve $30 billion in sales by 2006. Each business unit has specific plans to achieve this goal," Barton said. "In addition to engines, logistics and financial services, these plans include sales of compact equipment, paving products, articulated trucks and forestry machines, which are expected to at least double within the next five years."