Standard & Poor's Capital IQ analyst Michael Jaffe said the strong replacement demand for Caterpillar equipment in the United States and significant global demand for mining products are clear positives for Caterpillar even though sales have slowed in China and Brazil.
Caterpillar's results are watched closely because they are considered an indicator of industrial activity and the health of the overall economy.
Chief Financial Officer Ed Rapp said investors making too much out of the decline in demand in China. He said the situation is a temporary byproduct of the Chinese government's efforts to control inflation.
"We've been to this movie before in China," Rapp said in an interview with The Associated Press. Caterpillar still predicts China's economy will grow 8.5 percent in 20120.Caterpillar said it expects the global economy will continue to improve and average 3 percent growth in 2012. The U.S. economy will likely see similar growth levels, but Caterpillar said much of Europe will see little or no economic growth this year. Caterpillar said last year's acquisitions of mining equipment maker Bucyrus International and engine maker MWM Holding GmbH provided a $1.1 billion boost to sales during the quarter. That helped offset decreased demand for construction equipment in China and Brazil. "We're seeing strong global demand for most mining products and significant growth in replacement demand for products in the United States, which more than offset slowing in China and Brazil," Caterpillar Chairman and CEO Doug Oberhelman said. Caterpillar officials tried to allay concerns about China during a conference call with analysts. Mike DeWalt, the company's director of investor relations, said China is important to Caterpillar's long-term plans, but it represents only about 3 percent of total sales now. "We continue to be a strong believer that China is a major long-term growth opportunity," DeWalt said. "It is a very large economy with significant development and growth still ahead." ___ Online: Caterpillar Inc.: www.cat.com
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