Caterpillar Says China Charge Will Dent 4Q Results

PEORIA, Ill. (AP) ⿿ Caterpillar is stuck in some mud right now.

The big construction gear maker said last week that it found "deliberate, multi-year, coordinated accounting misconduct" at a China-based maker of roof supports for mines that it acquired in June. It said it will write down the value of the investment as a result and that will show up in its in fourth-quarter results being reported on Monday.

In addition, the company has warned that it doesn't expect the global economy to pick up until the second half of 2013. Mining companies, big customers for Caterpillar, have said they'll scale back their spending this year. Lower prices for metals and coal, along with higher operating costs, have hurt profit margins at many mining companies.

Analysts are forecasting lower earnings and revenue for Caterpillar compared with a year ago.

WHAT TO WATCH FOR: Caterpillar already offered some details of the problem in China and said it dismissed "several senior managers" at Zhengzhou Siwei, based in Zhengzhou, China. Investors will want to know where Caterpillar's China mining prospects stand considering that it apparently wildly overpaid for Siwei. The company said it will write down the value of the investment by $580 million, or 87 cents per share.

On Friday, Caterpillar said December sales of its construction machines fell 1 percent, including a 7 percent drop in Asia and a 6 percent drop in North America. Sales of power generators fell 2 percent.

WHY IT MATTERS: Caterpillar's results are watched closely because they are considered an indicator of industrial activity and the health of the overall economy.

At an investor conference in November, Caterpillar's director of investor relations Michael DeWalt said the company is expecting the U.S. economy to grow about 2 percent this year, with improvement also expected in Brazil and China.

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