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MINNEAPOLIS (AP) â¿¿ A slowdown in the mining business is digging a hole in Caterpillar's profits.
First-quarter profit shrank 45 percent and Caterpillar has lowered its expectations for full-year sales and profit because its mining business is slowing. Sales of Caterpillar-branded mining machines such as large trucks and bulldozers will drop by half this year, the company said on Monday.
Caterpillar, based in Peoria, Ill., said mining customers placed big orders for equipment last year, but then mining profits fell, so now those customers are cutting back. Dealers who would normally be stocking up on Caterpillar gear to get ready for a busy summer instead cut inventory during the first quarter.
Executives said they had hoped that a slowdown in orders from dealers in late 2012 would turn around this year. "Unfortunately, that hasn't happened," said Mike DeWalt, the company's controller, on a conference call. "Overall mining orders have remained depressed."
Profit margins are higher for mining gear than for many of Caterpillar's other products, making the slowdown more painful to the company's bottom line.
"We're definitely in a down-cycle right now, but long-term it's a great business for us," said Chairman and CEO Doug Oberhelman.
Caterpillar has already started cutting costs. On April 5 it said that it would lay off more than 460 employees at a mining truck plant in Decatur, Ill. Caterpillar also announced mining-related layoffs in Milwaukee and plans to cut 1,300 of 3,400 jobs at a plant near Brussels that makes excavators, loading vehicles and engine parts. This year's capital spending â¿¿ which covers big-ticket items like factories and computer systems â¿¿ will fall below $3 billion, from $3.4 billion last year.
Caterpillar employed 141,000 people at the end of the quarter, down 7 percent from a year earlier. The job cuts included about 1,000 U.S. workers and almost 7,000 in other countries. Besides the permanent layoffs, it has also been putting production and office workers on temporary furloughs.