Caterpillar’s All-Seeing Sensors Steady Profit in Downturn

Caterpillar Inc. is using cost-cutting logistics to keep profits steady during the commodities meltdown.

Sales at the world’s biggest machinery producer have declined in the past three years as its customers cut back on drilling, mining and building. But all the while, one of the company’s key gauges of profitability — gross margin — has remained relatively steady during a period it has called its longest downturn ever.

“If gross margin goes up when volumes are down so much, it does show they are making progress” in improving the company’s cost structure, Karen Ubelhart, a New York-based analyst at Bloomberg Intelligence, said in an interview.

Caterpillar, which analysts estimate will report second-quarter profit of 96 cents a share on Tuesday, has kept earnings from evaporating by shutting less-profitable factories and cutting 10,000 workers through 2018. That has steadied its gross margin, though the gauge is estimated to have fallen to 25.4 percent in the second quarter from 27.7 percent a year earlier.

Less publicized is that the company, known for its signature yellow trucks and excavators, is also reinventing its network connecting suppliers and customers.


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