A slowdown in the US shale boom made itself felt in the most recent results of heavy equipment maker Caterpillar, which on Wednesday reported a sharp dip in sales to the energy sector.
The industrial bellwether recorded an 11 per cent drop in revenues from the oil and gas industry in the second quarter, citing “lower demand for new equipment in the Permian Basin”.
The company retained its full year profit guidance of $12.06-$13.06 a share, but said it expected to come in at the lower end of this — assuming a recovery in oil and gas by the end of the year. Shares in Caterpillar were down 4 per cent in pre-market trading.
The US shale boom has driven up American oil production exponentially in recent years, but lately investment has slowed and recent indicators have highlighted a deceleration in production growth.
Despite the weaker results in energy, Caterpillar was boosted by stronger demand from the construction sector, where sales jumped 5 per cent, and natural resources, which rose 11 per cent. Overall revenues were up 3 per cent at $14.4bn for the quarter, with consolidated operating profit up 2 per cent at $2.213bn.
“Sales and revenues increased this quarter, including a record performance from Construction Industries, which reflected our strong competitive position globally,” said Caterpillar chairman and chief executive Jim Umpleby.
“Our strong operating cash flow in the quarter allowed us to repurchase shares and pay dividends of about $1.9 billion. This is in line with our intention to return substantially all free cash flow to shareholders.”
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