By JOSHUA FREED
AP Business Writer
MINNEAPOLIS (AP) – Caterpillar says the world’s economy is weaker than it thought, and it doesn’t expect growth to pick up until the second half of next year.
The company on Monday cut its 2012 revenue and profit guidance, and said next year won’t be much better.
Caterpillar makes the yellow-painted excavators, heavy tractors, and other construction equipment often seen on road-building projects. It’s the world’s largest maker of construction and mining equipment, and also makes engines, so its results are watched closely for signs of where the broader economy is headed.
Where it’s headed right now is for some weak growth, based on what Caterpillar was saying on Monday.
It predicted worldwide economic growth of 2.7 percent for next year, up from the 2.5 percent growth it expects for 2012. It expects the cheap lending offered in most countries to continue next year, although “growth has been slow to respond,” the company said.
“As a result, we are not expecting improvement in overall economic growth until the second half of 2013,” the company said.
Caterpillar sells to dealers, who turn around and sell to end users like construction and mining companies. Those dealers are trying to cut inventory, so they’re ordering less equipment than customers are buying.
In response, Caterpillar said it has reduced production, resulting in temporary shutdowns and layoffs. Lower production will continue until dealer demand lines up with end user demand, Caterpillar said.
As a result, Caterpillar cut its 2012 outlook for the second time this year. Revenue is expected to grow 9.7 percent to $66 billion, after rising 41 percent in 2011.
The economy this year “has been a disappointment,” Caterpillar said, with growth lower than expected in the U.S. and China, and with much of Europe in recession.
Caterpillar expects 2013 revenue to be about the same as this year, in a range of up 5 percent to down 5 percent.
“We’re not expecting rapid growth, and we’re not predicting a global recession,” Chairman and CEO Doug Oberhelman said.
The company said sales of mining gear will fall next year. Lower prices for metals and coal, along with higher operating costs, have hurt profit margins at many mining companies, Caterpillar reported. Sales of construction gear are expected to increase, and it expects improving activity in the U.S. It expects engine sales to be flat.
Profit in the third quarter rose 49 percent to almost $1.7 billion.
The results included a gain of $273 million from selling a majority interest in a logistics business.