A few days ago, Caterpillar announced its first-quarter 2020 results: sales and revenue for the first quarter of 2020 were $ 10.6 billion, down 21% from $ 13.5 billion in the first quarter of 2019. The reason for the decline is the decrease in end-user demand leading to a decline in sales and the impact of changes in agent inventory. During the first quarter of 2020, agents increased their machinery and engine inventory by approximately US $ 100 million, while during the first quarter of 2019 they increased by approximately US $ 1.3 billion.
Earnings per share for the first quarter of 2020 was US $ 1.98, while earnings for the first quarter of 2019 were US $ 3.25. Earnings per share for the first quarter of 2020 included $ 254 million in pre-tax revaluation earnings ($ 0.38 per share), which was the result of non-US pension obligation settlements. Earnings per share for the first quarter of 2019 included $ 178 million in unconventional tax benefits related to US tax reform ($ 0.31 per share). The first quarter of 2020 also benefited from the absence of short-term incentive compensation expenses, but was partially offset by the increase in the annual estimated tax rate to 31% excluding special projects.
The operating margin in the first quarter of 2020 was 13.2%, compared with 16.4% in the first quarter of 2019.
During the first quarter of 2020, the company's operating cash flow was $ 1.13 billion. Caterpillar has taken action to improve its strong financial position by increasing liquidity. On the basis of the merger, Caterpillar had $ 7.1 billion in cash at the end of the first quarter and received a global credit line of $ 10.5 billion. In April, Caterpillar raised US $ 2 billion in incremental cash by issuing new 10-year and 30-year bonds, and arranged additional US $ 8 billion in standby financing to supplement the company ’s liquidity.
Response to the COVID-19 epidemic and global business situation
"We are always committed to protecting the safety, health and well-being of all employees around the world. Caterpillar employees and agents are proud of their selfless dedication to customers, their communities, and everyone. During the COVID-19 outbreak , Products and services delivered by Caterpillar employees, helping customers build vital infrastructure to support our society. "-Caterpillar Chairman and CEO An Bojun
Business impact
Caterpillar has implemented safety measures in factories and offices to protect employees, including increasing the frequency of cleaning and disinfection in the workplace, maintaining social distance, and other measures that meet the requirements and guidance of specific regulations of health authorities.
Multinational governments attribute Caterpillar's business as necessary to support critical infrastructure. Over the past few weeks, due to supply chain problems, weak customer demand, or government regulations, Caterpillar has suspended operations at some factories. As of mid-April 2020, approximately 75% of the company's main production facilities across three major industries are in continuous operation worldwide. Some temporarily closed production facilities have also been restarted. The company will continue to pay attention to the development of the situation and may suspend the operation of more factories depending on the business conditions.
The company has taken actions to save costs, including reducing unconventional expenses, suspending many employees and all executives for 2020 base salary increases and short-term performance incentive programs. Caterpillar prioritizes expenses. The company will continue to invest in an important part of the strategy to achieve profitable growth launched in 2017-services and expanded product lines.
Outlook
As the COVID-19 epidemic brings continuous uncertainty to the global economy, Caterpillar's financial performance for the remaining quarter of 2020 will be affected. As a result, Caterpillar withdrew its performance guidance on March 26 and temporarily does not provide a 2020 performance outlook.
An Bojun said: "Caterpillar has taken decisive action to strengthen its strong financial position, while continuing to implement a strategy of profitable growth. For 95 years, Caterpillar has experienced and overcome many challenges. A stronger company. "
