Caterpillar records first-quarter loss; high redundancy costs

Since late last year Caterpillar Inc. (CAT-N) has laid off 10,000 of its full-time employees and eliminated 15,000 workers from its part-time payroll, bringing its redundancy costs in the first quarter of 2009 to US$558 million before tax, or 58 per share.

Those numbers and lower sales and revenues (down 22% year-on-year to US$9.23 billion) added up to a big loss in the first quarter for the mining equipment giant. Caterpillar lost US$112 million (19 per share), down US$1.03 billion from the US$922 million profit it recorded in the first quarter of 2008.

“This is an extremely difficult time for employees affected by this severe economic downturn, and providing them with financial assistance and transitional support is important,” Jim Owens, Caterpillar’s chairman and chief executive, said in a statement announcing the quarterly results. “While redundancy costs have been a considerable expense, it’s the right thing to do for our people.”

And the company isn’t ruling out additional lay-offs. Depending on business conditions, “more layoffs and reductions may be required as the year unfolds” the company said. “Additional action would likely be handled with flexible and cost-effective rolling layoffs.” Redundancy costs for 2009 are expected to be about $0.75 per share.

Owens said Caterpillar will lower inventory by about US$3 billion this year and expects sales and revenues for the full year to be in the range of plus or minus 10% around a midpoint of US$35 billion. (Last year sales and revenues reached US$51.32 billion.)

At presstime in New York, the world’s leading maker of construction and mining equipment, diesel and natural gas engines and industrial gas turbines, was trading at US$31.01 per share. It has a 52-week trading range of US$21.71-$85.96 per share and 601.5 million shares outstanding.