CAT first quarterly loss in 17 years, from job-cut charge

Caterpillar Inc (CAT - News), the world's largest maker of construction and mining equipment, reported its first quarterly loss in 17 years on Tuesday, pulled into the red by more than half a billion dollars in charges from its wave of recession-triggered layoffs.

The company also slashed its full-year earnings and sales forecast, sending its shares lower in early trading.

Caterpillar, which has eliminated about 25,000 full-time and temporary positions over the past few months, posted a first-quarter loss of $112 million, or 19 cents a share, compared with a year-earlier profit of $922 million, or $1.45 a share.

Sales fell 22 percent to $9.2 billion.

Caterpillar said it now expects full-year earnings of $1.25 a share, before restructuring costs, on sales of $31.5 billion to $38.5 billion. Three months ago, the company forecast profit of $2.50 a share, before restructuring, on sales of $36 billion to $44 billion.

The company blamed the cut, and the wide estimate range, on "the high degree of uncertainty" surrounding the global economy, the timing and impact of stimulus measures around the world, and the ability of its dealers to reduce inventory.

Shares of Caterpillar were down about 5 percent at $28.93 in trading before the market opened.

Sales of the company's distinctive yellow construction and mining machinery tumbled 29 percent overall, led by a 46 percent decline in sales in Europe, Africa and the Middle East as a result of lower commodity prices and lower oil production,

The results reflected $558 million in charges Caterpillar booked during the quarter as a result of the layoffs.

Stripping out those costs, Caterpillar said it made 39 cents a share.

On that basis, the results were better than expected. Analysts, on average had expected Caterpillar to report a profit of 2 cents a share, according to Reuters Estimates. But despite the earnings beat, Jim Owens, the company's chairman and chief executive officer, warned in a statement that it was "extremely difficult to know how our customers will respond during the remainder of 2009."

"They gave you a better first quarter, but it's going down the rest of the year" said Eli Lustgarten at Longbow Research.

"They're trying to level out and hold things together and stay profitable for the year before charges. But the first quarter is the best of the year and it's clearly getting weaker and there's still uncertainty about next year."

Caterpillar said economic activity had dropped over the past six months but that the rate of decline seemed to be moderating. Even so, it predicted world output would continue to fall in the near term.

It said it was taking several steps to conserve cash, including suspending stock repurchases and cutting capital expenditures by $3 billion.It also said additional job cuts might be necessary, but that they "would likely be handled with flexible and cost-effective rolling layoffs" rather than permanent separations.

"In this environment, liquidity is a major focus," Owens said, "and as a result we've decided to hold more cash than usual."

Disclosure I am long cat.