Jan 31, 2023
Caterpillar Warns of China Demand Slipping Below 2022 Levels
(Bloomberg) -- Caterpillar Inc., one of the world’s largest makers of heavy machinery, is warning investors that China demand won’t be bouncing back this year.
Chief Executive Officer Jim Umpleby told analysts on Tuesday’s quarterly earnings call that the US company expects demand from the Asian nation to continue to be sluggish, even falling below 2022 levels in the year ahead.
“We had a couple of really strong years in China in 2020-2021 and we saw softening in 2022,” Umpleby said. “We don’t see signs of improvement at this point.”
His comments helped extend Caterpillar’s stock drop, with shares down 4.4% at 10:44 a.m. in New York, after the machinery maker reported earnings that missed expectations.
While Caterpillar has previously said China accounts for just 5% to 10% of total business sales, such commentary is key for investors seeking insights on real demand in a nation that accounts for half of commodity markets and massive construction growth. China was a drag on Caterpillar last year as Covid-related lockdowns and a pullback in building cooled growth in the nation to the slowest pace in decades.
Caterpillar’s benchmark for demand in China is the 10-ton and above excavator market, which Umpleby said will be weaker in 2023 than last year. The CEO said the Irving, Texas-based machinery maker continues to invest in new products in China to maintain its competitiveness.
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