Caterpillar’s marine engine sales up 20 percent

PEORIA, Ill. – Caterpillar Inc. (NYSE: CAT) reported today record sales and profits for fiscal year 2004, due in part to a 20-percent increase in sales of marine engines, primarily from healthy demand for pleasure craft engines.

The manufacturer reported yesterday record sales and revenues of $30.25 billion and record profit of $2.03 billion, or $5.75 per share, up 85 percent, for fiscal year 2004. For the fourth quarter, the company also reported record sales and revenues of $8.57 billion and profit of $551 million, or $1.55 per share, up 58 percent over last year’s fourth quarter.

“Without question, 2004 was one of the most remarkable years in our proud history,” said Chairman and Chief Executive Officer Jim Owens. “In 1997, with sales and revenues less than $19 billion, we set the goal of becoming a $30 billion company by the middle of this decade. While many thought it was overly ambitious, today we’re able to celebrate that tremendous accomplishment ahead of schedule. We owe thanks for these record results to everyone who makes up Team Caterpillar – our employees, dealers and suppliers. Throughout the year, the team effectively responded to an unprecedented recovery in nearly every market we serve and enhanced our long-term strategic position by meeting record customer demand and building substantial field population.”

Sales and revenues were up $7.49 billion or 33 percent compared to $22.76 billion in 2003. Cat says that the increase in sales and revenues was driven by $6.26 billion of higher machinery and engines volume, a $515 million favorable impact of currency on sales due primarily to the strengthening euro and British pound, $512 million of increased price realization and $200 million of higher financial products revenues.

“We’re clearly pleased to have reached this important $30 billion milestone, but we have not yet delivered bottom line performance in line with our own expectations,” Owens added. “While we remain committed to satisfying our customers, we’re disappointed with our cost structure, particularly steel-related costs and supply chain inefficiencies due to lack of material availability. That, coupled with a record order backlog which delayed price realization, caused incremental margins to lag in 2004.”

Cat’s engines sales increased to $9.49 billion, an increase of $2.12 billion or 29 percent from 2003. Sales volume was up about 24 percent, of which 3 percent was attributed to the favorable impact of currency.

Expectations for 2005

Owens said he expects another “all-time record year” in 2005, expecting sales and revenues to be 12 to 15 percent and profit per share to be up 25 percent.

“The year will benefit from improved price realization, increased volume, manufacturing efficiencies and an intensified focus on our cost structure,” he predicted. “We expect material cost pressures to continue for the first half of 2005, with some relief in the last six months. As a result, we expect the last half of 2005 to be stronger than the first half.”

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