Caterpillar Inc. said Tuesday that revenue fell by at least a fifth in the last quarter in each of its three global segments: construction, mining, and power and transportation. 3M Co. said sales were down in about half of its business segments from a year earlier and demand for its products for non-emergency medical and dental procedures is not expected to recover in the future. next year.
Their findings show that business customer demand is fragile as the pandemic continues to disrupt work routines and commerce.
“It reflects the challenges that remain with Covid,” 3M chief executive Mike Roman said in an interview of demand for its medical and dental products. “It’s not going to be a perfectly straight line.”
Shares of 3M fell 1.8% to $163.15 on Tuesday, and Caterpillar fell 3.7% to $157.20.
At the same time, demand for 3M products such as N95 masks and household cleaning products is booming, and sales for the St. Paul, Minn.-based company are up 4.5% to reach $8.35 billion in the third quarter. Some consumer-focused manufacturers, like Whirlpool Corp., have struggled to meet demand from consumers renovating homes and buying new vehicles.
“We see both sides of the pandemic,” Roman said.
Covid-19 cases are rising sharply this month in the United States and other parts of the world. This leads to new restrictions on restaurants and other businesses. Industrial activity, meanwhile, remains moderate. US factory output fell in September after three months of gains, the Federal Reserve said earlier this month.
Some manufacturers said they were hit this year by a drop in demand followed by a surge. Engine maker Cummins Inc. said on Tuesday it posted its biggest sales increase in the last quarter compared to the previous three months.
“Even with the dramatic increase, however, sales remained below last year’s levels,” Cummins chief executive Tom Linebarger told analysts on Tuesday.
Coatings maker PPG Industries Inc. said last week that sales of its coatings used on aircraft fell 35% in its latest quarter as major aircraft manufacturers cut production and airlines flew less.
Caterpillar said slower construction of everything from cruise ships to pipelines during the coronavirus pandemic is weighing on demand for its heavy machinery.
“These are very big machines, very expensive, and people report [purchases] until they have some clarity,” Andrew Bonfield, Caterpillar’s chief financial officer, said in an interview.
The oil and gas market was particularly weak for Caterpillar. Its sales to customers in this industry fell 41% as lower energy prices blocked the development of new oil and gas fields. Caterpillar continues to view energy as a long-term opportunity. During the quarter, it announced it would buy the oil and gas business of Weir Group PLC for $405 million.
Caterpillar said there were positive signs in the markets for its machines. He expects China’s industry-wide construction demand to grow for the full year, despite a massive decline in early 2020 as the country initially struggled to contain the virus. In the United States, homebuilders have increased their construction rates in recent months.
“Residential construction is a beacon of hope. This is something we plan to continue,” Mr Bonfield said.
Caterpillar said it was well positioned to weather the crisis, with $9.3 billion in cash and $14 billion in cash on hand at the end of its third quarter.
The company said it expects fourth quarter sales to improve from the third. The company’s backlog increased $500 million from the second quarter, but remained $1.2 billion lower than the year-ago quarter.
“While the situation remains fluid, overall we are cautiously optimistic,” chief executive Jim Umpleby told analysts.
Caterpillar saw an increase in late customer payments, with the overdue payment rate dropping to 3.8% from 3.2% in the same quarter a year earlier. Still, the company said its customers remain in good financial health. While some opted for a revised payment schedule at the height of shutdowns earlier this year, about 90% have now returned to paying on a normal schedule, Caterpillar said.
Overall revenue fell 23% to $9.88 billion from $12.76 billion in the same quarter a year earlier. Profit fell 55% to $668 million.
3M said sales of N95s and other masks were $235 million higher than in the same quarter a year earlier. The company said it has sold 1.4 billion masks so far this year and is on track to sell 2 billion by the end of 2020 as it has more than tripled production.
The company said its global sales rose 0.9%, excluding acquisitions and currency movements, including a 5% increase in the United States and 8% in China. 3M posted a profit of $1.41 billion compared to $1.58 billion in the same period last year.
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