A global mining industry slump cut into second-quarter earnings at Caterpillar Inc. as companies spent less on equipment and dealers cut inventories more than Caterpillar expected.
The world's largest maker of construction and mining equipment posted a 43 percent slide in earnings and cut its profit and revenue outlook for the year.
Caterpillar reported earnings of $960 million, or $1.45 per share, compared with $1.7 billion, or $2.54 per share a year ago. Revenue slid 15.8 percent to $14.63 billion.
That was well short of Wall Street's expectations. Analysts surveyed by FactSet had expected a profit of $1.69 per share on revenue of $15.09 billion.
The company said dealers cut inventories by $1 billion as the global mining industry slowed. Growth especially slowed in China.
Shares of Caterpillar Inc. fell $2.06, or 2.4 percent, to $83.46 in afternoon trading.
Caterpillar also said it had currency translation and hedging losses during the quarter.
CEO Doug Oberhelman predicted improved profits during the second half of the year as the company takes further cost-cutting measures.
Caterpillar still cut its full-year profit outlook from about $7 per share to $6.50. And revenue is now expected to come in between $56 billion and $58 billion, down from previous guidance of $57 billion to $61 billion.
Dealers, Oberhelman said, used inventory from Caterpillar's product distribution during the quarter rather than stocking their own businesses. Company inventory also dropped by $1.2 billion.
Dealers are positioned to cut inventory even further, and the company expects it to fall by $1.5 billion to $2 billion in the second half, Oberhelman said.
"That means we are underselling end-user demand this year, and it sets us up for better sales in 2014," he said.
Caterpillar, which has seen its share price decline 7 percent this year, repurchased $1 billion worth of stock in the second quarter, and based on strong cash flow, it expects to buy another $1 billion worth in the third quarter.
On a conference call, Mike DeWalt, the company's controller and investor relations chief, conceded that production and profit margins won't pick up until mining companies begin ordering more equipment from dealers, who will then restock inventories.
"I think that's certainly having some impact on the dealer order rates to us," he said. "Certainly until we get through the inventory reduction, that will probably be a drag at least on orders placed on us," he said.
Oberhelman said the company already has temporarily closed factories and had rolling layoffs. "We've taken significant action already, and we will be taking additional cost reduction measures in the second half of 2013," he said.
Caterpillar cut its global full-time work force by more than 10,000 people compared with the second quarter of last year. The company had 122,402 employees at the end of June. The temporary work force also dropped by 9,633 during the quarter.
Profits fell in each of Caterpillar's big divisions. Operating profit fell 61 percent to $550 million in resource industries, which includes mining. It was down 47 percent to $362 million for construction equipment, and down 3 percent to $955 million in power systems, which makes items including large electrical generators and locomotive engines.