On The Call: Caterpillar addresses dealer inventories

On The Call: Caterpillar’s inventories

PEORIA, Ill. — Heavy machinery maker Caterpillar Inc. said Thursday that stabilizing inventories at dealerships helped push its quarterly profits up 91 percent in the second quarter.

The company said inventories were flat, compared with the sharp tumble they took in the year-ago quarter. That was when dealers cut way back on inventories in response to crumbling demand for Caterpillar machinery as the recession took hold.

Caterpillar’s director of investor relations, Mike DeWalt, discussed the company’s inventory strategy on a conference call with analysts.

QUESTION: It is easy to read the 10-year dealer inventory lows as a positive for future production, but there is also the offset where you are trying to work them lower. I was wondering if you can fill that out with some metrics if they are below your new target.

RESPONSE: Overall dealer inventory, right now, they have come down a lot. They are below the historical averages as you said. It is not in our plan to take them down from here, but on the increase in volume we have seen this year, the plan is to hold them steady where they are right now.