Caterpillar in Profit While JCB Struggles

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As Caterpillar posts a return to profit and JCB still teeters on the edge of continuing losses the relative position of the two companies firmly underlines the diverse fortunes of the construction and mining industries.

Caterpillar’s focus this time last year was on contingency plans they drew up on the basis of poor copper prices. As prices crashed, the company swiftly moved to implement those plans by late December of last year. Since then Caterpillar has laid off, bought out or retired about 34,000 workers globally according to a Chicago Business article. Aided by a rapidly recovering copper price and with it a resurgent mining sector, the company returned to profitability (albeit less than half of the figure posted this time last year) on the back of rising sales of big earth movers.

JCB of the UK, on the other hand, is still struggling to make a profit this year, as sales dropped from 56,000 units in 2008 to a projected 35,000 this year. If it does post a loss it will be the first in it’s 64 year history but hardly surprising as sales outside of China and India have dropped by 50% for them this year. JCB is globally the third largest producer of earth moving equipment by units sold behind Komatsu of Japan and Caterpillar of the USA, although with revenues significantly less than the two leaders as its focus is on smaller machines more often used in the construction industry than mining. Although JCB has a manufacturing presence in China it is still in the early stages of development. Sales are growing there at 10-15% a year according to this FT article but it is Europe that has seen the largest downturn. A bright spot for JCB is India, where the company is the largest supplier of construction machines by units, accounting last year for just more than half the total 30,000 machines sold. Sales in India are up and the country is likely to become JCB’s biggest market by units sold this year. However the company is forecasting growth in the rest of the world as flat next year with little sign of an early turn around in commercial construction. As an example of how an industry’s fortunes can impact their supply chain one doesn’t have to look further than mining and construction’s impact on Caterpillar and JCB.

–Stuart Burns

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