The weakness in the Chinese economy is a major factor to the equipment maker’s woes. The emerging economy has spent billions of dollars on infrastructure and equipment, including Caterpillar’s bulldozers, excavators and tractors.
Caterpillar Chief Financial Officer Andrew Bonfield pointed out that China made up between 5% and 10% of the company’s total sales and 10% to 15% of its construction unit’s revenue. The company calculated that the impact from tariffs on steel and other materials was about $40 million in the third quarter and over $100 million for the full year.
China, the world’s second largest economy, has slowed down in recent months, following the extended trade tiff with the U.S. Many companies have already pointed to softness in China as a major concern in the earnings season.
“In Asia-Pacific, we expect construction growth in countries outside of China,” Chairman and CEO Jim Umpleby said on a call with investors, CNBC reports. “Within China, the industry is very dynamic and there are a variety of forecasts. We will continue to monitor the situation but as of now we are forecasting the overall China market to be roughly flat in 2019 following two years of significant growth.”
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