Caterpillar would like to sell more machines to the customers filling its order book, but can’t because of supply-chain challenges and a shortage of semiconductors. Austen Hufford reports in The Wall Street Journal:
Strong construction activity in the U.S. drove demand for Caterpillar Inc., CAT -0.95% though the equipment maker said it faced higher costs and a bulging order backlog.
Caterpillar said Friday that it continues to have trouble obtaining enough electronics, semiconductors and other parts to make hydraulic shovels and asphalt pavers. The company’s backlog for the quarter ended Dec. 31 increased more than 60% from the year before, to around $23 billion.
“Demand is strong but the ability of us to meet that demand is dependent on the unwinding of some of the supply-chain challenges,” said Andrew Bonfield, Caterpillar’s chief financial officer. “The key for us is to reduce the bottlenecks as much as possible.”
Caterpillar’s shares fell 5.2% to $201.16 Friday as the company said a profit measure had declined due to higher shipping and manufacturing costs. The company reported higher-than-expected shipping costs in the latest quarter as it used more expensive means, like air shipments, to speed deliveries to customers.
Caterpillar and other manufacturers have been dealing with port delays, higher trucking and flying costs, as well asdifficulties obtaining enough parts and computer chips. Many of the problems have been driven by strong orders across the board, stretching the economy’s ability to make enough products, manufacturers said.
The backlog is now worth nearly half of Caterpillar’s sales for the just-completed year.
“They want us to meet their demand,” Mr. Bonfield said. “They need those machines to do their work.”
Factory shutdowns in some parts of China, driven by a recent increase in Covid-19 cases, pose another challenge for Caterpillar. The company said construction demand could fall in China this year.
Caterpillar said a strong global economy was leading to more orders from customers, as well as less trouble in paying their outstanding bills. The company said the percentage of past dues in its financial arm were the lowest in 15 years, declining to 1.95% at the end of 2021 compared with 3.49% at the end of 2020.
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