Equipment Giants Post Huge Profits Despite Covid-19

Global equipment manufacturers have made a strong start to 2021, reporting high revenues for the first quarter of the year despite the undesirable impact of Covid 19 on the construction equipment industry.

Caterpillar, for example, has reported $11.9 billion in total sales and revenues during the period – a 12% increase on the $10.6 billion posted in the first quarter of 2020 – mainly attributable to changes in its dealer inventories and higher demand from end-users.

The company’s Construction Industries segment reported $5.5 billion in sales and revenue, up from $1.1 billion last year, and $1.03 billion in profit during the period under review.

Likewise, Cat’s Resources segment which includes mining brought in $2.2 billion in the first three months of the year, compared with $2.08 billion in 2020.

“We’re encouraged by improving conditions in our end markets and are proactively managing supply chain risks. Our dedicated team continues to execute our strategy for long-term profitable growth,” Cat’s Chairman and CEO Jim Umpleby said in a statement.

Sales for Europe, Africa, the Middle East (EAME), Latin America, and the Asia/Pacific region rose by 22%, 48% and 72% respectively – with North America bringing in just 2% more than in 2020.

Bigger inventories

This, Cat said, was partly due to “favourable currency impacts” in the Latin America, EAME, and Asia/Pacific regions, which meant dealers in the markets had bigger inventories in the first quarter of 2021 than they did a year earlier.

Like Caterpillar, Volvo Construction Equipment (CE) is also swimming in money. Sales for the first quarter totalled $2.9 billion compared to $2.4 billion in 2020.

Operating income rose by 42% to $454 million, with the operating margin up 13.3% to 15.4%. The company also reported a 73% rise in order intake.

According to the company, all geographical market areas reported increased sales – from 12% in Europe to 35% in Asia, which also posted the highest sales at $1.3 billion.

This was nearly half the total sales for the quarter, lifted by strong demand in China due to State infrastructure investment and increased demand in South East Asia, Korea, and India.

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Volvo CE president Melker Jernberg said it was encouraging to see demand rising in the first three months of the year, with sales up across all regions and markets.

“Together with a high level of construction activity in several other sectors, this is driving demand for both new machines and services, reflected in both deliveries and order intake rising sharply for the first quarter,” Jernberg said.

Impact of pandemic

Volvo CE’s Q1 results marked the third consecutive quarter that sales have improved year-on-year, after a downturn in Q2 of 2020 that mirrored the impact of Covid-19 on construction equipment industry.

In February, Deere & Company posted much stronger-than-expected earnings for the first three months ending in January – saying an improving market for agricultural and construction equipment was expected to boost sales and profits this year as the global economy recovers from the pandemic.

The Illinois-based heavy equipment giant said its sales and revenues grew 19% to $9.11 billion compared to the same period a year earlier, while equipment operations net sales rose to $8.051 billion, from $6.530 billion in the same period last year.

Looking into the end of the 2021 financial year, Deere & Co. sees an overall full-year income of between $4.6 billion and $5 billion, higher than its November forecast of between $3.6 billion to $4 billion.

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