28 Jan 13. Caterpillar Inc, the world’s largest maker of construction equipment, posted a 55 percent drop in quarterly profit on Monday due to a charge connected with accounting fraud at a Chinese subsidiary and weak demand among its dealers. Caterpillar’s bulldozers, tractors and other machines have been accumulating in warehouses due to slowing economies in China, Europe and the United States. The company said it was able to sell off some of this glut in the fourth quarter, reducing the value of its inventory from the third quarter by $2bn. Inventory levels, however, remain $1bn above year-ago levels, and executives expect 2013 to be a “tough year.” Adding to the company’s troubles, quarterly results were hit by a charge of 87 cents per share after the company discovered accounting fraud at a Chinese coal mining supplier it bought last year. In a somber note on the global economy, Caterpillar said the “most significant favorable factor” for 2013 profit will be the absence of the ERA accounting fraud writedown, not increased demand for its machines.
“We’re encouraged by recent improvements in economic indicators, but remain cautious,” Caterpillar Chief Executive Doug Oberhelman said in a statement. For the fourth quarter, the company posted net income of $697m, or $1.04 per share, compared with $1.55bn, or $2.32 per share, in the year-ago quarter. Excluding one-time items, the company earned $1.46 per share. By that measure, analysts expected earnings of $1.69 per share, according to Thomson Reuters I/B/E/S. Wall Street, however, appeared to look past the China accounting fraud mess, sending Caterpillar’s shares up 2.1 percent to $97.62 in morning trading. Revenue fell 7 percent to $16.08bn. Analysts expected revenue of $16.12bn, according to Thomson Reuters I/B/E/S. Caterpillar expects to earn $7 to $9 per share in 2013, below the $9.12 per share analysts expect. Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei, China’s fourth-largest maker of hydraulic coal mine roof supports, last June, paying $653.4m (HK$5.06bn). After the deal closed, Caterpillar found that physical inventory did not match accounting statements, a discovery that led to the charge. The case has opened questions about Caterpillar’s research into ERA before the deal, as well as the adequacy of its auditors. Caterpillar does not expect the fraud to harm its 2013 profit, but it will hinder the company’s expansion into China, the world’s largest coal producer. (Source: Reuters)
29 Jan 13. Chinese Firm Wins A123 Despite U.S. Tech Transfer Fears. China’s largest auto parts maker won U.S. government approval to buy A123 Systems Inc., a maker of electric car batteries, despite warnings by some lawmakers that the deal would transfer sensitive technology developed with U.S. government money. The sale of the lithium-ion battery maker to a U.S. unit of Wanxiang Group was approved by a U.S. government committee on foreign investment, according to a statement from the Chinese company. (Source: glstrade.com/Reuters)
28 Jan 13. Strong demand for 4G buoys Filtronic. Shares in Filtronic jumped up to a fifth on Monday after strong demand for fourth-generation or “4G” products boosted the telecoms equipment maker’s revenues and triggered earnings upgrades. Sales in Filtronic’s wireless division more than doubled year-on-year to £11.9m for the six months to 30 November because of widespread adoption of 4G services, which provide faster internet access to mobile users. The wireless division swung into the black, posting a £1.8m operating profit compared to a £0.4m loss in the corresponding period last year. Wireless now accounts for 80 per cent of the group’s turnover. Alan Needle, chief executive, said: “We expect to see growth coming from wireless for the foreseeable future.” Total revenues jumped 56.2 per cent year-on-year to £16.4m. Analysts upped their forecasts in response, with Panmure Gordon increasing its pre-exceptionals fore