Caterpillar profit drops braces for slowdown

Caterpillar on Monday reported a 55 percent drop in fourth-quarter profit from a year ago, hit by a big charge on a Chinese acquisition after accounting fraud was found. The US construction and mining equipment giant, considered a bellwether of the global economy, said earnings were also hit by steps it took to slow production and cut inventories by $2 billion to adjust to tough global market conditions. Caterpillar reported fourth-quarter net profit of $697 million compared with $1.5 billion in the year-earlier period. Revenue fell 6.8 percent from 2012 to $16.07 billion. As previously announced, Caterpillar took a $580 million writedown on Siwei, a Chinese mining equipment company it acquired last year and subsequently discovered accounting fraud at the unit. Caterpillar chief executive Doug Oberhelman restated that Siwei\'s problems did not alter Caterpillar\'s desire to become a bigger player in China. The China market is already \"very important\" and will become even more so in the future, he said. \"Even with the impairment (the acquisition) still makes sense,\" Oberhelman said on a conference call with analysts. Oberhelman took responsibility for the Siwei acquisition and reiterated that the fraud was the result of willful actions by former company officials. He said Caterpillary is considering \"all possible actions\" to respond. Offsetting in part the China writedown and other negative hits to quarterly profit, the company posted a $300 million one-time gain related to a tax issue. Excluding special items, earnings per share came in at $1.46. Analysts had forecast $1.70. \"Considering the weak economy in the United States, along with much of Europe in recession and China slowing, we had a solid year,\" Oberhelman said in a statement. \"Our incremental profit pull-through was very good, we made progress adjusting inventory levels and our quality and safety indicators continued to improve.\" Caterpillar reduced inventory by reducing production rather than selling goods at a reduced price, company officials said. Credit Suisse in a note called Caterpillar\'s move to reduce inventory \"key as inventory has been a huge overhang on the stock.\" Caterpillar shares were up 1.3 percent in early-afternoon trading. Caterpillar said it was taking steps to prepare for an uncertain market in 2013. The Peoria, Illinois-based company forecast this year\'s revenue in the range of $60-68 billion and profit per share of $7-$9. \"The range of our 2013 outlook reflects the level of uncertainty we see in the world today,\" said Oberhelman. \"We\'re encouraged by recent improvements in economic indicators, but remain cautious.\"