As part of a strategic investment in the mining business, Caterpillar (CAT) will open a new manufacturing facility in Thailand. The company expects to start production from late 2012.
To set up its first manufacturing facility in Thailand, an Australian subsidiary of Caterpillar inked a deal with Hemaraj Land & Development Pcl to buy land at an industrial estate in Thailand for the purpose. The facility, which is expected to engage 800 employees, will be built on an area of 71,759 square yards.
During the third quarter conference call, Caterpillar announced its plans of expanding mining products with shovels and electric-drive trucks. This new facility will complement the company’s plans, as a full range of underground mining articulated trucks and loaders will be manufactured at this facility. Underground mining articulated trucks and loaders are used in hard-rock underground mining applications.
The production from the new facility will add to underground mining products produced by Caterpillar in Australia and Brazil, thereby increasing total capacity. The Machinery and Engines Sales, which increased a whopping 59% in the third quarter of 2010, will be further augmented by increased production from the new facility.
However, in early January, Caterpillar decided to defer its earlier plan of producing a full range of mining shovels at its Aurora, Illinois facility. The decision is a an outcome of Caterpillar’s pending purchase of Bucyrus International Inc. (BUCY), a South Milwaukee-based manufacturer of mining equipment and mining shovels, in a transaction worth $8.6 billion.
Caterpillar expects 2010 sales to be between $41 billion and $42 billion and earnings in the range of $3.80 to $4.00 per share for full year 2010. The Zacks Consensus Estimate for fourth-quarter 2010 is $1.27 per share. For fiscal year 2010, the Zacks Consensus Estimates is $4.03 per share. Caterpillar also expects sales to be $50 billion in 2011. The Zacks Consensus Estimates is $4.03 per share for full year 2011.
We believe Caterpillar’s strong brand name, pricing power and global dealer network place it in an advantageous position to capitalize on the growing need for infrastructure development worldwide.
We maintain our “Neutral” recommendation on Caterpillar. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base. Caterpillar operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd., (KMTUY) and Volvo AB (VOLVY).
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