113 annotations
Conversely, dealer inventory and Energy & Transportation increase mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand.
As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders.
E$ & T inventiry depends on commissioning pipeline
Transcript
2023 Q4
28 Feb 24
During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential.
Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023
positive weighting to end in 2024
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2023 Q4
28 Feb 24
As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023.
2024 guide --0 saldes & revenue similar to 2023
Transcript
2023 Q4
28 Feb 24
Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution.
(No comment added)
Transcript
2023 Q4
24 Feb 24
this was nearly offset by the increase in dealer inventory
(No comment added)
Transcript
2023 Q3
24 Feb 24
sales to users were lower than we had anticipated
(No comment added)
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2023 Q3
24 Feb 24
We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level.
(No comment added)
Transcript
2023 Q4
24 Feb 24
The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022.
(No comment added)
Transcript
2023 Q4
24 Feb 24
Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion.
fcf guide for 2024
Transcript
2023 Q4
6 Feb 24
Yes. So I think what we guided to is that we expect price to exceed manufacturing costs for the full year.
We expect price to be positive in the first half of the year, more positive in the first half of the year because of carryover pricing. Obviously, there will be some other factors that go through there.
Geographic mix, for example, was positive this year. That may not be as positive as we go through the second part of the year.
So those are the sort of mix things that can happen. At this stage, we're not giving you a prediction -- a firm prediction. We know what we think overall for the full year, but most of that price benefit will come through in the first half.
pricing in 2024
Transcript
2023 Q4
6 Feb 24
Jim, Andrew, I'm wondering if you could just say more about the increase to the free cash flow guidance, a bigger increase there than on the margin framework. And we're a couple of years away, where you folks in 2020 were below the $5 billion number.
So can you just talk about what's playing out better than you folks expected to drive the much stronger outlook for free cash flow conversion? And obviously, we're seeing a little performance here as well, but I'm wondering if you could just expand on the comments on the confidence through the cycle?
D. Umpleby
Well, Jerry, you recall when we launched our strategy in 2017, we really focused very heavily on OPACC, operating profit after capital charge. And we're really challenging our teams to work to ensure that we get a return for every dollar of capital that we invest. And we've also worked hard to reduce our structural costs. And again, with OPACC as our measure, that obviously helps us produce more cash.
Again, we demonstrated the ability to produce higher free cash flows. If I remember the numbers correctly, between 2019 and 2022, we produced $5 billion to $6 billion of free cash flow. And then in 2020, we had a 22% decline in our top line. And even that year, even during the COVID year when our top line dropped more than 20%, we still produce $3 billion of free cash flow.
So again, we have the whole organization based on OPACC, and that's working all those levers every single day, and that helps us drive increased free cash flow.
fcf target raise hike colour
Transcript
2023 Q4
6 Feb 24
o can you help us understand what could drive this acceleration in growth? And do you need industry growth to remain positive during these next 3 years to support that aspiration? Or can services grow independent of the end market or industry growth?
D. Umpleby
Well, thank you for your question. We've been pleased by the progress we've made.
You recall, we started with that 2016 baseline of $14 billion, and we have increased it to $23 billion.
Our teams continue to strive to achieve that $28 billion number.
And one of the things we said when we laid out the target is we didn't expect it to be in a straight line. We thought it would be relatively back-end loaded. But we continue to invest in our digital capabilities, e-commerce. I talked earlier about CVAs and the other things that we're doing. We're working very closely with our dealers as well.
So we do believe that there's an opportunity, regardless of industry growth to increase services. And again, we continue to strive to achieve that number.
One of the things that we also would notice is STUs were positive as well. And one of the things that impacts, of course, our services sales is dealer buying patterns are on parts, but we're encouraged by the fact that STUs were positive.
services to 28bn?
Transcript
2023 Q4
6 Feb 24
China is relatively weak. Over time, that market has been 5% to 10% of enterprise sales, and we had strong years in China in 2020 and 2021. We saw a decline in 2022, a further decline in 2023, and we expect that market to still be relatively weak again this year.
china weak
Transcript
2023 Q4
6 Feb 24
Energy & Transportation
e & t 2024
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2023 Q4
6 Feb 24
n Construction Industries, sales for equipment to end users should remain roughly similar compared to the strong year we saw in 2023.
However, we do not expect a dealer inventory build as we saw last year.
We also anticipate our services initiatives will benefit the segment in 2024.
cons ind 2024
Transcript
2023 Q4
6 Feb 24
In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison.
resource will be lowe
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2023 Q4
6 Feb 24
We anticipate another year of services growth as we continue to target $28 billion by 2026.
serv ces gr9owth
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2023 Q4
6 Feb 24
Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales.
Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged.
To explain, while higher gross margin support increasing the top end of the range, that actually pressure our margins in periods of decreasing volume.
For that reason, we believe that the bottom end of the range remains challenging, but achievable.
We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues.
raised high end of op mgn
Transcript
2023 Q4
6 Feb 24
see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms.
strong demand for used equipment
Transcript
2023 Q4
6 Feb 24
The increase was mainly due to a lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets.
Our portfolio continues to perform well with past dues in historic levels of 1.79%. We saw a 10-basis-point improvement compared to the fourth quarter of 2022 and a 17-basis-point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006.
The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever.
v high credit quality
Transcript
2023 Q4
6 Feb 24