Outlook remains rocky for Joy Global, Caterpillar
If there’s a bottom to the mine shaft for Milwaukee mining equipment companies, which saw business plummet in 2013, they haven’t found it. Joy Global Inc. ended the year with net income down 30%, to $533.7 million, or $4.99 a share, and revenue down 12% to $5 billion.
Caterpillar Inc., which has its mining equipment division based in South Milwaukee, reports fourth-quarter and full-year earnings on Jan. 27. In its most recent quarter, the company said earnings plunged 44%, to $946 million, or $1.45 a share, and that revenue would be down 17% for the year.
Caterpillar shut factories and cut its workforce by some 13,000 people, including hundreds of jobs in Milwaukee and South Milwaukee, where it manufactures some of the world’s biggest mining machines.
Until 2013, rising commodity prices fueled a boom for Caterpillar, based in Peoria, Ill., and Joy Global. Then China’s economy sputtered, undercutting demand for mined materials and the machines used to extract them from the ground.
This past year delivered a string of serious blows to the mining industry, business consulting firm Deloitte & Touche said in a recent report.
“As China put the brakes on its ultra-high growth rates, key commodities such as iron ore and coal threaten to tip into oversupply,” the report noted.
Mining equipment companies will remain in a rough patch for at least another year or two, analysts say. The drop in sales this year won’t be as dramatic as last year, but the industry hasn’t hit bottom yet.
“If you look at what miners are saying publicly, they expect their capital expenditures to continue to decline through 2016,” said analyst Mircea Dobre with Robert W. Baird & Co.
“They had a tremendous run, for about a decade,” Dobre said.
It resulted in a hiring frenzy at Joy Global and Caterpillar, with Joy spending millions of dollars to upgrade its factory on W. National Ave. and adding several hundred jobs in 2011 and 2012.
Joy went years without a major layoff at its P&H mining equipment factory, but last fall laid off several hundred people including welders and others in the skilled trades.
“These jobs are very important to this community. But the mining industry is cyclical, and Milwaukee has been through these down periods more than once,” Dobre said.
There was a pullback in mining in 2009, but the recovery was fairly quick as mine operators responded to commodity demands from China and continued to invest in expansions.
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