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The price of Caterpillar vehicles in 2013 is set to rise by three per cent.
The price of Caterpillar vehicles in 2013 is set to rise by three per cent.

Caterpillar foreshadows price rises

Citing industry factors and general economic conditions, Caterpillar has implemented a price increase of up to three per cent on most of its machines globally.
This price increase will be effective from January 2013 and includes adjustments to list prices and merchandising support. It will vary geographically as well as by the type of equipment. Additionally, the company intends to increase prices by up to seven per cent on select models for applicable regions to cover the cost of incremental pollution-reduction components to comply with stricter federal standards.

“Even though spot steel prices have come down during the recession, a lot of manufacturers say they believe if demand for their products picks up early in 2013 they expect to see steel prices rise again by the middle of next summer,” said Mark Koznarek of Cleveland Research.

“Caterpillar and the other manufacturers want to get away from having to make mid-year adjustments by announcing small increases now. Also, I think it helps abate some of the discounting that has been going on. We’re seeing it among a lot of manufacturers,” he said.

Koznarek said he does not view the price increase as a sign that Caterpillar is optimistic demand will increase soon. He said that his firm researched the company’s North American dealers and learned that they have not recently seen much of an increase in demand.

“I don’t think there is a relation between the price increase and any feelings of optimism, at least not in North America,” he said.

In October 2011, Caterpillar announced price increases of up to two per cent worldwide, effective January 2012. It had also implemented an emissions-related price increase of two to six per cent for applicable products and regions. The company recently trimmed its guidance for fiscal 2015, due to modest and insipid economic growth expectations through 2015 and a less likely scenario of a worldwide recession.

Caterpillar will discuss its 2013 expectations when it releases its quarterly earnings in November. The year 2013 is expected to be similar to 2012 with respect to worldwide economic growth, and better growth is expected in 2014.

The company remains hopeful that construction activity in the emerging markets will witness modest improvemen and plans to remain focused on cost control measures and continues to invest in research and development. However, Caterpillar has opted to be cautious toward acquisitions and investments in expansion.

Sources: Zacks Equity Research, PJ

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Tuesday, 22 October, 2019 7:51am
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