Caterpillar, Inc. · NYSE:CAT
Caterpillar — Investor Day (March 2014)
46 slides from Caterpillar's investor day presentation, Mar 4, 2014
Slide 1: Welcome to CONEXPO-CON/AGG
Welcome to CONEXPO-CON/AGG Caterpillar Strategy & Business Review Forward-Looking Statements Certain statements in this filing relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believ
Slide 2: Today's Agenda
Today’s Agenda Strategy Review • Overview Doug Oberhelman • Unmatched Dealer Support Stu Levenick • Lean / Integrated Value Chains Dave Bozeman • Growth & Financial Performance Brad Halverson Business Reviews • Construction Industries Ed Rapp • Resource Industries Steve Wunning • Energy & Transporta
Slide 3: In 2010 … significant changes to our strategy
• We’ve been in business a very long time • We’ve delivered total shareholder return in the top 30% of the S&P500 over the past 20 years • We have a great strategy for the future In 2010 … significant changes to our strategy External focus on beating competitors and helping customers succeed CPS, qu
Slide 4: Our 2010 Strategy … the Big 8 Imperatives
Our 2010 Strategy … the Big 8 Imperatives Execute the Business Model Excel at Product Development Simplify and attack cost structure Achieve profit and cash pull through Win in China Achieve profitable global machine leadership Expand leadership in Mining and Quarry & Aggregates Aggressively grow Po
Slide 5: But, We Have More To Do
But, We Have More To Do Volatile industry demand … need more cost flexibility Inventory management … made industry volatility even worse PINS / POPS up, but behind target … we need to accelerate Top quartile TSR … good in 2010 & 2011, relatively flat since 2012 Employee engagement … more to do So …
Slide 6: What we told you in 2010
What we told you in 2010 Our goal is to deliver total shareholder return over the business cycle in the top 25% of the S&P 500
Slide 7: Our Big Imperatives
Our Big Imperatives … what we need to execute to drive results through 2018 • Execute the Business Model • Substantially improve dealer collaboration and performance • Exceed customer expectations with outstanding products and solutions • Increase responsiveness to customers at the lowest possible c
Slide 8: To Summarize
So…the key elements we’re focused on are … More flexible cost structure We took out significant costs in 2013, but minimize trough to peak structural cost need to be better prepared and more growth & improve asset utilization flexible Accelerate growth with PINS, We’ve improved PINS the last 3 years
Slide 9: Unmatched Dealer Support with Across the Table
Unmatched Dealer Support with “Across the Table” Stu Levenick Caterpillar Dealer Network Tremendous Strength -- Capital, Assets, People • Average tenure of Caterpillar Dealers – 40+ Yrs. • 178 independent dealerships serving every region in the world • Employ more than 162,000 people • 1,249 dealer
Slide 10: Vision 2020 Across The Table
Vision 2020 Across The Table Relationship Based on What we value ‐‐ Long‐Standing Principles then and now The Foundation • Character and reputation • Business enterprise • Capital and financing • Product line experience • Territory knowledge • Co-operative relationships
Slide 11: Across the Table: Ideal Profile of a High Performing Cat Dealer
Across the Table Addressing a Changing Competitive Business Landscape Traditional Distribution Model Being Challenged • Globalization • Disruptive Technology • eBusiness “Partnering for our future, inspired by our past” • Economic Uncertainty • Focused Competitors • Fragmented Customer Needs Ideal P
Slide 12: Addressing Fragmented Customer Coverage
Across the Table Addressing Fragmented Customer Coverage Eight Distribution Models Three Core Models Value Add & Cost Competitive • Traditional • Retail • Rental & Used Five Account Management Models Building Upon the Core • Production Critical Equipment • Cross-Territorial • Mobile • OEM • Solution
Slide 13: BUILT FOBT.
BUILT FOBT. BUILT FOBT.
Slide 14: Across the Table Objectives
Across the Table Objectives I Strengthening the • Across the Table Caterpillar-Dealer model • Dealer Renewal & Succession Planning II Enhancing Customer • The Playbook ‐ Driving Best Practices in Serving the Entire Portfolio Focus III • Transparent & Consistent Marketing Achieving Superior • Parts L
Slide 15: Lean Transformation and Integrated Value Chains
What’s Next • Cascade to Dealer leadership teams • Assessments to determine current state and define future vision • Future strategy and planning process • Execution and Governance Lean Transformation and Integrated Value Chains Dave Bozeman
Slide 16: Caterpillar Value Chain Framework
Caterpillar Value Chain Framework Market Back Internal & Product Product Customer External Logistics Operations Strategy Distribution Requirements Suppliers Strategy Capability Performance Enterprise Excellence Strong CPS Customer Satisfaction Customer Service Promise Lean Transformation
Slide 17: Lean Transformation Highlights
Lean Transformation Highlights Lean Summit with Major Customer • Great opportunity to connect with customers and share our journey ... build relationships based upon value • “Excellent for our group …they’re all talking about zero defects and not passing on the problem" Highlighted Results • Wheel E
Slide 18: Driving Lean Transformation Results
Driving Lean Transformation Prioritized Launch … Sense of Urgency 65% Leverage Eur. Production 65% Leverage Enterprise Coverage N.A. Production 36% Global Sales 30% Leverage Asia Production Coverage … 60% Leverage 40% Global Warranty Coverage … 75% Leverage 95% Leverage L.A. Production Improveme
Slide 19: Growth & Financial Performance
Growth & Financial Performance Brad Halverson First … a quick look back at 2013 2013 – Difficult Environment Our Response Sales & Revenues ($10B) 2012 Sales & Revenues $66B 25-30% Operating Profit Pull-thru ($2.5 - $3B) and $8.48 PPS Target decremental margin rate Product Mix - mostly mining ($0.8
Slide 20: Top Quartile Total Shareholder Return
Our strategic financial performance goal… TSR in the top 25% of the S&P 500 over the long-term Profit growth 15%+ over the cycle… that means incremental operating profit pull through of about 25% We’re in cyclical industries … some years it’ll be more than 15% … some years less Top Quartile To
Slide 21: Minimize Volatility & Improve Performance
We are in Cyclical Industries … Annual Percent Change in Sales vs. Prior Year 50% Forecasting sales and profit at a point in time depends on cyclicality 40% 30% 20% 10% 0% ‐10% ‐20% ‐30% That’s why our goals are for long-term ‐40% EPS CAGR and incremental operating profit ‐50% 1980 1985 1990 1995 20
Slide 22: Financial Strength and Managing for Growth
Financial Strength And Managing for Growth We Invest for … Financial Strength and Growth * We expect significant cash to invest * Includes dividend declared for 1Q 2013, but paid in December 2012
Slide 23: Managing our Performance… OPACC
Managing our Performance… OPACC is our measure We set expectations with OPACC curves We manage our cash…and invest for financial strength and growth We Measure with OPACC Operating Profit After Capital Charge OPACC = Operating Profit After Capital Charge Operating Profit (EBIT) Higher OPACC is a Sim
Slide 24: We manage to OPACC Curves
We manage to OPACC “Curves” Sets profit expectations through a range of volumes 2013 2014 2018 Base vs Base vs Base vs 2012 2013 2013 High to Base High to Base High to Base Trough to Base Trough to Base Trough to Base Trough Base High Trough Base High Trough Base High Each business is responsible
Slide 25: Business Review Construction Industries
In Summary 2013 was a tough year … but we executed well Top quartile returns in the S&P 500 is our long-term goal We have balance in our business to help mitigate volatility … Construction Industries, Resource Industries, Energy & Transportation, Financial Products We’ve invested significantly for g
Slide 26: Construction Industries
CONSTRUCTION INDUSTRIES Machine Business Divisions • Excavation • Earthmoving • Building & Construction Products Operations Divisions • Europe/South America Operations • China Operations Commercial Sales & Marketing Division • Global Construction & Infrastructure 17 Product Families / 250 Models CON
Slide 27: Strategic Levers to Grow OPACC
STRATEGIC LEVERS TO GROW OPACC GEOGRAPHIC & MARKET SEGMENTS • Segment Diversity • Long-term Customer Relations • Business Model • Grow position in developed markets • Systematically build out business model in emerging markets • Customer economics GEOGRAPHIC & MARKET SEGMENTS • Build a strong pipeli
Slide 28: Value Assigned to Dealer Capability
GEOGRAPHIC & MARKET SEGMENTS CUSTOMER ECONOMICS • Segment Diversity • Long-term Customer LIFECYCLE Value Assigned to Dealer Capability Relations PERFORMANCE • Business Model LIFECYCLE VALUE Lifecycle Performance UTILITY Lifecycle Value Value Assigned to Productivity / Performance Utility STRATEGIC L
Slide 29: Lifecycle Performance
PRODUCT & SERVICE PORTFOLIO • Depth & Breadth of Product Line • Scale • Systems Integration LIFECYCLE PERFORMANCE 972M XE Wheel Loader PRODUCT & SERVICE PORTFOLIO • Depth & Breadth of Product Line • Scale • Systems Integration LIFECYCLE VALUE 950 GC Wheel Loader
Slide 30: A Fuel Efficiency Leader
PRODUCT & SERVICE PORTFOLIO Track-type Tractors • Depth & Breadth small and medium Telehandlers Pipelayers of Product Line • Scale • Systems Integration Motor graders Backhoe Loader Track Excavators mini, small, medium and large NEVER STRONGER … AND GETTING BETTER Wheeled Excavator Wheel Loaders Sel
Slide 31: Never Stronger … and Getting Better
PRODUCT & SERVICE PORTFOLIO • Depth & Breadth of Product Line • Scale • Systems Integration NEVER STRONGER … AND GETTING BETTER STRATEGIC LEVERS TO GROW OPACC GEOGRAPHIC & PRODUCT & SERVICE MFG FOOTPRINT & MARKET SEGMENTS PORTFOLIO SUPPLY CHAIN • Segment Diversity • Depth & Breadth • Global Footprin
Slide 32: Units
MFG FOOTPRINT & SUPPLY CHAIN • Global Footprint • Currency Hedge • Supply Base • Caterpillar Production System INVENTORY BUILD UNITS INVENTORY INTEGRATED BURN VALUE CHAIN STRATEGIC LEVERS TO GROW OPACC GEOGRAPHIC & PRODUCT & SERVICE MFG FOOTPRINT & GO TO MARKET MARKET SEGMENTS PORTFOLIO SUPPLY CHAIN
Slide 33: Business Review Resource Industries
STRATEGIC LEVERS TO GROW OPACC GEOGRAPHIC & PRODUCT & SERVICE MFG FOOTPRINT & GO TO MARKET MARKET SEGMENTS PORTFOLIO SUPPLY CHAIN WITH DEALERS • Segment Diversity • Depth & Breadth • Global Footprint • Dealer Capital • Long-term of Product Line • Currency Hedge & Capability Customer • Scale • Supply
Slide 34: Global Mining
GLOBAL MINING Wherever there’s mining. We’re there. * no firm industry data available January 1, 2014 MINING Mining.com – Supply OUTLOOK worries cloud mining outlook – “The contrast …SHORT-TERM between the performance of commodities and equities is startling.”” January 20, 2014 Peabody Energy’s Forg
Slide 35: How We Compete
MINING OUTLOOK …LONG-TERM Declining ore grades, greater depth, increasing ore hardness … harder to get to deposits Copper grades Past: 1.3% Present: 1.1% Future: 0.9% Fund R & D Growth Initiatives… CAT MINING STRATEGY… Products & Solutions HOW WE Increase Market Share… PINS & POPS COMPETE Bucyrus Ac
Slide 36: Business Review Energy & Transportation
Attractive business...recent economic swings Excellent fit…high share & strong profitability SUMMARY Strong team…best in the industry Explicit strategy…disciplined execution Cat Dealers…greatest advantage TODAY’S PROFIT LEADER IS TOMORROW’S MARKET LEADER Business Review Energy & Transportation Jim U
Slide 37: Power Systems
POWER SYSTEMS JIM UMPLEBY ENERGY & TRANSPORTATION JIM UMPLEBY
Slide 38: Energy & Transportation 2013 Sales
Energy & Transportation 2013 Sales Transportation Industrial Power Generation Oil & Gas Energy & Transportation Billions of $ 2010 2011 2012 2013 Sales $ 15.5 $ 20.1 $ 21.1 $ 20.2 Profit $ 2.3 $ 3.1 $ 3.4 $ 3.4 Diverse end markets, customers and product line
Slide 39: Oil & Gas: Global Energy Demand
OIL & GAS Global Energy Demand 20.000 56% 28% Million tons oil equivalent 15.000 Oil 23% 33% Increase in 10.000 Energy 22% demand 2010-2040 5.000 Coal 27% 28% 2010 2020 2030 2040 Source: EIA – International Annual Energy Outlook, July 25, 2013
Slide 40: Oil & Gas
OIL & GAS PRODUCTS • Reciprocating Engines • Pumps & Transmissions • Gas Turbines & Compressors APPLICATIONS • Offshore & Land Drilling • Well Service • Production • Gas Compression POWER GENERATION
Slide 41: Power Generation
POWER GENERATION PRODUCTS • Generator Sets (10kW – 22 MW) • Reciprocating Engines • Gas Turbines DIESEL APPLICATIONS • Data Centers • Telecommunications • Hospitals • Universities POWER GENERATION GASEOUS FUEL APPLICATIONS • Natural Gas • Landfill • Coal Mine Methane • Coke Oven Gas • Digester
Slide 42: Marine
MARINE MARINE SOLUTIONS PROVIDER • Marine Engines • Marine Auxiliary Units • Cat Propulsion Systems (Berg) APPLICATIONS • Cargo • Cruise and Ferry • High Performance • Commercial Workboat
Slide 43: Rail
RAIL RAIL SOLUTIONS PROVIDER • Freight and Transit Locomotives • Freight Car, Signal and Track Services
Slide 44: Industrial
INDUSTRIAL INDUSTRIAL ENGINES • Power Generation • Agriculture • Material Handling • Construction
Slide 45: Natural Gas Innovation
NATURAL GAS INNOVATION Dual Fuel Engines • Oil & Gas DYNAMIC GAS BLENDING • Marine • Rail • Mining ENERGY & TRANSPORTATION Power Generation Industrial Oil & Gas Marine Rail
Slide 46: END Q&A
BUILT FOBT. END Q&A