Reaches beyond manufacturing to high-impact processes. Engineered. Value Chain. Cat Production Systems. (CPS) & 6 Si
FORWARD-LOOKING STATEMENTS Forward-looking Statements Certain statements in this financial review 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 “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements. Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) our ability to develop, produce and market quality products that meet our customers’ needs; (vi) the impact of the highly competitive environment in which we operate on our sales and pricing; (vii) information technology security threats and computer crime; (viii) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (ix) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (x) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) union disputes or other employee relations issues; (xiii) adverse effects of unexpected events including natural disasters; (xiv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xvi) our Financial Products segment’s risks associated with the financial services industry; (xvii) changes in interest rates or market liquidity conditions; (xviii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xix) currency fluctuations; (xx) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xxi) increased pension plan funding obligations; (xxii) alleged or actual violations of trade or anti-corruption laws and regulations; (xxiii) international trade policies and their impact on demand for our products and our competitive position; (xxiv) additional tax expense or exposure; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) new regulations or changes in financial services regulations; (xxvii) compliance with environmental laws and regulations; and (xxviii) other factors described in more detail in Caterpillar’s Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission. A reconciliation of non-GAAP financial information referenced in this presentation can be found in the appendix to this presentation.
2017 Investor Day Agenda: Tuesday, September 12th Management Presentations: Materials from today’s presentations can be found at Caterpillar.com, Investors, Events & Presentations Agenda and Safety Review Amy Campbell, Head of Investor Relations Strategic Plan Review Jim Umpleby, Chief Executive Officer Construction Industries Strategic Review Bob De Lange, Group President of Construction Industries Resource Industries Strategic Review Denise Johnson, Group President of Resource Industries Break Energy & Transportation Strategic Review Tom Pellette, Group President of Energy & Transportation Customer & Dealer Support Strategic Review Rob Charter, Group President of Customer & Dealer Support
Financial Review Brad Halverson, Chief Financial Officer Q&A
Strategic Plan Review Jim Umpleby Chief Executive Officer
Construction Industries Strategic Review Bob De Lange, Group President Construction Industries
Our Industries
GENERAL CONSTRUCTION
HEAVY CONSTRUCTION
QUARRY & AGGREGATES
ROAD CONSTRUCTION
INDUSTRIAL & WASTE
AG & LANDSCAPING
FORESTRY
DIVERSE MARKETS, CUSTOMERS AND SOLUTIONS 8
CONSTRUCTION INDUSTRIES
Product Portfolio EARTHMOVING DIVISION
Medium Tractor Products
Medium Wheel Loaders
Motor Graders
Paving Products
Wheel Excavators
Work Tools
SEM Products
EXCAVATION DIVISION
Track Excavators
Forestry Machines
BUILDING CONSTRUCTION PRODUCTS
Backhoe Loaders
Small Wheel Loaders
Compact Wheel Loaders
Small TrackType Tractors
9
Mini Hydraulic Excavators
Compact Track Loaders
Skid Steer Loaders
Telehandlers
CONSTRUCTION INDUSTRIES
A Global Snapshot
$15.7 Billion 2016 Sales 100k + A legacy of New Customers 90+ years since 2014
300 + MODELS
1.4 Million
in construction
Producing a machine every
5 minutes
46,000
Over Machines Financed Annually 10
Active Global Construction Machines
CONSTRUCTION INDUSTRIES
We are in Industries with Long Term Growth Potential •
Increasing need for global infrastructure - Roads - Housing - Airports - Energy
• •
Industry up ~15% in 2017 Market volatility to continue
INCREASED WORLD POPULATION TODAY: 7.5B
2040: 9B
URBANIZATION TODAY: 55%
2040: 65%
11
CONSTRUCTION INDUSTRIES
Business Overview Key Business Metrics | 2016
Key Business Breakdown | 2013-2016 Average** Industry Mix 7%
$15.7B
*
SALES
10.5%
7% 5%
26%
13%
SEGMENT MARGIN
21%
22%
Sales by Region 19% 48% 23%
Road Construction Heavy Construction General Construction Quarry and Aggregates Industrial / Waste Ag & Landscaping Forestry
North America Latin America Europe, Africa & Middle East Asia Pacific
10% * Sales information includes inter-segment sales
** Retail sales by end user
12
CONSTRUCTION INDUSTRIES
Financial Results
$19.8
Sales*
Segment Profit and Margin %
(in USD Billions)
(in USD Billions)
13.5%
$20.7
$17.9
$15.7
$16.3 6.8%
10.3%
10.4%
$2.1
$1.9
2014
2015
$1.3
2013
2014
2015
2016
2013
LTM
* Sales information includes inter-segment sales
10.5%
$1.6
2016
$2.2
LTM
LTM – Last 12 Months (July 2016 – June 2017)
13
CONSTRUCTION INDUSTRIES
Early Adopter of the O&E Model Sales, Segment Margin % and Segment OPACC $s
• • •
Index of 100% = 2013
10X 8X 6X
•
4X 2X 0%
2013 Sales
2016 Segment Margin %
LTM
OPACC Biased Resource Allocation Margin Improvement Structural Cost Reduction – Competitive & Flexible Cost – Lean Capital Efficiency and Improved Asset Turns – Footprint Consolidation – Lean
(Jul ‘16 – Jun ’17)
OPACC $s
14
CONSTRUCTION INDUSTRIES
Early Adopter of the O&E Model Sales, Segment Margin % and Segment OPACC $s
OPACC Biased Resource Allocation Margin Improvement Structural Cost Reduction – Competitive & Flexible Cost – Lean • Capital Efficiency and Improved Asset Turns – Footprint Consolidation – Lean • Reinvesting in Profitable Growth • • •
Index of 100% = 2013
10X
10X 10X
8X 6X 5X
4X 2X 1X
0%
2013 Sales
1.5X
2X2X%
.79
.821X
2016 Segment Margin %
LTM (Jul ‘16 – Jun ’17)
OPACC $s
15
CONSTRUCTION INDUSTRIES
Our Strategy for Profitable Growth
Operational Excellence
• • •
Quality End-to-End Lean Competitive & Flexible Cost Structure
Expanded Offerings
• •
Best Products Lifecycle Value / Utility
Services
• •
Aftermarket Technology
16
CONSTRUCTION INDUSTRIES
Driving Operational Excellence OPERATIONAL EXCELLENCE
QUALITY
LEAN
COMPETITIVE & FLEXIBLE COST STRUCTURE
40%
$3.3B
7.9M
IMPROVEMENT
ASSET REDUCTION
SQ. FT. REDUCTION
Announced Footprint Consolidation: Sagami | Gosselies | Aurora | Other
17
CONSTRUCTION INDUSTRIES
Meeting Changing Customer Needs A P P L I C AT I O N P R O F I L E S
EXPANDED OFFERINGS
Cost/ Unit Work
LIFECYCLE PERFORMANCE MEDIUM TO HEAVY APPLICATIONS LIFECYCLE VALUE LIGHT TO MEDIUM APPLICATIONS
Cost/ Hour
UTILITY APPLICATIONS LOW
MACHINE UTILIZATION / PERFORMANCE REQUIREMENT
18
HIGH
CONSTRUCTION INDUSTRIES
Meeting Changing Customer Needs EXPANDED OFFERINGS
Cost/ Unit Work
MEDIUM TO HEAVY APPLICATIONS
CAT® XE MODELS
972M XE CAT® STANDARD MODELS
950M
LIGHT TO MEDIUM APPLICATIONS
UTILITY APPLICATIONS
Cost/ Hour
LOW
CAT® GC MODELS
SEM™ MODELS
950 GC
655D
MACHINE UTILIZATION / PERFORMANCE REQUIREMENT
19
HIGH
CONSTRUCTION INDUSTRIES
Helping Customers Succeed through Technology SERVICES
CAT ® PAYLOAD
CAT ® COMPACT
Help reduce load times, optimize loading efficiency and increase jobsite productivity
Meet compaction targets faster, more uniformly and in fewer passes
CAT ® LINK
CAT ® GRADE
Tracking individual asset’s performance and needs to increase uptime and lower costs
Boost grading efficiency by as much as 50%
20
CAT ® DETECT Expanded view of the working environment around equipment keeps people and assets safe
CAT ® COMMAND Remote control offering improves operator safety, equipment availability and site productivity
CONSTRUCTION INDUSTRIES
Delivering Operating Performance Improvement Long-Term Profitable Growth OPERATIONAL EXCELLENCE
• Quality • Lean • Competitive & Flexible Cost Structure
EXPANDED OFFERINGS
• Best Products • Life Cycle Value / Utility
SERVICES
• Aftermarket • Technology
~$21B
+5-7% pts ~10%
Sales*
Segment Margin
Demonstrated Performance
Segment Margin
Expected Performance
* Sales information includes inter-segment sales
21
CONSTRUCTION INDUSTRIES
We Are…
OPTIMISTIC about the industries we serve… CONFIDENT in our strategy and our global team COMMITTED to driving growth through the O&E Model
22
CONSTRUCTION INDUSTRIES
Resource Industries Strategic Review Denise Johnson, Group President Resource Industries
Resource Industries
Three Machine Businesses Serving Our Customers
SURFACE MINING
MATERIAL HANDLING
UNDERGROUND
CUSTOMERS | PROFITABILITY | TECHNOLOGY | PEOPLE
24
RESOURCE INDUSTRIES
A Global Snapshot LARGEST
$0.3 BILLION 2017
AUTONOMOUS FLEET In one of the largest mines in the world
June YTD
Segment Profit
86
> 80,000
Machine Models
26 LOCATIONS For component and machine manufacturing
MACHINES IN POPULATION
REMOTE, RUGGED, 24/7
More than
500 MILLION TONS HAVE SAFELY been moved with autonomous trucks
from Australia with temperatures of +120F to the Oil Sands where temps can drop to -40 F to altitudes above 4500 meters in Chile to a mine one mile below the surface, underground
25
RESOURCE INDUSTRIES
Business Overview Key Business Metrics | 2016
Key Key Business Business Breakdown Breakdown || 2012-2016 2013-2016 Average*** Average** Industry Mix
*
-17%**
SALES
SEGMENT MARGIN
$6.0B
4%5% 8% 13% 70%
Sales by Region 27%
22% * Sales information includes inter-segment sales ** 2016 Segment Margin includes $595M goodwill impairment
33%
Mining Heavy Construction Quarry and Aggregates General Construction Other
North America Latin America Europe, Africa & Middle East Asia Pacific
18%
*** Retail sales by end user
26
RESOURCE INDUSTRIES
Mining Long Term Growth Prospects INCREASED WORLD POPULATION
Coal Emerging markets lead demand for infrastructure and electric grid expansion
Iron Ore Primarily consumed in steel making. China iron ore grades expected to remain poor, driving demand for seaborne traded iron ore
URBANIZATION GLOBAL INFRASTRUCTURE
27
Copper
Gold
Continued strong demand for construction and electric. Removal of overburden to increase as grades continue to decline
Safe haven during times of crisis: no indicators suggesting this will change
RESOURCE INDUSTRIES
Mining Industry is Improving
Commodity Price Increase
Organic Growth
COMMODITY PRICE
MINER CAPEX
2012 2013 2014 2015 2016 2017
2012 2013 2014 2015 2016 2017F
Source: Standard & Poor’s / Goldman Sachs / Haver Analytics
Machine Replacements
Fleet Repairs
PARKED TRUCK %
2012 2013 2014 2015 2016 2017
Source: Q2 2017 Mining Intelligence Capex
Source: June 2017 Internal Analysis
28
TRUCK UTILIZATION
2012
2013
2014
2015
2016
2017
Source: June 2017 Internal Analysis
RESOURCE INDUSTRIES
Financial Results
Sales*
Segment Profit and Margin %
(in USD Billions)
(in USD Billions)
21.0% $4.3
$20.4
13.5% 5.9% 0.0%
$1.7 $12.4
2012
2013
$9.6
2014
$0.6 $8.1
2015
$6.0
2016
$6.6
LTM
2012
* Sales information includes inter-segment sales
29
2013
2014
-8.1% $0.0
-17.4%
2015
$(1.0) 2016 **
$(0.5) LTM **
LTM – Last 12 Months (July 2016 – June 2017) ** 2016 and LTM segment profit and margin % includes $595M goodwill impairment
RESOURCE INDUSTRIES
Our Strategy for Profitable Growth
Lean Competitive & Flexible Cost Structure Reshape Manufacturing Footprint Targeted Product Initiatives
Operational Excellence
• • • •
Expanded Offerings
• Machine Electrification • Market Specific Offerings
Services
• • • •
Autonomy Retrofits and Upgrades Site Solutions Support Agreements
30
RESOURCE INDUSTRIES
Lowered Breakeven point through Restructuring and O&E Model Resource Industries Breakeven Point *
2012
2013
2014
2015
2016
*Operating profit break even point, the sales levels that are required to cover total costs for Resource Industries.
31
•
Lowered breakeven point every year since 2012… and continuing
•
Completed closure / restructuring of 25 mining facilities since 2012
•
Exited three product lines
•
Consolidated and streamlined core product and component development
RESOURCE INDUSTRIES
Lean Execution Across the Enterprise OPERATIONAL EXCELLENCE
Engineered Value Chain
Cat Production Systems (CPS) & 6 Sigma
•
Customer back approach
•
Reduces waste
•
Synchronizes value chain
•
Reaches beyond manufacturing to high-impact processes
ENTERPRISE PRIORITY 32
RESOURCE INDUSTRIES
Our Focus on Best Products – Large Mining Trucks EXPANDED OFFERINGS
33
•
Mechanical and electric drive offerings optimized based on size class
•
Application and infrastructure determine customer pull
•
Deep vertical integration for both Cat drive systems
•
Broadest, differentiated offerings
RESOURCE INDUSTRIES
Our Focus on Best Products – Machine Electrification EXPANDED OFFERINGS
794 / 795 AC
988 XE
ELECTRIC DRIVE
ELECTRIC DRIVE OPTION
34
UG LHD
ENERGY STORAGE
RESOURCE INDUSTRIES
Ensuring our Customers’ Success – Autonomy SERVICES
• Largest autonomous fleet in the world with 500 million tons safely hauled • 100+ active mine site opportunities LMT
Drill
LTTT
UG LHD
UG LW
35
• Developing scalable solutions to expand autonomy to large construction / smaller mine sites
RESOURCE INDUSTRIES
Ensuring our Customers’ Success – Site Solutions SERVICES
•
Expanding value chain offerings to provide comprehensive solutions
•
Competitive advantage leveraging domain expertise and mining equipment design knowledge
•
Demonstrated > 20% improvement in equipment cost per ton
Our solutions help customers achieve lower cost per ton production
36
RESOURCE INDUSTRIES
Ensuring our Customers’ Success – Aftermarket SERVICES
37
•
Large mining installed base, long life
•
Growing aftermarket through: - Increased offerings - Customer support agreements - Site management and solutions - “Plan for every serial number”
•
Critically important to O&E improvement
RESOURCE INDUSTRIES
Delivering Operating Performance Improvement Long-Term Profitable Growth Lean Competitive & Flexible Cost Structure Reshape Manufacturing Footprint Targeted Product Initiatives
OPERATIONAL EXCELLENCE
• • • •
EXPANDED OFFERINGS
• Machine Electrification • Market specific offerings
~$10B 12B +2-6% pts
~10%
SERVICES
• • • •
Autonomy Retrofits and Upgrades Site Solutions Support Agreements
Sales*
Segment Margin
Demonstrated Performance
Segment Margin
Expected Performance
* Sales information includes inter-segment sales
38
RESOURCE INDUSTRIES
We Are… Partnering with CUSTOMERS at the site
Accelerating SERVICES Focusing on achieving segment leading PERFORMANCE
39
RESOURCE INDUSTRIES
Energy & Transportation Strategic Review Tom Pellette, Group President Energy & Transportation
Energy & Transportation
TRANSPORTATION
POWER GENERATION
OIL & GAS
INDUSTRIAL
CAT MACHINES
DIVERSE MARKETS, CUSTOMERS AND SOLUTIONS
41
E N E R GY & T R A N SPORTATION
Diverse & Global Portfolio
42
E N E R GY & T R A N SPORTATION
A World Leader in Reciprocating Solutions MaK M32-46
C280/3600 MWM TCG 2032
C0.5-1.7 C2.2 C2.8/3.6
MaK M20/M25
C4.4
C175
C7.1 C9.3
3500 MWM TCG 2020
4000 Series
C27/C32
43
MWM TCG 2016
C13 C15/C18
E N E R GY & T R A N SPORTATION
A World Leader in Turbines and Compressors Power Generation
Titan 250
C16V
Titan 130
C33E
C40M
C41
C50
Oil & Gas
C51 C61
Mars 90 & 100
Taurus 70 Taurus 60
Centaur 40 & 50
Saturn 20
C40P
44
C45
C65
C75
C85
E N E R GY & T R A N SPORTATION
A World Leader in Rail Rolling Stock and Infrastructure Transportation
Freight Locomotives
Infrastructure Products & Services
Transit Locomotives
Rolling Stock Products 45
Rolling Stock Services
E N E R GY & T R A N SPORTATION
A Global Snapshot
6M + Tons Recycled since 2010
30,000 Locomotives Worldwide
Over
More than
2 billion
gas turbine operating hours
750,000
Caterpillar generator sets installed worldwide
Producing an engine every 2 minutes A legacy of
20 million
90+ years
engines built
of engines in the field
46
E N E R GY & T R A N SPORTATION
Business Overview Key Business Metrics | 2016
$17B* SALES
Key Business Breakdown | 2013-2016 Average**
13% SEGMENT MARGIN
* Sales information includes inter-segment sales
** External Sales
47
E N E R GY & T R A N SPORTATION
Financial Results
$23.7
Sales*
Segment Profit and Margin %
(in USD Billions)
(in USD Billions)
$25.7
15.1%
$21.4
2014
2015
15.8%
$4.3 $17.0
2013
16.7%
2016
$3.6
$17.5
2013
LTM
* Sales information includes inter-segment sales
13.1%
14.0%
$2.2
$2.5
2016
LTM
$3.4
2014
2015
LTM – Last 12 Months (July 2016 – June 2017)
48
E N E R GY & T R A N SPORTATION
Global Energy Demand Favors Our Business 20000 18000
7% Nuclear
Energy Demand (Mtoe)
16000
19% Renewables
14000 12000
24% Natural Gas
10000
8000 6000 4000 2000
81%
74%
Fossil Fuels
Fossil Fuels
20% ABSOLUTE Increase in
Fossil Fuel
27% Oil
Energy Usage
23% Coal
0
2015
2020
2025
2030
2035 49
2040
Source:
IEA World Energy Outlook 2016 New Policies Scenario
E N E R GY & T R A N SPORTATION
Turning Upward – Oil & Gas New Cost Paradigm
Old Cost Paradigm $400
OVERALL
E&P capex
$300
is expected to rise
20%
$200 $100
Onshore E&P Spending
DECLINE in 2017
2018
2017
2016
2015
2014
2013
2012
2011
0
OFFSHORE SPENDING is expected To continue its
from 2016 – 2018 2010
Nominal $ Billions
$500
Offshore E&P Spending
50
Source: IHS Markit May 2017 Upstream Spend Report
E N E R GY & T R A N SPORTATION
Our Strategy for Profitable Growth
Operational Excellence
• Quality • Lean • Competitive & Flexible Cost Structure
Expanded Offerings
• Expand Product Range • Increase Power Density • Solutions Beyond Core
Services
• Expand Service Solutions • Provide Digital Solutions
51
E N E R GY & T R A N SPORTATION
Well positioned for Profitable Growth OPERATIONAL EXCELLENCE
FOOTPRINT
4.5M Manufacturing Square Footage Reduction since 2013
ASSETS
$1.3B Reduction in Assets since 2013
52
COST
Significant Material Cost Savings and Period Cost Reductions since 2013
E N E R GY & T R A N SPORTATION
Significant Investment in New Products EXPANDED OFFERINGS
CONSTRUCTION
ELECTRIC POWER AGRICULTURE MATERIAL HANDLING NEW C2.8 AND 3.6
53
NEW C9.3B
E N E R GY & T R A N SPORTATION
Significant Investment in Power Density EXPANDED OFFERINGS
New 3516E
Upgraded C32
LOWER INSTALLED COST LIGHTER WEIGHT | EASIER HANDLING | SMALLER FOOTPRINT 54
E N E R GY & T R A N SPORTATION
Beyond the Core Engine Solutions EXPANDED OFFERINGS ENGINE
PUMP
TRANSMISSION
Pumps and Transmissions
FLOW IRON
Unions, Valves, Joints, and Manifold Trailers
Oil & Gas High Pressure Flow Iron
GENERATOR SET
Well Servicing Solution
Oil & Gas High Pressure Flow Iron 55
E N E R GY & T R A N SPORTATION
Delivering Integrated Solutions EXPANDED OFFERINGS
Thrusters, Controllable Pitch Propellers, Controls and PODS
CONTROLS BATTERIES ENERGY MANAGEMENT SYSTEM
GENSET ENGINE
MOTOR-GENERATOR
PROPULSION
Marine Vessel Solution
Marine Propulsion Systems 56
E N E R GY & T R A N SPORTATION
Significant Investment in New Product EXPANDED OFFERINGS
TRANSIT MARKET ENTRY FAST | EFFICIENT | TIER 4 57
E N E R GY & T R A N SPORTATION
Leading in the World of Digital SERVICES 10101010101010101010101010101010 10101010101010101010101010101010 Low Cost 10101010101010101010101010101010 10101010101010101010101010101010 Engine Connectivity 10101010101010101010101010101010 10101101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 SIMPLE, LOW COST RETROFIT 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 COMPONENT SOLUTION 01010101010101010101010101010101
10101010101010101010101010101010 10101010101010101010101010101010 10101010101010101010101010101010 10101010101010101010101010101010 10101010101010101010101010101010 10101101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 SCALABLE TO MULTIPLE 01010101010101010101010101010101 APPLICATIONS 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 FLEXIBLE SOLUTIONS 01010101010101010101010101010101
58
10101010101010101010101010101010 DIGITAL 10101010101010101010101010101010 SOLUTIONS 10101010101010101010101010101010 10101010101010101010101010101010 10101010101010101010101010101010 10101101010101010101010101010101 Progress Rail Uptime 01010101010101010101010101010101 01010101010101010101010101010101 Marine Asset 01010101010101010101010101010101 Intelligence 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 FULLY INTEGRATED, 01010101010101010101010101010101 HIGHLY CAPABLE 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 01010101010101010101010101010101 DIGITAL ECOSYSTEM 01010101010101010101010101010101
E N E R GY & T R A N SPORTATION
Growing Solar Turbines’ Service Success SERVICES
Total Life Cycle Support Technical Support Service Parts Technical Training Overhaul Compressor Restage Package Upgrades Controls Retrofits Package Refurbishment Insight System Equipment Health Management Fleet Assessment Services Commissioning 59
E N E R GY & T R A N SPORTATION
Expanding Our Service Presence in Rail SERVICES
ROLLING STOCK SERVICES Service Agreements Aftermarket Parts New Parts
Locomotive Rebuilds Locomotive Repowers Running Maintenance
PR Uptime Freight Car Repair Freight Car Leasing
INFRASTRUCTURE SERVICES Rail Welding Rail Take Up Equipment Services
Maintenance and Leasing Track Services Truck
Mobile Rail In-Track
Signal Engineering and Services
Asset Protection
Engineering
Structures
60
E N E R GY & T R A N SPORTATION
Sustainability through Remanufacturing SERVICES
COMPONENTS
ENGINES
TURBINES
MATURATION
REGULAR MAINTENANCE
REPLACE BEFORE FAILURE
TEST
RE-ENTERS SUPPLY CHAIN
Product Lifecycle
Global Market Access Reman Process
CORE RETURNS TO CAT PERFORM
PRODUCT BEGINS LIFECYCLE
ASSEMBLE
Salvage Processes Competitive Repair Options
SALVAGE DISASSEMBLE & CLEAN
RAIL
61
E N E R GY & T R A N SPORTATION
Delivering Operating Performance Improvement Long-Term Profitable Growth OPERATIONAL EXCELLENCE
• Quality • Lean • Competitive & Flexible Cost Structure
~$23B
+1-3% pts
EXPANDED OFFERINGS
SERVICES
~15%
• Expand Product Range • Increase Power Density • Solutions Beyond Core
Sales*
• Expand Service Solutions • Provide Digital Solutions
Segment Margin
Demonstrated Performance
Segment Margin Expected Performance
* Sales information includes inter-segment sales
62
E N E R GY & T R A N SPORTATION
We Are…
Serving industries that are both DIVERSE AND ATTRACTIVE A MARKET LEADER
INVESTING to provide competitive solutions
63
E N E R GY & T R A N SPORTATION
Customer & Dealer Support Strategic Review Rob Charter, Group President Customer & Dealer Support
Servicing Our Customers What our Customers are telling us…
Operational Excellence
“Leading parts availability at a proper value proposition”
Expanded Offerings
“Improve uptime by anticipating needs and
“Be easy to do business by offering E-Commerce solutions”
leveraging digital insights”
“Provide consistent local services across the globe”
Services
“Offer a full suite of products and services” “Unique, tailored services that address specific customer needs”
65
CUSTOMER & DEALER SUPPORT
Improving Our Customer Service Capabilities… a Continuous Journey 2010
2014
DEVELOPING INDUSTRY EXPERTISE Key Service Requirements
DRIVING CONSISTENT BEST PRACTICES Foundational Capabilities
2017 TODAY’S DISCUSSION
FOCUS ON:
Evolution of Our Global Service Network
66
CUSTOMER & DEALER SUPPORT
“Provide Consistent Local Services Across the Globe” SERVICES 592
Cat Dealers Employees
54
157,335
46 North America
Dealers
172
52,182 642
EAME*
41,168
Branches
2,163
Asia Pacific
32
Cat Dealer Employees Cat Dealers Branches
29,898
South America
40
34,087
280 649
*EAME: Europe, Africa, Middle East, & CIS
67
CUSTOMER & DEALER SUPPORT
“Offer a Full Suite of Products and Services – Full Product Line” SERVICES
RESOURCE INDUSTRIES
ENERGY & TRANSPORTATION
CONSTRUCTION INDUSTRIES
Cat Financial 68
CUSTOMER & DEALER SUPPORT
“Offer a Full Suite of Products and Services – Financing and Rental” SERVICES
69
CUSTOMER & DEALER SUPPORT
“Offer a Full Suite of Products and Services – In-Field Support” SERVICES
RESOURCE INDUSTRIES
ENERGY & TRANSPORTATION
70
CONSTRUCTION INDUSTRIES
CUSTOMER & DEALER SUPPORT
“Offer a Full Suite of Products and Services – Rebuild Capabilities” SERVICES
71
CUSTOMER & DEALER SUPPORT
“Leading Parts Availability at a Proper Value Proposition” OPERATIONAL EXCELLENCE
Moscow
Lean and Engineered Value Chain
Machine Data Analytics to Better Plan Availability
Denver
Morton St. Paul
Spokane
Grimbergen
Clayton
California
York Waco
Sagami
Atlanta Miami
Shanghai
San Luis Potosi
Dubai Singapore
Focused Parts Lifecycle Management
3D Printing
Dealer Branches Parts Distribution Centers
Piracicaba
Queensland Johannesburg Melbourne
Right Part, Right Place, Right Time, Right Dealer Service 72
CUSTOMER & DEALER SUPPORT
“Be Easy to do Business by Offering e-Commerce Solutions” OPERATIONAL EXCELLENCE
Established Customer
First Time Customer
Delivery Options
Customer Experience
Frequently interact with the dealer
Regular payment process with dealer on a customer account
Multiple locations, tailored parts kits
Personalized shopping experience integrated into ERP
Transactional
Seeking flexibility, credit card
Most convenient / lowest cost
Standard shopping experience
Relationship
Payment Terms
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CUSTOMER & DEALER SUPPORT
“Unique, Tailored Services that Address Specific Customer Needs” SERVICES
Samples of tailored solutions delivered by Caterpillar and Dealers Condition Monitoring • e.g. Repair recommendations
Custom Track Service • e.g. Maximize undercarriage life
Repair Options • e.g. Partial vs. complete rebuild
Customer Support Agreement • e.g. Maintenance
Certified Rebuild • e.g. Second life of equipment
Maintenance and Repair Contract • e.g. Availability guarantees
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“Improve Uptime by Anticipating Needs and Leveraging Digital Insights” EXPANDED OFFERINGS
Fleet Monitoring Center
2M+
~550K
FIELD POPULATION*
CONNECTED ASSETS*
*Cat Branded Equipment 75
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Profitable Growth for Our Customers… How it Fits Together KNOWLEDGE & EXPERTISE LEVERAGING SCALE CONNECTIVITY
DATA
INSIGHTS
TAILORED SOLUTIONS
Health
Repair History
Domain Knowledge
Repair Before Failure
Hours
Product Data
Location
Fluid Analysis
Monitoring Service
Customer Support Agreements
Fuel Consumption
Equipment Inspection
CONSTRUCTION INDUSTRIES
RESOURCE INDUSTRIES
ENERGY & TRANSPORTATION
Global Data Engineering Expertise
Site Conditions
Rebuilds
WHAT THE CUSTOMER EXPERIENCES
Lower Owning and Operating Costs Higher Productivity/ Uptime Easier to do Business with Trusted Partner
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We Are… Committed to the DEALER DISTRIBUTION network Leveraging GLOBAL SCALE to more efficiently serve our customers needs Improving UPTIME by connecting assets and using digital technologies Offering TAILORED SOLUTIONS focused on specific customer requirements Becoming EASIER to do business with by offering E-commerce solutions 77
CUSTOMER & DEALER SUPPORT
Financial Review Brad Halverson, Chief Financial Officer Corporate Services
Recent Past Has Been A Significant Challenge Sales & Revenues (in billions)
– – –
$
Most Prolonged Downturn in Our History Four Consecutive Years of Downturn Our Industries Were Impacted by: • • •
65.9 $
55.7
$
55.2 $
47.0 $ $
Falling Commodity Prices / Demand Inconsistent Investment in Infrastructure Sluggish Worldwide Economy
2012
2013
2014
2015
38.5
2016
43.0 *
2017
* - At midpoint of Outlook as of July 25, 2017 79
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Despite our Past Challenges, We Delivered
Reduced Period Cost Structure
Reducing our Manufacturing Footprint… over 20 million sq. ft.
Managed Decremental Margins
Consistently Invested R&D… 4%-5% of Sales
Maintained Strong Balance Sheet… ME&T Debt to Cap within Targeted Range
Delivered Solid Cash Flow… Consolidated Cash Balance 2Q 2017 = $10.2B
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Great Markets… Positioned for Profitable Growth
Increasing Energy Demand
Sustainability
Growing Population
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Urbanization
C O R P O R ATE S ERVIC ES
Great Strengths… Positioned for Profitable Growth
Largest Installed Base
Superior Products
Unrivaled Dealer Network
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Manufacturing Footprint
Great People
C O R P O R ATE S ERVIC ES
The Operating & Execution Model
–
It’s how we will run the company
–
Clear definition of winning – profitable growth
–
Business strategies based on granular understanding of end markets and focused reinvestment
–
Aligned beliefs and behaviors around value creation; disciplined governance
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C O R P O R ATE S ERVIC ES
How does the O&E Model Work?
Using FACTS and DATA, we create a detailed understanding of which markets are most profitable and what it takes to win in these markets
We DEVELOP STRATEGIES to expand and improve our competitive position in profitable markets
We ALLOCATE RESOURCES to strategies that have the best potential for future, profitable growth
We have a disciplined GOVERNANCE PROCESS that proactively manages our investment portfolio
Focused on Making Decisions Based on Market Economics & Our Competitive Position
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Enterprise Goals Services Growth Long-term OPACC Growth
Safety
Quality Defects Per Unit
# of Assets
# of Active
with Connectivity
Customer Support Agreements
Free Cash Flow (FCF)
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C O R P O R ATE S ERVIC ES
Long Term Profitable Growth for Caterpillar Inc. Long-Term Profitable Growth
~$55B
+2-5% pts
~12%
2
Sales & Revenues ($Billions) 1 Adjusted Op Margin %
3
1
Demonstrated Performance
Demonstrated Performance
1
Expected Performance
1
Excludes restructuring costs, mark-to-market gain/losses related to pension and OPEB Excludes restructuring costs, mark-to-market losses related to pension and OPEB, goodwill impairment 3 Sales and revenues and operating profit in mid-point of outlook range (July 25, 2017) 2
See appendix for adjusted operating margin % calculation and reconciliation to US GAAP
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Generates More Cash for a “Reinvestment Advantage”
We are Investing for the Future in … – – – –
Connectivity, e-commerce, & Digital Services for Installed Base Expanding Product Offerings for Superior Products Services and Capabilities for Unrivaled Dealer Network Improving Operating Leverage of Manufacturing Footprint
Result: Greater Competitive Advantage & Profitable Growth 87
C O R P O R ATE S ERVIC ES
Cash Deployment Prioritized Toward Growth 2012 – 2016 Cash Deployment
Cash Priorities 2012-2016 (Average)
Growth Investment Capex and M&A
30-45%
10-15%
Funding Employee Pension / Benefit Plans Return to Shareholders Dividend Payments / Stock Repurchase
Credit Rating
Growth
40-60%
Pension / Benefits
Returned to Shareholders
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Priorities going forward
~ 40% ME&T Debt-to-Cap
~ 30-45% ME&T Debt-to-Cap
“Mid/Low-A” Metrics
“Mid-A” Stable Metrics
ME&T Capex: $2.1B / year
Grow the Business ME&T Capex: ~$1.0-1.5B / year
~$0.7B / year
~$0.7B / year - US Pension sunset in ‘19
23 years of dividend growth
Target continued dividend growth Heavy % returned to shareholders, dictated by circumstances
38% avg dividend payout ratio ~$8B stock repurchase
C O R P O R ATE S ERVIC ES
Caterpillar is Positioned for Profitable Growth WE ARE… CONFIDENT in our strategy…
CONTINUING to focus on executing… COMMITTED to deliver profitable growth.
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Appendix
Caterpillar Inc. – Appendix of Reconciliation to US GAAP Demonstrated Performance
2017 2013
2014
2015
2016
Outlook1
Operating margin %
17.7%
6.0%
8.1%
1.3%
8.2%
Operating margin % restructuring costs Operating margin % mark-to-market gains or losses
0.4% -6.2%
0.8% 4.7%
1.9% 0.3%
2.6% 2.6%
2.7%
Operating margin % goodwill impairment Adjusted operating margin %
-
-
-
1.5%
11.9%
11.5%
10.3%
8.0%
10.9%
1
Sales & Revenues ($Billions) Operating Margin % Operating Margin % = Operating Profit / Sales & Revenues 1 Sales
and revenues and operating profit in mid-point of outlook range (July 25, 2017)
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