How to Use This Template - Caterpillar Inc.

8 downloads 218 Views 15MB Size Report
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

73

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

74

CUSTOMER & DEALER SUPPORT

“Improve Uptime by Anticipating Needs and Leveraging Digital Insights” EXPANDED OFFERINGS

Fleet Monitoring Center

2M+

~550K

FIELD POPULATION*

CONNECTED ASSETS*

*Cat Branded Equipment 75

CUSTOMER & DEALER SUPPORT

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

76

CUSTOMER & DEALER SUPPORT

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

C O R P O R ATE S ERVIC ES

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

80

C O R P O R ATE S ERVIC ES

Great Markets… Positioned for Profitable Growth

Increasing Energy Demand

Sustainability

Growing Population

81

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

82

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

83

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

84

C O R P O R ATE S ERVIC ES

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)

85

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

86

C O R P O R ATE S ERVIC ES

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

88

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.

89

C O R P O R ATE S ERVIC ES

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)

91

C O R P O R ATE S ERVIC ES