Posted on August 7, 2018
Cat Financial reported second-quarter 2018 revenues of $723 million, an increase of $47 million, or 7 percent, compared with the second quarter of 2017. Second-quarter 2018 profit was $71 million, a $43 million, or 38 percent, decrease from the second quarter of 2017.
The increase in revenues was due to a $35 million favorable impact from higher average financing rates and a $26 million favorable impact from higher average earning assets, partially offset by a $14 million unfavorable impact from lower lending activity with Caterpillar (CAT).
Profit before income taxes was $100 million for the second quarter of 2018, compared with $164 million for the second quarter of 2017. The decrease was primarily due to an $86 million increase in provision for credit losses, partially offset by a $12 million increase in net yield on average earning assets and a $12 million favorable impact from higher average earning assets.
The provision for income taxes reflects an estimated annual tax rate of 24 percent in the second quarter of 2018, compared with 30 percent in the second quarter of 2017. The decrease in the estimated annual tax rate is primarily due to the reduction in the U.S. corporate tax rate beginning January 1, 2018, along with changes in the geographic mix of profits.
During the second quarter of 2018, retail new business volume was $3.56 billion, an increase of $863 million, or 32 percent, from the second quarter of 2017. The increase was primarily driven by higher volume in Asia/Pacific, North America and Europe, partially offset by a decrease in Caterpillar Power Finance.
At the end of the second quarter of 2018, past dues were 3.16 percent, compared with 2.71 percent at the end of the second quarter of 2017. Write-offs, net of recoveries, were $80 million for the second quarter of 2018, compared with $26 million for the second quarter of 2017. The increase in write-offs, net of recoveries, was primarily driven by a small number of customers in the Caterpillar Power Finance portfolio and recent collection experience in the Latin America portfolio.
As of June 30, 2018, the allowance for credit losses totaled $416 million, or 1.48 percent of finance receivables, compared with $403 million, or 1.45 percent of finance receivables at March 31, 2018. The allowance for credit losses at year-end 2017 was $365 million, or 1.33 percent of finance receivables.
“Despite continued weakness in the Cat Power Finance and Latin Americaportfolios, we are pleased with the performance of our core asset portfolio and the growth of our business,” said Dave Walton, president of Cat Financial and vice president with responsibility for the Financial Products Division of Caterpillar Inc. “The global Cat Financial team remains focused on executing our strategy to help Caterpillar customers and dealers succeed through financial services solutions.”
For over 35 years, Cat Financial, a wholly owned subsidiary of Caterpillar, has provided financial service excellence to customers. The company offers a wide range of financing solutions to customers and Cat® dealers for machines, engines, Solar® gas turbines, marine vessels and various operational needs. Cat Financial has offices and subsidiaries located throughout North and South America, Asia, Australia, Europe, Africa and the Middle East, with its headquarters in Nashville, Tennessee.
Source: Seeking alpha
