Strong Balance Sheet is Helping Caterpillar Inc. Endure Weak Mining Market
Caterpillar Inc. is taking a beating as mining companies continue to cut costs and capital spending in an attempt to boost profits.
The equipment manufacturer has struggled with weak demand from the global mining sector as sales have tapered off by more 33 percent in the first quarter of 2014. And while the mining sector is falling to pieces, Caterpillar will likely weather the storm as the company relies on cash flow from operations and impresive balance sheet.
CAT’s Machinery, Energy & Transportation segment had a debt-to-capital ratio of about 30 percent at the end of the March quarter. This implies that despite the severe decline in its mining sales, the company’s cash flows from operations should be enough to pay-off the company’s debt, pension and other obligations. Not to mention, CAT increased its quarterly dividend by 17 percent to 70 cents a share. This will allow the company to pay off its obligations as well as provide enough room to increase cash return to shareholders.
In a recent release, Caterpillar stated it had returned over $5 billion to shareholders through buybacks and dividends since 2013.
The increase in quarterly dividends showcases that Caterpillar anticipates its cash flows to remain strong enough to outlast coming months as mining equipment sales continue to flat line.
Coal India Secures First-Of-Its-Kind Digital Deal
Coal India Limited (CIL) has appointed Accenture Solutions to digitally transform seven of its open-cast mines as the company strives to improve performance and increase coal production. Accenture is due to lay down digitalisation groundwork until March 2022.
The deal aims to increase coal production by 100 million tonnes (MT) by the end of FY’23. Once the minimum quantity has been surpassed, an agreed sum will be paid to the consultant for every additional sum of coal produced. This success fee will only be paid on the procurement of the minimum assured quantity.
The move will see heavy earth moving machinery (HEMM) fitted with digital sensors to monitor performance efficiency at all levels. Additionally, modern data analytic techniques aim to increase mine productivity and project monitoring through functional system management and effective observation.
An Exciting Venture For Global Mining
CIL, which aims to provide energy security in an environmentally and socially sustainable manner, hopes the move will help transform the entire business of mining operations and ensure higher volumes of coal are acquired at a lower cost.
“This is a first of its kind initiative by the company utilising digitalisation to ramp up coal output,” CIL has said.
A Digital Step Towards Enhanced Performance
Digitalisation is expected to take place at open-cast mines in Kusmunda, Gevra, Dipka of Southern Eastern Coalfields (SECL), Migahi, Jayant, Dudhichua, and Khadia of Northern Coalfields (NCL). Nearly 32% (188 MT) of CIL’s 596 MT output in FY’21 was accounted for by the seven selected mines. However, this new deal is set to see a large increase following the subsequent digital changes due to be made.
“Learning from the outcome and success of this model, we may replicate it in our other large mines,” says CIL, optimistic about the future following the modernisation of their mining.
It is expected that the move will help address roadblocks and guarantee corrective measures are put into place, ensuring the company is able to move forward with its aim of increasing output whilst remaining sustainable and eco-friendly.