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May 04, 2012

Caterpillar boss upbeat about Africa's future, mulling investment

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Creamer Media's Irma Venter speaks to Caterpillar CEO Doug Oberhelman about the company opening a manufacturing facility in Africa. Camerawork and Editing: Nicholas Boyd & Darlene Creamer. Recorded: 04.05.2012
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“I am more optimistic about Africa than I have ever been in my career,” said Caterpillar CEO Doug Oberhelman on Friday. “Africa has changed greatly.”

Delivering a presentation at Barloworld, the South African Caterpillar dealer, the 37-year company veteran noted that it would not be long before the continent saw bigger foreign direct investment flows as economic and political conditions continue to stabilise as had been the case over the last ten years.

Africa had seen a mining and energy driven recovery, which had the domino effect of an increase in disposable income, which would, in turn, require an increase in foreign direct investment, he noted.

Oberhelman said Africa had a “huge population” who wanted “to live better”.

“We are looking to make an investment in Africa.”

Oberhelman noted that Caterpillar had on its radar screen the development of an African manufacturing plant, but cautioned that this would not happen within the next two to three years.

Such a facility would also not manufacture mining capital equipment, but more energy and construction-related equipment, with specialised mining equipment production remaining at the company’s existing manufacturing sites.

This meant, however, that the capital equipment manufacturer would need to see “faster growth in the energy and construction sectors” in Africa.

Taking a global view, Oberhelman said worldwide population growth had seen a global consumer base that required infrastructure and consumed commodities – all of which suited the Caterpillar brand.

“Every time a road goes in, or an airport, we want to be there.”

Oberhelman noted that global iron demand was expected to increase from 1-billion tons in 2010 to 2.5-billion tons in 2030. Copper demand was to increase from 19-million tons to 43-million tons, and aluminium from 41-million tons to 99-million tons.

Estimated total mining capital expenditure was anticipated to see a 9.8% compound yearly growth rate to 2015.

Energy demand was very much in the same boat, with oil, natural gas and coal to account for 80% of the energy fuel mix through to 2040.

Caterpillar had certainly managed to cash in on the world’s hunger for energy and commodities, with the company posting record results in 2011 and looking set to repeat this in 2012.

Sales and revenues reached $16-billion in the first quarter of 2012, compared with $12.9-billion in the first quarter of 2011.

“We are in a sweet spot right now,” admitted Oberhelman.

Profit after tax reached $1.58-billion in the first quarter of 2012, compared with $1.22-billion for the same period in 2011.

The outlook is for the company to reach revenues of between $68-billion and $72-billion in 2012, a big jump from the $32.4-billion recorded in 2009.

A $10-billion trail of acquisitions in the rail, mining equipment and electric power sectors look set to spur on these numbers further over the next few years.

Oberhelman was especially positive about the potential contribution from MWM, which “would be our jewel”.

MWM had developed an engine that burnt natural gas.

Waiting in the wings was the acquisition of Siwei, which would be Caterpillar’s largest acquisition in China.

Siwei produced a roof support product line for the mining industry.

* Barloworld on Thursday evening opened a R250-million remanufacturing centre in Boksburg, which has the capacity to rebuild capital equipment components for customers in the mining and infrastructure sectors.

Edited by: Creamer Media Reporter
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