Caterpillar Inc. (CAT - Analyst Report) is planning to invest $9 million (£5.4m) to expand its truck parts manufacturing operation in Northern Ireland. This will help generate up to 100 jobs at its plant in Larne, County Antrim.
This investment takes into account the high standard of the facilities, processes, skills and expertise in Northern Ireland. Cost competitiveness of manufacturing in Northern Ireland, proximity to customers as well as access to ports and other transportation infrastructure are added advantages.
Axles produced at the factory will be a part of Caterpillar’s trucks used for earth moving, mining and quarrying globally. The plant is under Caterpillar’s subsidiary FG Wilson one of Northern Ireland's most famous manufacturing companies, which came under the Caterpillar umbrella in 1999. It was thereafter renamed as Caterpillar (Northern Ireland) in Jan 2013. Caterpillar continued to produce the range of leading products under the FG Wilson brand.
In Sep 2012, Caterpillar’s decision to shift production of a line of diesel generators from its FG Wilson subsidiary, from Northern Ireland to Tianjin Port Free Trade Zone, China, cost 760 jobs. A slowdown in global demand for Caterpillar’s generator sets led to the job cuts.
Given the slowdown in demand, the mining and equipment behemoth had slowed down its investment and acquisition activities. Following this news, which comes on the heels of upbeat fourth quarter results, it remains to be seen whether Caterpillar resumes its investments. Given the signs of improvement in the world economy, the company expects increased sales for its Construction Industries and Power Systems segments.
Caterpillar will also benefit from its incessant efforts to cut down costs. Caterpillar’s cash flow remains strong despite the drop in profits. This has enabled the company to improve its balance sheet, repurchase shares, raise its dividend and also reduce its debt level.
Furthermore, the company will also be able to invest in growth opportunities. The company will also benefit from the recovery in the U.S. construction sector. However, declining backlog, continuing lower mining demand and negative impact of the European debt crisis remain concerns.
Peoria, IL-based Caterpillar Inc. is a manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that compete globally from a principally domestic manufacturing base.
Caterpillar currently retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Terex Corp. (TEX - Analyst Report), Zebra Technologies Corp. (ZBRA - Snapshot Report) and Graco, Inc. (GGG - Snapshot Report). While Terex holds a Zacks Rank #1 (Strong Buy), Zebra Technologies and Graco hold a Zacks Rank #2 (Buy).