Jan. 28 - Caterpillar's $653.4 million deal in China behind the company's 55% drop in quarterly profit. Bobbi Rebell reports.
The Daily Digit today is $653.4 million. That's the worth of a deal Caterpillar made in China last June- later found to involve accounting fraud- and the very reason behind a 55% drop in the company's fourth quarter profits. Caterpillar, which is the world's largest maker of construction equipment, bought ERA Mining Machinery and its subsidiary Siwei, to expand in the mining business in China. But after the transaction closed, Caterpillar found that physical inventory in the companies it acquired did not match accounting statements. That led to a charge and the 55% drop. Weak demand was another drag. Caterpillar's bulldozers and tractors have been piling up in warehouses waiting for economies in China, Europe and the United States to pick up pace. In 2013, Caterpillar expects to earn $7 to $9 per share, below the $9.12 per share analysts foresee. The company does not expect the fraud in China to harm its 2013 profit, but it will hinder the company's expansion into China, the world's largest coal producer.