January 28, 2019
Cat Financial Announces 2018 Year-End Results
Full-Year 2018 vs. Full-Year 2017
Cat Financial reported revenues of $2.85 billion for 2018, an increase of $158 million, or 6 percent, compared with 2017. Profit was $305 million, a $281 million, or 48 percent, decrease from 2017.
The increase in revenues was primarily due to a $107 million favorable impact from higher average financing rates and a $94 million favorable impact from higher average earning assets, partially offset by a $48 million unfavorable impact from lower lending activity with Caterpillar.
Profit before income taxes was $433 million for 2018, compared with $590 million for 2017. The decrease was primarily due to a $222 million increase in provision for credit losses, which was driven by a higher allowance rate and an increase in write-offs, due to continued weakening in the Cat Power Finance portfolio. This decrease was partially offset by a $42 million favorable impact from higher average earning assets and a $36 million increase in net yield on average earning assets primarily due to changes in portfolio mix.
The provision for income taxes reflects an annual tax rate of 25 percent for 2018, compared with negative 1 percent for 2017. The increase in the annual tax rate is primarily due to the overall impact of U.S. tax reform in 2017, along with changes in the geographic mix of profits.
Retail new business volume for 2018 was $12.08 billion, an increase of $853 million, or 8 percent, from 2017. The increase was primarily driven by higher volume in Asia/Pacific, Europe and North America, partially offset by a decrease in Cat Power Finance.
At the end of 2018, past dues were 3.55 percent, compared with 2.78 percent at the end of 2017. Write-offs, net of recoveries, were $189 million for 2018, compared with $114 million for 2017. As of December 31, 2018, the allowance for credit losses totaled $511 million, or 1.80 percent of finance receivables, compared with $365 million, or 1.33 percent of finance receivables at December 31, 2017. The increase in past dues, write-offs and allowance for credit losses was primarily due to continued weakening in the Cat Power Finance portfolio.
Fourth-Quarter 2018 vs. Fourth-Quarter 2017
Cat Financial reported fourth-quarter 2018 revenues of $699 million, an increase of $21 million, or 3 percent, compared with the fourth quarter of 2017. Fourth-quarter 2018 profit was $18 million, a $253 million, or 93 percent, decrease from the fourth quarter of 2017.
The increase in revenues was primarily due to a $23 million favorable impact from higher average financing rates and a $22 million favorable impact from higher average earning assets. The favorable changes were partially offset by a $16 million unfavorable impact from returned or repossessed equipment and a $9 million unfavorable impact from lower lending activity with Caterpillar
Profit before income taxes was $46 million for the fourth quarter of 2018, compared with $133 million for the fourth quarter of 2017. The decrease was primarily due to an $86 million increase in provision for credit losses, which was driven by a higher allowance rate and an increase in write-offs, due to continued weakening in the Cat Power Finance portfolio.
The provision for income taxes reflects an effective tax rate of 48 percent in the fourth quarter of 2018, compared with negative 107 percent in the fourth quarter of 2017. The increase in the effective tax rate is primarily due to the overall impact of U.S. tax reform in 2017, along with changes in the geographic mix of profits.
During the fourth quarter of 2018, retail new business volume was $3.10 billion, a decrease of $313 million, or 9 percent, from the fourth quarter of 2017. The decrease was primarily driven by lower volume in Cat Power Finance.
"Despite the decrease in profit from continued weakness in Cat Power Finance and Latin America portfolios, we are pleased with the overall performance of our core asset portfolio and the portfolio growth achieved in 2018," said Dave Walton, president of Cat Financial and vice president of the Financial Products Division of Caterpillar Inc. "The global Cat Financial team remains focused on strategy execution to continue helping 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.
Click here to download the full version of the Cat Financial 4Q and full-year 2018 release, including Statistical Highlights.
Caterpillar media contact: Corrie Scott, 224-551-4133 (Office) or Scott_Corrie@cat.com
