Cat Financial’s originations, receivables, and revenues increased in the second quarter as the company’s credit concerns diminished and interest rates rose.
Cat Financial, the finance subsidiary of equipment manufacturer Caterpillar, posted $3.2 billion in Q2 originations, up 27.9% quarter over quarter and 1.8% year over year, according to the company’s earnings supplement.
“Retail new business volume performed well, increasing versus the prior year and the first quarter,” Caterpillar’s Chief Financial Officer Andrew Bonfield said during today’s earnings call. “We continue to see strong demand for used equipment.”
Cat Financial’s total assets clocked in at $33 billion, up 2.5% sequentially and 3.3% compared with yearend 2022, according to an Equipment Finance News analysis of the earnings supplement.
Caterpillar Financial Products’ revenue, which includes Cat Financial and Caterpillar Financial Insurance Services, was $923 million, a 15.7% YoY increase, according to the earnings release.
Cat Financial’s Q2 revenue tallied $793 million, up 3.3% QoQ and 18.7% YoY, according to the earnings release. Caterpillar Financial Insurance Services, which offers extended protection for equipment and insurance for equipment and businesses, logged revenue of $130 million, down 3% QoQ but flat YoY, according to an Equipment Finance News analysis of the supplement.
Past-dues down 4 bps YoY
Cat Financial’s past-due accounts clocked in at 2.15% at the end of Q2, down 4 basis points (bps) YoY, according to the supplement.
“This is the lowest second-quarter past dues percentage since 2007,” Bonfield said.
Write-offs net of recoveries landed at $8 million in Q2, representing 0.02% of the total portfolio, down 1 bps QoQ but up compared with less than $1 million in write-offs in Q2 2022, according to an EFN analysis of the supplement.
Allowance for credit losses in Q2 was $320 million, or 1.15% of finance receivables, down 12 bps from March 31 and down 14 bps compared with yearend 2022, according to the supplement.
Higher financing rates and lower provisions for credit losses led to improvements in Cat Financial’s second-quarter performance, Bonfield said.
Construction, resources sales elevated YoY
Caterpillar Construction’s Q2 North American sales revenue was $4 billion, an increase of 32% YoY, according to the release. Caterpillar Resources, meanwhile, reported North American sales revenue of $1.3 billion, a 30.1% YoY increase.
“North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction,” Caterpillar Chief Executive James Umpleby III said during the call. “Non-residential continues to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter.”
Consolidated North American sales revenue totaled $8.9 billion in Q2, up 11.3% QoQ and 31.8% YoY, according to the supplement. The increase in infrastructure projects in North America also benefited Caterpillar sales in Q2 and the expectation is that it will be a reason for optimism, Umpleby said.
“We are starting to see some benefit of the numerous infrastructure bills that have passed, some of that is coming from the states, but permitting takes time for a number of projects,” he said. “It’s very difficult to judge exactly how long that permitting process will take and how this will play out, but I do expect it to last for some time.”
Shares of Caterpillar Inc. [Nasdaq: CAT] were trading at $288.65 at market close, down $23.48 or 8.85% from market open. Caterpillar has a market capitalization of $148.76 billion.