Caterpillar Financial Services, which is
part of Caterpillar’s global Caterpillar Financial Products’
division, recorded strong new business and profit growth
of six per cent for Q2 2008. Its profit after tax reached
U$4130m for Q2 2008, up from US$123m for Q2 2007 and its revenue
also saw an increase of five per cent to US$785m for Q2
2008.

Although Cat Financial has not been affected by the global
credit crisis, it has had to increase its credit spreads on debt
issuance. Nevertheless, according to its interim results statement,
it has maintained strong investor demand and good access to
commercial paper.

It also recorded new retail financing at US$4.60 billion, an
increase of US$944 million, or 26 per cent, from the second quarter
of 2007. The increase was the result of increased new retail
financing primarily in our Asia-Pacific, Diversified Services and
Europe operating segments.
 
However, the higher provision expense of US$21m, as well as an
increase of US$11m in general, operating and administrative
expenses saw Cat Financial’s pre-tax profit decrease by US$11m or 6
per cent from US$187m in Q2 2007 to US$176m in Q2 2008.

The group also saw an increase in operating costs: write-offs
and net of recoveries was US$19m for Q2 2008, up from US$12m in Q2
2007, which was due to the continued softening in the US housing
industry.
This was nevertheless offset by an increase of five per cent
in revenues and a margin increase of US$15m – related to operations
in wholesale, retail finance, operating leasing and associated fee
revenues minus the interest expense and depreciation on assets
leased, the statement said. The margin increase was principally due
to growth in average earning assets over 2007 of US$3.72bn.
The five per cent increase in revenues can be broken down into
the following: US$101m originated through growth in earning assets;
seven million US dollars through a net increase in other net
revenue items; US$12m related to gains on the sales of
receivables.

Cat Financial president Kent M. Adams said: “Although past dues
are up from last year, our portfolio continues to perform very well
with write-offs as a percentage of the retail portfolio in-line
with the five-year historical average. During this time of economic
uncertainty in key markets, we continue to work to be a reliable
source of financing for Caterpillar customers and dealers.”