Caterpillar Inc., the world’s largest manufacturer of mining and construction equipment reported a 46 percent annual drop in first-quarter earnings, with sales falling across all regions and all of its primary business segments as a result of the global COVID-19 pandemic.

The world’s biggest construction and mining equipment maker reported an adjusted profit of $1.60 per share, down from $2.94 a year earlier and below the $1.69 forecast by analysts on average, Refinitiv Eikon data showed.

Caterpillar is considered a bellwether for economic activity and Reuters reported that it the company warned the impact of the virus on its business would be far worse in the second quarter.

Governments around the world have ordered lockdowns to stop the spread of the virus and as a result, economic activity has come to a halt. Caterpillar said it anticipates dealers will reduce their inventories by as much as $1.5 billion this year in response to depressed equipment demand.

The International Monetary Fund this month predicted the “Great Lockdown” would result in the worst global recession since the Great Depression of the 1930s.

Sales at Caterpillar’s energy & transportation and mining business, which accounts for 60% of the company’s revenues, fell 19 percent during the quarter from a year ago.

Construction equipment sales declined an annual 27 percent.

As of mid-April, the company said about 75 percent of its primary production facilities were in operation. It said some facilities which were temporarily closed had reopened.

However, Chief Financial Officer Andrew Bonfield said the capacity utilization rate is lower in comparison to the period before the coronavirus outbreak.

The company said it is aligning production with expected demand and is prioritizing investment in its more profitable and resilient services and parts business.

In response to weak demand, it has cut discretionary spending and withheld annual salary increases and bolstered its liquidity position.
Caterpillar said its enterprise operating cash flow was $1.130 billion. It ended the first quarter with $7.1 billion in cash and has $20.5 billion of liquidity pool to tap into.