Caterpillar is the leading global manufacturer and a leading U.S. exporter of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. It principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. Yengst Associates monitors much of the machinery found in the three product segments listed above as part of our service. In April 2017, company management announced its plans to relocate corporate headquarters to Deerfield, Illinois. It expected to relocate approximately 100 employees in 2017 and 300 total people when fully operational in mid-2018. Its February 15, 2018 SEC filing lists its headquarters in Deerfield, Illinois. Its Financial Products business is headquartered in Nashville, Tennessee.
We look to the company’s performance as a gauge of the health of the global economy; its machines are huge, expensive, and used in different such projects that companies and governments are only likely to invest in if they're confident in the economic outlook and their financial standing. Caterpillar’s performance and the discussion thereof have provided early substantiation of our forecasts and observations about the global and North American economies over the last several years. Caterpillar’s 2017 results confirm and support some of our observations; particularly the awakening of mining and gas industries and improved demand in North America for construction machinery.
Caterpillar reputed for its premier equipment, shifted its strategy in recent years when it introduced SEM branded machines to target customers in developing economies. SEM (a Chinese manufacturer) has its own brand, distribution channels, marketing strategy and product support. The SEM brand of compact, small and mid-sized wheel loaders, 18-ton to 22-ton soil compactors, mid-sized motor graders, and track type tractors are targeted at utility customers for Chinese domestic and select growth markets around the world. In 2016, to further enhance the SEM brand, Caterpillar approved the endorsement “SEM - A Caterpillar Brand”. SEM products meet or exceed regional industry requirements for quality and reliability and target customers who emphasize initial acquisition cost over long-term total cost of ownership. SEM products are affordable, reliable and simple to operate.
Overall, 2017 was a very good year for Caterpillar. Many key markets improved both in the fourth quarter and the full year as previously implemented cost controls resulted in strong margins and a strengthened balance sheet. Fourth quarter 2017 Machinery, Energy and Transportation (MET) sales increased 37 percent ($3,909 million) year-over-year. Sales volume increase represented approximately $3 billion of the total increase. Construction Industries’ segment sales volume increased $1.5 billion. Energy Transportation and Resource Industries followed with $800 million and $669 million sales volume increases respectively. Stronger demand is reflected in lower December 31, 2017 inventory levels. The strong fourth quarter results reflect the need for increased production in 2018 in order to meet current demand.