This week we hosted Caterpillar’s Annual Shareholder Meeting.
I had the opportunity to highlight the great accomplishments of our global team that contributed to Caterpillar’s strong 2022 performance.
Thank you, Nikki. Welcome, everyone. Thank you, again, for joining us at our meeting this morning.
I want to begin by extending my thanks to our global team for delivering one of the best years in our nearly 100-year history. During 2022, they worked to meet healthy customer demand while remaining focused on executing our enterprise strategy for long-term profitable growth.
Our purpose is to help our customers build a better, more sustainable world, and our independent network of global Cat dealers is integral to our customer’s long-term success. With 156 dealers in more than 2,800 locations around the world, they have the expertise our customers count on, and offer the most extensive sales and service network in the industries we serve. They provide a clear competitive advantage.
Our Values in Action are the foundation: Integrity, Excellence, Teamwork, Commitment and Sustainability. They represent a shared commitment to the highest ethical standards, defining what we stand for and how we conduct ourselves with our customers, suppliers and one another.
We’re also committed to fostering a workplace that respects and celebrates our employees’ diverse backgrounds, experiences and perspectives, and encourages a culture where employees feel valued and included. This heightens the opportunity for greater team performance and strengthens us as a company, enabling us to provide superior value to our customers. We recently published our third annual Diversity & Inclusion Report, which highlights our D&I framework and advancements.
While Caterpillar and our dealers help customers build the world’s infrastructure, our Caterpillar Foundation focuses on building thriving communities. The spirit of giving is part of Caterpillar’s DNA. This was illustrated in the Foundation’s record-breaking giving in 2022 through Matching Gifts, the United Way campaign and its support of both urgent and long-term needs of the Ukraine humanitarian crisis.
Next, I’ll recap our team’s 2022 performance, beginning with our financial results.
Our global team increased sales by 17% last year to $59.4 billion. We achieved a full-year profit per share of $12.64 and a record full-year adjusted profit per share of $13.84. Despite supply chain challenges, our team achieved double-digit top-line growth for the second consecutive year and generated strong Machinery, Energy & Transportation, or ME&T, free cash flow, which enabled us to return $6.7 billion to shareholders through share repurchase and dividends. We’ve paid a higher dividend annually for 29 consecutive years and are proud to be recognized once again as a member of the S&P 500 Dividend Aristocrats Index.
Our strategy includes operational excellence, expanded offerings, services and sustainability.
Operational excellence includes safety, quality, Lean, and a competitive and flexible cost structure. In terms of safety, even one injury is one too many. We want everyone to return home safely every day. The same goes for quality. We are striving for perfection in safety and quality in a continuous, never-ending journey. The same is also true for Lean. We are committed to continuing our Lean manufacturing journey by synchronizing across our value chains, reducing lead times, optimizing working capital and increasing availability.
As we focus on expanded offerings, we continue to grow our product line beyond our core performance products. We’re developing a variety of products and solutions for our wide range of customers. We’re committed to creating superior customer value and to ensuring our customers are more successful using Caterpillar products than they would be with the competition.
Services include all the ways we help our customers succeed after they buy a piece of equipment. Ongoing initiatives and investments, as well as price realization, contributed to services sales growth of $3 billion in 2022, a 17% increase over 2021 and a more than 50% increase from our 2016 baseline.
Next, I’ll touch on a few service initiatives that are contributing to this growth.
Our connected assets grew from 1.2 million in 2021 to more than 1.4 million in 2022, which helps our customers operate their fleets more efficiently.
The number of Customer Value Agreements increased, with more than 60% of equipment delivered with a CVA. These agreements help our customers to minimize downtime, improve utilization and extend the life of their Caterpillar products.
We’re also making Cat equipment easy to buy and easy to own while driving eCommerce sales with tools like the new Cat® Central app and the introduction of serial-number-specific codes that provide quick access to equipment-specific parts and services.
We also had the highest level of parts availability in our history in 2022.
Customer demand remained strong for remanufactured products and components. Cat Reman gives materials a new life and delivers sustainability benefits by reducing waste and minimizing the need for raw materials, energy and water to produce new equipment. In 2022, Cat Reman continued to expand services, introducing 28% more remanufactured products than the prior year.
Lastly, we continue to work closely with dealers focusing on the largest service opportunities by region, customer and product to develop opportunity-based targets to grow services.
We’re increasingly confident that we’ll achieve our $28 billion ME&T services sales target by 2026.
Turning to sustainability, with the retirement of Julie Lagacy in February, we named Dr. Lou Balmer-Millar as our new chief sustainability officer. Lou’s experience includes more than 20 years of technical and business leadership at Caterpillar, as well as materials and chemical engineering research work before joining Caterpillar.
We take pride in Caterpillar’s legacy of providing products and services that continually improve the quality of life and the environment by helping our customers fulfill society’s need for infrastructure in a sustainable way.
We support the transition to a lower carbon future. We’re reducing greenhouse gas emissions from our operations, and we’re investing to provide our customers with a
diverse portfolio of products, services and solutions to lower their greenhouse gas emissions, improve efficiency and productivity, and deliver energy flexibility.
We believe the energy transition and growing global energy demand will increase Caterpillar’s total addressable market and expand opportunities for profitable growth in a variety of ways.
For example, we are helping our customers meet accelerating commodity demand resulting from the increasing adoption of electric vehicles, battery storage, wind and solar power. Our products and services are helping address rising global energy demand for renewables and many traditional forms of energy. The growing momentum of the energy transition will also require significant global infrastructure investment while expanding Caterpillar’s services opportunities.
Caterpillar is well positioned to benefit from both renewables and traditional sources of energy.
Caterpillar has been a technology leader for nearly a century, and that leadership continues as we invest to meet the needs of our diverse global customers. We’re increasing our investments in autonomy, alternative fuels, connectivity and digital, and electrification, or AACE, to help our customers achieve their sustainability objectives.
We have the largest autonomous truck fleet in the world, with nearly 600 machines and more launching every year, and recently signed an agreement to deploy autonomous solutions in a quarry and aggregates application. Last November, we successfully demonstrated a fully loaded battery electric Cat 793 large mining truck prototype at our Tucson proving grounds. Four battery electric machine prototypes are currently in development — the 301.9 mini excavator, the 320 medium excavator, the 950 GC medium wheel loader and the 906 compact wheel loader. All of our Cat machines can operate on renewable diesel. Caterpillar engines operating on natural gas blended with up to 100% hydrogen are being demonstrated in power generation projects today, and our Solar turbines can operate on up to 100% hydrogen.
Additionally, strategic investments in companies like Lithos Energy, which manufactures battery packs for demanding environments, support our commitment to delivering robust electrified products and solutions for our customers.
At our Tucson Proving Grounds, we’ll demonstrate how Caterpillar is addressing the complex challenges that come with managing the energy transition for our mining customers. Our ability to deliver an integrated solution – from the power source to the machine, the supporting technology, the infrastructure and the services – will continue to create value for our customers.
We continue to be transparent about our goals, progress and innovations and remain committed to shareholder responsiveness. One example is our inaugural Task Force on Climate-related Financial Disclosures report, or TCFD, which summarizes how we govern our strategy to address climate-related risks and opportunities and support customers during the energy transition. We also disclosed our Scope 3 use of sold products emissions for the first time.
Our commitment to a reduced-carbon future extends to our public policy efforts as we advocate for a thoughtful approach to identifying and advancing policies that support our customers during the energy transition. Our Lobbying Report, issued earlier this year, provides greater transparency and disclosure of our advocacy efforts and political engagements, including climate lobbying, as well as a description of the oversight and management of these activities.
In closing, I want to thank our Caterpillar team for their focus on executing our enterprise strategy. With Our Values in Action as our guide, we create the products, services and solutions that help our customers build a better, more sustainable world.
I am optimistic about Caterpillar’s future opportunities and believe we are well-positioned to contribute to a reduced-carbon future while profitably growing our company.
Thank you for joining us today. And on behalf of our outstanding global team, thank you for your continued support of Caterpillar.