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Caterpillar

Caterpillar Inc. manufacturers the world's largest off-road dump trucks at its Decatur plant.

DEERFIELD— Inventory levels on Caterpillar Inc. dealer lots across the globe ticked upward in the third quarter to reach the lower end of the company's target range, despite supply challenges related to American trade conflicts that have affected raw material availability.

The buildup followed about 12 months of dealer contentions that inventory levels were too tight as Caterpillar emerged from an unprecedented four-year downturn, director of investor relations Amy Campbell told analysts at the Baird 2018 Global Industrial Conference in Chicago on Thursday.

"We have been able to build dealer inventory up at the bottom end of our monthly sales range, so we feel good about it," Campbell said. "At the end of the third quarter, the regions were really largely in line with what we think the right level of dealer inventory should be."

Caterpillar manufactures the world's largest off-road dump trucks for the mining industry at its Decatur plant. Caterpillar employs about 3,000 workers at its Decatur facility, according to the company.

Sales of Big Yellow machinery surged beginning in 2017 after steep declines from 2012 to 2016 that forced a major restructuring. The company has repeatedly revised annual revenue and profit projections upward as quarterly earning reports beat company and analyst forecasts. CAT has posted record quarterly profit figures in each of three consecutive reports so far in 2018.

Equipment demand related to oil and pipeline projects in North America drove sales growth in the company's construction industries segment into the third quarter, Campbell said.

"They've been very healthy businesses, both good growth markets for us this year," Campbell said.

The meteoric growth in sales for some business segments, however, has slowed, and CAT has predicted an increase in material costs on the low end of a $100 million to $200 million range for 2018 because of tariffs imposed on imported steel and aluminum by the Trump administration.

But Campbell said the recovery of one of CAT's core categories of end users -- miners -- remains in its early days, with machinery overhauls dominating rebounding sales and extending equipment life longer than originally anticipated.

The company has not yet released sales and profit projections for next year, but even 2019 may not see a full recovery of the mining sector.

"We think the replacement cycle likely begins in earnest in 2020," Campbell said.

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