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Caterpillar cut its full-year sales and profits forecast for a second straight quarter on Tuesday, highlighting the struggle to call a bottom to an emerging market downturn amid fresh risks created by Brexit and geopolitical turmoil.

Weak demand for equipment used in the mining and energy sector continued to weigh on its business while the strong dollar and weaker capital spending in Europe ate into its overseas sales.

Brad Halverson, chief financial officer, said in an interview that the slump in demand was not only a reflection of the broader economic environment but the fact that miners had until a couple of years ago bought more heavy equipment than they needed, which was weighing on replacement demand.

On a more positive note, he said dealers had started to see demand for spare parts to rebuild 50 tonne mining trucks, although this year it was expecting to sell only 100 new trucks compared with previous years when it sold between 600-700.

“If you go back historically, we’ve not had more than two years down [in sales] since the late 20s, 30s, before it has started to recover,” Mr Halverson said. “For us to be in our fourth year . . . is something we’ve not experienced.”

Although the US heavy machinery maker, best known for its yellow excavators, said commodity prices appeared to have stabilised, they remained at low levels and the group warned that the fallout from the Brexit vote in the UK and turmoil in Turkey added to the lack of predictability.

Mr Halverson said that the company had contingency plans in place in case the various difficulties in Europe were exacerbated. It is reducing costs by $2bn this year and is prepared to take out further costs if necessary, while spending on areas such as adding digital equipment to its machinery which it sees as a key growth opportunity.

The company warned that more lay-offs were expected in the second half as it tried to adapt to the tough trading environment. “World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve,” the company said in a statement.

Caterpillar said it expected sales and revenues to be in a range of $40bn to $40.5bn in 2016. This compares with its previous outlook of $40bn to $42bn issued in April, the $40bn to $44bn guidance in January, and the $47bn recorded in 2015.

It expects profits to come in at a midpoint of $2.75 a share this year, or about $3.55 excluding restructuring costs. This is down from the guidance given in April for $3 a share (or $3.70 a share excluding restructuring costs) and the forecast of $3.50 a share (or $4 a share excluding restructuring costs) issued in January.

The cut in forecast comes as second-quarter revenue tumbled 16 per cent to $10.3bn. Sales fell in all categories and drove profit down to 93 cents a share, compared with $1.31 per share last year.

Adjusted earnings — which exclude restructuring costs — came in at $1.09 a share, ahead of forecasts of 96 cents a share.

The recent recovery in commodity prices has yet to translate into increased mining activity or a rise in equipment purchases. Mining companies are trying to adjust their balance sheets and cost structures, and may continue to delay equipment purchases.

Analysts at Jefferies also noted that Caterpillar has 20 “key facilities” in the UK and said potential trade restrictions stemming from the country’s decision to leave the EU could impact businesses.