Cummins Inc. last week reported third-quarter sales of $2.53 billion, down 31 percent from the same period last year, and net income of $95 million, or $0.48 a share. However, the company significantly improved its profitability and cash position from the second quarter despite the global recession that continues to affect demand in most markets.
Third-quarter Earnings Before Interest and Taxes of $155 million, or 6.1 percent of sales, decreased 59 percent from a year ago.
The third-quarter results include $22 million of restructuring and other charges associated with the cost of job-reduction actions. Excluding the charges, EBIT was $177 million, or 7.0 percent of sales, and net income attributable to Cummins Inc. was $110 million, or $0.56 a share.
Compared to the second quarter, sales increased 4 percent on the strength of improving demand in China, India and Brazil and a short-term increase in on-highway engine and components sales in the United States. Those increases more than offset quarter-to-quarter sales declines in the Company’s Power Generation and Distribution businesses.
Despite the modest increase in sales, net income attributable to Cummins rose 70 percent, EBIT increased 42 percent and the company improved its cash position by $152 million from the second quarter. The significantly improved profitability and cash position from the second quarter are largely the result of lower spending, better utilization of manufacturing capacity and reduced inventory.
“Given the continued weakness in many of our markets, the company performed extremely well in the third quarter,” said Cummins chairman and CEO Tim Solso. “The decisive actions we have taken over the past several months have allowed us to remain profitable, generate cash and invest in the company’s future in the face of the worst recession in decades.”
Compared to the same period a year ago, sales fell by at least 25 percent in all four of the company’s operating segments, with the largest declines coming in the Power Generation and Engine segments. Despite the continued weakness in demand, all four segments were profitable in the third quarter.
Based on the third-quarter results and company forecasts for the remainder of the year, Cummins raised its sales and profit guidance for 2009. The company now expects 2009 sales to be slightly less than 30-percent lower than 2008 and anticipates EBIT of 6 percent of sales for the year, excluding the restructuring charges. Previously, the company said it expected 2009 sales to be slightly more than 30 percent lower than last year and EBIT to be 5 percent of sales, excluding restructuring charges.
Headquartered in Columbus, Ind., Cummins Inc., is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems.
