Cummins Inc. has reported results for the first quarter of 2016.
First quarter revenues of $4.3 billion decreased 9% from the same quarter in 2015. Lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3% compared to last year, primarily due to a stronger U.S. dollar.
Revenues in North America decreased 10% while international sales declined by 8%. Within international markets, revenues in Latin America and Asia declined the most.
Earnings before interest and taxes (EBIT) in the first quarter were $484 million, or 11.3 percent of sales, down from $562 millionor 11.9 percent of sales a year ago.
Net income attributable to Cummins in the first quarter was $321 million ($1.87 per diluted share), compared to $387 million($2.14 per diluted share) in the first quarter of 2015. The tax rate in the first quarter of 2016, was 28.4%.
“Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” says Rich Freeland Chief Operating Officer. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.”
Based on the current forecast, Cummins expects full year 2016 revenues to be down 5-9%, and EBIT to be in the range of 11.6-12.2% of sales, unchanged from its forecast three months ago.
Effective April 2016, Cummins re-organized its business to combine the Power Generation Segment and High Horsepower engine business creating the Power Systems Segment. Going forward, it will present results for four operating segments: Engine, Distribution, Components and Power Systems. Cummins will begin to report results for its new reporting structure in the second quarter of 2016 and will also reflect this change for historical periods. “The formation of the Power Systems Segment combines two businesses that are already strongly interdependent and will allow us to streamline business and technical processes to accelerate innovation, grow market share and more efficiently manage our supply chain and manufacturing operations,” says Chairman and CEO Tom Linebarger.
Other recent highlights:
- The QSK95 diesel engine received Tier 4 Final certification from the EPA for the U.S. locomotive market.
- Cummins announced a joint venture with Olayan to expand access to markets and enhance the service and support provided to customers in the Middle East.
- Ethisphere Institute named Cummins to its list of the world’s most ethical companies for the 9th straight year.
- The company returned $745 million to shareholders in the form of dividends and share repurchases in the first quarter, consistent with its plans to return 75% of Operating Cash Flow to shareholders in 2016.
First quarter 2016 detail (all comparisons to same period in 2015)
- Sales - $2.3 billion, down 10%.
- Segment EBIT - $200 million, or 8.6% of sales, compared to $253 million or 9.7% of sales.
- Sales declined due to lower production in the North American heavy-duty truck market and weak demand in power generation, oil and gas, commercial marine and mining markets.
- Sales - $1.5 billion, down 1%.
- Segment EBIT - $95 million, or 6.5% of sales, compared to $88 million or 6.0% of sales.
- Increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency.
- Sales - $1.2 billion, down 5%.
- Segment EBIT - $173 million, or 14.0% of sales, compared to $195 million or 15.0% of sales.
- Lower sales in North America and the unfavorable impact of currency more than offset growth in China.
Power Generation Segment
- Sales - $550 million, down 19%.
- Segment EBIT - $31 million, or 5.6% of sales, compared to $49 million, or 7.2% of sales.
- Weaker sales in most regions, with Asia and Latin America declining the most.