Cummins Inc. has reported results for the second quarter of 2019.
Second quarter revenues of $6.2 billion increased 1% from the same quarter in 2018. Increased truck production in North America and stronger demand in North American power generation markets was partially offset by lower demand in oil and gas and international truck markets. Currency negatively impacted revenues by 2% primarily due to a stronger U.S. dollar.
Second quarter sales in North America set a new record and improved by 7% while international revenues decreased by 6%. Sales in North America increased in all segments except Power Systems, which was negatively impacted by lower demand in oil and gas markets. International revenues declined primarily due to lower truck demand in China, Europe, Brazil, and India.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were a record $1.1 billion, or 17.0% of sales, compared to $897 million or 14.6% of sales a year ago. Net income attributable to Cummins in the second quarter was $675 million ($4.27 per diluted share), compared to net income of $545 million ($3.32 per diluted share).
“We achieved record revenues, EBITDA, and operating cash flow in the first half of 2019, extending our track record of raising performance cycle over cycle,” says Chairman and CEO Tom Linebarger. “While we do expect to see a moderation in demand in the second half of the year, our financial strength combined with our diversified geographic and end market exposure will enable us to generate strong profits, continue to invest in future growth, and return cash to shareholders.”
Cummins now expects 2019 revenue to be flat, which places the forecast at the low end of our previous guidance range of flat to 4%. This lower outlook is driven by reduced truck demand in international markets, moderating parts demand in North America, and the impact of a stronger U.S. dollar. The company continues to expect EBITDA to be in the range of 16.25 to 16.75% of sales and plans to return 75% of Operating Cash Flow to shareholders in the form of dividends and share repurchases.
The outlook does not include any potential impact of the company’s review of its emission certification process and compliance with emissions standards or acquisition of Hydrogenics.
Second Quarter 2019 Highlights:
- The Board of Directors approved a 15% increase in the company's quarterly cash dividend from $1.14 per share to $1.311 per share
- Cummins entered into a definitive agreement to acquire the majority of shares of fuel cell systems provider Hydrogenics Corporation. The agreement is subject to customary closing conditions and Hydrogenics’ shareholder approval
- Cummins and Gillig announced that the GILLIG zero-emission battery electric bus, powered by Cummins, is now available for commercial orders by customers
Second quarter 2019 detail (all comparisons to same period in 2018)
- Sales - $2.7 billion, flat versus prior year
- Segment EBITDA - $416 million, or 15.4% of sales, compared to $362 million or 13.4% of sales
- On-highway revenues increased 2% and off-highway revenues decreased by 7%
- North America revenues increased by 7% due to higher demand in on-highway markets while international revenues declined 15% primarily due to lower demand in China
- Sales - $2.0 billion, up 2%
- Segment EBITDA - $172 million, or 8.5% of sales, compared to $145 million or 7.3% of sales
- Revenues in North America increased by 2% and international sales were flat
- Strong demand for power generation equipment in North America, especially data centers, was partially offset by lower demand in oil and gas markets and the unfavorable impact from a stronger U.S. dollar, which impacted sales by 2%
- Sales - $1.8 billion, down 2%
- Segment EBITDA - $297 million, or 16.1% of sales, compared to $237 million or 12.6% of sales
- Revenues in North America increased by 5% due to higher heavy- and medium-duty truck production while international sales declined by 12% due to lower demand in Europe, China, and India
Power Systems Segment
- Sales - $1.2 billion, down 3%
- Segment EBITDA - $173 million, or 14.4% of sales, compared to $186 million or 14.9% of sales
- Industrial revenues decreased 11% due to lower demand in North America oil and gas and global mining markets while power generation revenues were flat
Electrified Power Segment
- Sales - $8 million
- Segment EBITDA loss - $33 million