Cummins Inc. last week reported that the fourth quarter 2009 was the most profitable fourth quarter in company history, eclipsing the previous mark set in 2007. Sales of $3.4 billion grew 3 percent from $3.29 billion in the fourth quarter 2008, while net income attributable to Cummins Inc. increased to $270 million, or $1.36 a share, from $43 million, or 22 cents a share, a year ago. Fourth-quarter results were driven by continued strength in China, India and Brazil, along with a significant increase for on-highway truck engines and components in North America in advance of new emissions standards that took effect at the beginning of 2010.
Earnings Before Interest and Taxes was $383 million or 11.3 percent of sales, compared to $56 million, or 1.7 percent of sales in the fourth quarter 2008. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring, while the 2008 results included a $37 million pre-tax charge for similar actions. Excluding these charges, fourth-quarter 2009 EBIT was $387 million, or 11.4 percent of sales, compared to $93 million, or 2.8 percent of sales in the same period in 2008.
For all of 2009, the company reported revenues of $10.8 billion, down 25 percent from $14.3 billion in 2008 as a result of the deep global recession that reduced demand in most markets throughout the year. Despite the downturn, Cummins reported solid profit and significant positive cash flow in 2009 as the company’s results improved on a quarter-to-quarter basis throughout 2009.
“Given the extraordinarily challenging economic climate throughout much of the year, we are extremely pleased with our financial results for both the fourth quarter and all of 2009,” said Cummins chairman and CEO Tim Solso. “By taking decisive action early in the recession to bring our costs in line with real demand for our products, and through the hard work of all our people worldwide, we delivered as we promised in 2009: We earned a solid profit during the deepest recession in decades and generated a significant amount of cash while continuing to invest in technologies and programs critical to our success.”
Engine segment sales in the fourth quarter jumped by 12 percent compared to the same period in 2008, while Components sales, which are closely tied to engine volumes, grew 8 percent. When compared to the third quarter of 2009, the gains were even more dramatic: Engine sales increased 51 percent and Components sales were up 24 percent.
At the same time, Cummins’ strong presence in China, India and Brazil continued to play an important role in the company’s performance in the fourth quarter. The economies in all three countries have rebounded from the recession much more quickly than more mature markets such as the United States and Western Europe. The company expects revenue in China and India to return to pre-recession levels in 2010, with solid growth also expected in Brazil.
“In many ways, the first half of 2010 will be more challenging than the environment we faced in the early part of the recession,” said Cummins president and chief operating officer Tom Linebarger. “We will continue to manage our business very conservatively to ensure that we stay focused on our priorities of earning a solid profit throughout the entire downturn, investing in our future and demonstrating that we care about our customers more than anyone else in the industry.”
Based on its current forecasts, Cummins expects 2010 sales and earnings to be similar to its 2009 performance. The company’s current full-year guidance calls for sales of $11 billion for the year, with an EBIT of 7 percent of sales.
The company also expects to continue to generate positive cash flow, and intends to significantly increase its capital investment in 2010. Cummins is forecasting capital spending of approximately $400 million in 2010, an increase of nearly 30 percent from 2009, to fund projects critical to the company’s long-term growth.
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.