Cummins Reports Decline in 4Q Sales, Income
Engine builder Cummins Inc.’s fourth-quarter earnings sank 30% as the heavy-duty truck engine maker saw sales in most of its segments decline, led by its core engines business.
As reported by MarketWatch.com, the Columbus, Ind.-based company reported a profit of $381 million, or $2.02 a share, down from $548 million, or $2.86 a share, a year earlier. The year-earlier period included benefits of 17 cents a share from asset sales and 13 cents from flood insurance recoveries. Excluding those items, restructuring costs and other items, per-share earnings were down to $2 from $2.56.
Revenue dropped 13% to $4.3 billion while gross margins narrowed to 24.7% from 25.2%.
In the engine segment — the largest contributor to the top line — fourth-quarter sales slipped 18% to $2.51 billion. Components sales fell 14% and power generation sales sank 17%. Distribution sales were up 8.8%.
Sales for the full year were $17.3 billion, down 4% from 2011. Net income for the full year was $1.66 billion, or $8.74 per diluted share, down from $1.85 billion, or $9.55 per diluted share in 2011.
The company blamed the fourth-quarter revenue decline on weaker demand in truck, construction, and oil and gas markets in North America, as well as lower demand in international markets for power generation equipment and construction, truck and mining engines.
“After a strong start to the year, demand declined across most geographies and end markets in the second half of 2012 as the global economy slowed,” CEO Tom Linebarger said. “The work we have undertaken to reduce costs and lower inventory should benefit the company when the global economy improves, however there is uncertainty surrounding the timing and pace of improvement in end markets in 2013.”
The company said Wednesday (Feb. 6) it has cut its work force by about 650 employees, or 3%, while also eliminating about hourly 650 positions.
For the new year, the company forecast revenue to be flat to down 5%, compared with estimates of a 2% rise from analysts polled by Thomson Reuters.
Cummins recently unveiled cost-cutting measures as it said a weakening global economy was driving down demand for its engines. The company has described a particularly sharp contraction in the North American commercial truck market — where Cummins is the largest supplier of engines for heavy-duty trucks — saying trucking companies have been throttling back on their purchases because of uncertainty about freight volumes and the strength of the U.S. economy.
Cummins also continues to experience weaker-than-anticipated demand from manufacturers of construction machinery, trucks and power generation equipment in China.