Cummins has reported record profits for all of 2010, as well as record quarterly sales and profits for the fourth quarter, on the strength of significant growth in key international markets and improved productivity in its global manufacturing operations.
Fourth quarter sales were $4.14 billion, up 22 percent from $3.40 billion during the same period in 2009. Earnings Before Interest and taxes (EBIT) were $541 million, or 13.1 percent of sales, a 41 percent increase from $383 million, or 11.3 percent of sales. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring.
Net income attributable to Cummins Inc. was $362 million ($1.84 per share) compared to $270 million ($1.36 per share) in the fourth quarter 2009.
For the fourth quarter, the Engine, Components and Distribution segments all reported record sales and segment EBIT. The Power Generation segment, which was affected by the recession later than the Company’s other business segments, continued to rebound and reported strongly higher sales and segment EBIT than during the same period in 2009.
For the full year, sales were $13.23 billion, up 22 percent from $10.80 billion in 2009. EBIT of $1.66 billion, or 12.5 percent of sales, increased 114 percent from $774 million, or 7.2 percent of sales excluding restructuring and other charges, in 2009.
Net income attributable to Cummins Inc. was $1.04 billion ($5.28 per share) from $428 million ($2.16 per share) in 2009. Results for 2009 included restructuring and other charges of $0.33 per share.
Full-year 2010 sales were second only to 2008, while EBIT and net income attributable to Cummins Inc. were Company records. Three of the Company’s four business segments – Engine, Components and Distribution – reported full-year record earnings, while Power Generation also posted strong sales and profit gains from the previous year.
The company’s strong performance in 2010 came despite a significant decline in its important North American truck engine markets, which were affected by the continued weakness in the U.S. economy and a change in emissions standards. Engine shipments to the North American heavy-duty truck market fell 61 percent and 44 percent to the North American medium-duty truck and bus markets.
Those decreases were more than offset by growth in international markets, particularly China, India and Brazil, and the Company continues to benefit from actions taken over the past two years to improve the productivity of its manufacturing operations around the world.
Sales in China and Brazil increased by more than 70 percent, while sales in India rose 37 percent for the year. Cummins’ total international sales increased by 48 percent from 2009 and accounted for 64 percent of the Company’s total sales in 2010.
“2010 was the best year in the Company’s history,” said Chairman and Chief Executive Officer Tim Solso. “The fact that we were able to achieve record profitability in the face of a sharp decline in large North American on-highway markets speaks to the global strength of our business and the work we did to keep the Company strong during the recession.”
“Given our strong balance sheet, the expected recovery of our North American markets and the global growth opportunities in front of us, we are forecasting further significant growth in 2011 and beyond.”
Based on its current forecasts, Cummins expects sales to grow to $16 billion in 2011 and EBIT to be 13.5 percent of sales.
The Company is forecasting sales to grow by 25 percent in its Engine and Components segments in 2011, led by recovery in the North American truck markets. The Company expects sales to increase by 15 percent in both its Power Generation and Distribution segments, driven by improving markets in North America and continued strength in key international markets.
In addition to the expected economic recovery in North America, the Company also is forecasting further strong growth in China, India and Brazil as well as in other parts of the world, including Mexico, the Middle East and Europe.
The Company expects to invest $600-$650 million in capital expenditures in its consolidated operations. In addition, the Company expects its joint ventures to make $300 million worth of capital investments in their operations to expand their businesses.
“We have significant growth opportunities in markets around the world, and we are well positioned to take advantage of those opportunities,” said President and Chief Operating Officer Tom Linebarger. “In particular, we expect a significant recovery in the North American truck markets this year, where our new engines are performing very well.”
“We shipped 62,000 engines to the North American truck markets in 2010 equipped with Selective Catalytic Reduction systems, which have allowed us to meet the stringent EPA emission standards and provide improved fuel economy to our customers.”
In other recent highlights in mid-January, Cummins dedicated its new “megasite” facility in Phaltan, India. The site will allow Cummins to significantly expand production capacity for engines, components and generators, and eventually use India as a base for experts to Asia, the Middle East and Africa. The Company plans to invest $300 million in the 300-acre campus over the next several years
Cummins finished 2010 as one of the top performing stocks in the Standard & Poor’s 500 index. Cummins’ stock price appreciated by nearly 140 percent in 2010 and the Company further returned value to shareholders by increasing its dividend by 50 percent in the third quarter 2010.