Industry News

Good Financial News: Cat, Cummins, AGCO

July 27, 2010

AGCO reported 1.4% net sales drop to approximately $1.7 billion for the second quarter of 2010, down 1.4% compared to the second quarter of 2009. Further, net sales for the first six months of 2010 were $3.1 billion, a decrease of approximately 6.9% compared to the same period in 2009.

Excluding the favorable impact of currency translation of approximately 4.2%, net sales for the first six months of 2010 decreased approximately 11.1% compared to the same period in 2009. Despite that, AGCO reported a bigger-than-expected quarterly profit driven by especially strong sales of its agricultural machinery in South America, which largely offset continued weakness in much of the rest of the world. AGCO posted a second-quarter profit of $62.9 million, or $0.66 a share, up from $57.4 million, or $0.61 a share, last year.

Cummins Inc. said that its second quarter had the highest quarterly earnings as a percentage of sales in more than 25 years. The Columbus, Ind. company cited productivity improvements in manufacturing, as well as strong performance in international markets.

Sales of $3.21 billion in the second quarter were 32% higher than $2.43 billion in the same quarter in 2009, the company reported. Earnings before interest and taxes (EBIT) was $401 million, or 12.5% of sales, up from $109 million or 4.5% of sales in the second quarter of 2009. EBIT also improved from 10.7% in the first quarter of 2010. For the first time ever, Cummins said, all four segments posted quarterly EBIT in excess of 10% of sales.

The sales gains were led by the company’s engine and components segments, which each reported 45% sales improvements compared to the same period in 2009. Power Generation sales increased 16%, while Distribution sales rose 24%. This despite what Cummins characterized as a weak North American heavy duty truck market, which the company said was due to the transition to new on-highway emissions standards at the beginning of the year.

Based on the Company’s performance in the first half of 2010 and its forecast for the rest of the year, Cummins today increased its financial guidance for 2010. The Company now expects to generate EBIT of 12 percent of sales on revenues of $13 billion.

Last week, Caterpillar Inc. reported sales and revenues were up $2.434 billion from the second quarter of 2009. Sales volume improved $2.259 billion and profit was up $336 million from the second quarter of 2009. The increase, Cat said, was primarily the result of higher sales volume, improved operating efficiencies and favorable price realization, partially offset by higher taxes, provisions for incentive compensation and the absence of $110 million of LIFO inventory decrement benefits from the second quarter of 2009.

Further, Cat said second-quarter profit of $1.09 per share, an increase of $0.49 per share from a profit of $0.60 per share in the second quarter of 2009. Profit of $707 million was 91% higher than second-quarter 2009 profit of $371 million. Sales and revenues of $10.409 billion were up 31% from $7.975 billion in the second quarter of 2009.