Cummins Third Quarter Sales Fall 18%
By Mike Brezonick27 October 2020
Cummins Inc. reported that its sales for the third quarter of 2020 fell 18% from the same period of a year ago, while revenues of $5.1 billion decreased 11% percent from the same quarter in 2019.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $876 million (17.1% of sales), compared to $958 million (16.6% of sales) a year ago.
“Cummins successfully translated increased sales into strong profits and produced record operating cash flow during the third quarter,” said Chairman and CEO Tom Linebarger. He added that “Over the last six months we have faced both the most severe decline in quarterly sales in our history as well as the largest sequential increase. We continue to work safely and effectively through an incredibly challenging period, meeting our commitments to customers who provide products critical to the functioning of the global economy.”
Net income attributable to Cummins in the third quarter was $501 million compared to $622 million in 2019.
The company said it currently expects fourth quarter revenues to be similar to third quarter levels, with higher demand in North America truck markets and continued improvement in aftermarket sales, partially offset by lower demand in China.
On October 1st, the company ended temporary salary reductions that began in April. Compensation expense is projected to increase by approximately $90 million in the fourth quarter due to the end of these salary reductions.
“We are encouraged by the recovery in demand across our markets in the third quarter,” said Linebarger. “We will continue to manage cautiously through the remainder of the year as visibility on future orders remains low and the impact of the virus on economies around the world remains difficult to predict.”
Third quarter sales in Engine Segment were $2.1 billion, down 13% from the previous year. On-highway revenues decreased 13% and off-highway revenues declined 9%. Sales fell 18% in North America but increased 8% in international markets primarily due to increased demand in China
The Distribution Segment had sales of $1.7 billion, down 14% from 2019. Revenues in North America fell 18% and international sales declined by 5%.
Components Segment sales fell 7% to $1.5 billion. Revenues in North America decreased by 24%, but international sales increased by 26% due to higher demand in China and India.
In the Power Systems Segment, sales were $981 million, down 13% from 2019. Power generation revenues fell 7% while industrial revenues decreased 21% due to lower demand in mining and oil and gas markets.
The New Power Segment had sales of $18 and an EBITA loss of $40 million, which the company said was due to costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles.