Cummins unveils large rise in quarter two revenues
By Ian Cameron03 August 2021
Company also outlines plans for its Filtration business with possibility of making it a stand-alone company
Cummins has reported second quarter revenues of $6.1 billion - an increase of 59 % from the same quarter in 2020.
The company also revealed it is exploring future plans for its Filtration business unit – which could include separating it into a stand-alone business.
Sales in North America increased 74% while international revenues increased 42% driven by strong demand across all global markets compared to the same quarter in 2020, which was impacted significantly by the pandemic, the company said. Currency positively impacted sales by 3% primarily due to a weaker US dollar.
“Strong demand across many of our key markets drove continued sales growth in the second quarter, particularly in North America, and resulted in solid profitability,” said Chairman and CEO Tom Linebarger.
He added: “The strength of the order board reflects robust underlying demand in many of our markets which is remarkable considering the challenges and uncertainty we faced during this same period last year. I cannot thank our employees and the employees of our supply base enough for their unwavering contributions during these challenging times given the significant supply chain constraints we continue to experience in our industry.”
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $974 million (15.9% of sales), compared to $549 million (14.3% of sales) a year ago.
Net income attributable to Cummins in the second quarter was $600 million ($4.10 per diluted share) compared to $276 million ($1.86 per diluted share) in 2020. The tax rate in the second quarter was 21.4% including $7 million, or $0.05 per share, of unfavorable discrete items.
Cummins also announced its “exploration of strategic alternatives for its Filtration business unit”. Potential strategic alternatives to be explored include the separation of the business into a stand-alone company, it added.
Cummins Filtration, founded by Cummins in 1958. The company added that the company has grown consistently, and as an independent company, would have the opportunity to accelerate growth as it further diversifies into new products and end markets.
The company added: “Cummins Filtration is a premier filtration platform with a broad portfolio of products for use in on-highway, heavy, medium, and light-duty trucks, off -highway industrial equipment, and power generation systems.
“The business benefits from a large installed base with comprehensive aftermarket coverage driving recurring revenue and cash flow visibility; and has a leading global footprint across many key regions; including North America, India, and China. Cummins Filtration is well-positioned for continued growth, sustained margin performance, and strong free cash flow generation. In 2020, the business had sales of approximately $1.2 billion.
“The Cummins Board, along with management, believes a separation could realize value for Cummins and its stakeholders by, among other things, unlocking value for shareholders, enabling further enhanced focus on key strategic initiatives and empowering continued innovation in core and new technologies to power a more prosperous world.
“The Cummins Board and management also believe that a separation could simultaneously result in material benefits for Cummins Filtration, including sharpened strategic focus, increased operating flexibility and resources to capitalize on growth opportunities, tailored capital allocation focused solely on Cummins Filtration’s growth and value creation strategy and enhanced value for Cummins Filtration’s employees, customers, and other stakeholders
“Cummins Filtration is a technology leader with global presence and significant runway for continued growth,” Linebarger said. “We expect that the strategic alternatives we are considering will result in enhanced value for our stakeholders, and position Cummins Filtration to take advantage of enhanced opportunities to invest in organic and inorganic growth.”
The execution of this exploration process is dependent upon business and market conditions, along with a number of other factors and considerations.
Based on the current forecast, Cummins is maintaining its full year 2021 revenue guidance of up 20 to 24% versus last year. EBITDA is expected to be in the range of 15.5 to 16.0 % and the Company expects to return 75% of Operating Cash Flow to shareholders in 2021 in the form of dividends and share repurchases.
Any expenses outside of the normal course of business associated with the evaluation of strategic alternatives for the Filtration business have been excluded from the outlook provided, it added.
Among second quarter 2021 highlights Cummins pointed out that Cummins and Iberdrola announced an agreement to partner together to accelerate the growth of business opportunities in the electrolyzer market of Iberia, promoting the green hydrogen value chain. The alliance helps to position Cummins as a leading supplier of electrolyzer systems for large-scale projects in Iberia and Iberdrola as a leading developer of electrolyzer projects and hydrogen supplier to final industrial customers.
In addition to the commercial partnership, Cummins announced plans for one of the world’s largest electrolyzer plants, which is scalable to more than 1GW per year, and will be located in Castilla-La Mancha, Spain.
In the period Cummins signed a Letter of Intent for Cummins to acquire a 50% equity interest in Momentum Fuel Technologies from Rush Enterprises. The joint venture between Rush Enterprises and Cummins will produce Cummins-branded natural gas fuel delivery systems for the commercial vehicle market in North America, combining the strengths of Momentum Fuel Technologies’ compressed natural gas (CNG) fuel delivery systems, Cummins’ powertrain expertise, and the engineering and support infrastructure of both companies.
The Company began testing of a hydrogen-fuel internal combustion engine, taking another step forward in advancing zero carbon technology. The proof-of-concept test is building on Cummins’ existing technology leadership in gaseous-fuel applications and powertrain leadership to create new power solutions that help customers meet the energy and environmental needs of the future.