COLUMBUS, Ind. — Cummins Inc. has reported that the fourth quarter 2009 was the most profitable fourth quarter in company history, eclipsing the previous mark set in 2007.
Sales of $3.40 billion grew 3 percent from $3.29 billion in the fourth quarter 2008, while net income attributable to Cummins Inc. increased to $270 million, or $1.36 a share, from $43 million, or 22 cents a share, a year ago.
Earnings Before Interest and Taxes (EBIT) was $383 million or 11.3 percent of sales, compared to $56 million, or 1.7 percent of sales in the fourth quarter 2008. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring, while the 2008 results included a $37 million pre-tax charge for similar actions. Excluding these charges, fourth quarter 2009 EBIT was $387 million, or 11.4 percent of sales, compared to $93 million, or 2.8 percent of sales in the same period in 2008.
For all of 2009, the company reported revenues of $10.8 billion, down 25 percent from $14.3 billion in 2008 as a result of the deep global recession that reduced demand in most markets throughout the year. Despite the downturn, Cummins reported solid profit and significant positive cash flow in 2009 as the company’s results improved on a quarter-to-quarter basis throughout 2009.
EBIT before restructuring and other charges was $774 million, or 7.2 percent of sales – compared to EBIT before restructuring and other charges of $1.26 billion, or 8.8 percent of sales in 2008. Net income attributable to Cummins Inc. in 2009 declined by 43 percent to $428 million, or $2.16 a share, compared to $755 million, or $3.84 a share in 2008. Excluding the restructuring and other charges, full year 2009 earnings per share was $2.49.
The company reported an increase in cash of $244 million in the fourth quarter and approximately $500 million for all of 2009, driven by broad-based efforts to lower costs, align manufacturing capacity with demand and reduce inventory levels across all its businesses. The company had $930 million in cash at the end of 2009.
“Given the extraordinarily challenging economic climate throughout much of the year, we are extremely pleased with our financial results for both the fourth quarter and all of 2009,” said Cummins Chairman and Chief Executive Officer Tim Solso. “By taking decisive action early in the recession to bring our costs in line with real demand for our products, and through the hard work of all our people worldwide, we delivered as we promised in 2009: We earned a solid profit during the deepest recession in decades and generated a significant amount of cash while continuing to invest in technologies and programs critical to our success.”
In addition to its strong financial performance, the company invested significantly in new products in 2009, delivering engines and components that will allow Cummins to meet the most stringent emissions standards in the world and enter new product markets in China and other growing regions.
The company’s fourth quarter results were driven by continued strength in China, India and Brazil, along with a significant increase for on-highway truck engines and components in North America in advance of new emissions standards that took effect at the beginning of 2010.
Despite the strong fourth quarter results and the expected continued improvement in large emerging markets, Cummins expects the first half of 2010 to be extremely challenging, especially in the United States and Europe. The increase in truck engine and components sales in the United States during the fourth quarter was largely the result of OEM customers buying 2009 engines in advance of the EPA emissions regulations, which took effect on Jan. 1.
“In many ways, the first half of 2010 will be more challenging than the environment we faced in the early part of the recession,” said Cummins President and Chief Operating Officer Tom Linebarger. “We will continue to manage our business very conservatively to ensure that we stay focused on our priorities of earning a solid profit throughout the entire downturn, investing in our future and demonstrating that we care about our customers more than anyone else in the industry.”
Based on its current forecasts, Cummins expects 2010 sales and earnings to be similar to its 2009 performance. The company’s current full-year guidance calls for sales of $11 billion for the year, with an EBIT of 7 percent of sales.
The company also expects to continue to generate positive cash flow, and intends to significantly increase its capital investment in 2010. Cummins is forecasting capital spending of approximately $400 million in 2010, an increase of nearly 30 percent from 2009, to fund projects critical to the company’s long-term growth.
“We have worked hard to position Cummins to emerge from the current downturn an even stronger company,” Solso said. “The company is in the best financial condition in its history. I am confident we have the plans and the people in place to resume our strong growth in 2011 and sustain it well into the future.”
