- First quarter revenues of $4.3 billion, EBIT of 11.3 percent of sales
- Cummins reaffirms full year guidance for revenues and EBIT
- Company announces a second quarter change to Operating Segments
Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2016.
First quarter revenues of $4.3 billion decreased 9 percent from the same quarter in 2015. Lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3 percent compared to last year, primarily due to a stronger US dollar.
Revenues in North America decreased 10 percent while international sales declined by 8 percent. Within international markets revenues in Latin America and Asia declined the most.
Earnings before interest and taxes (EBIT) in the first quarter were $484 million, or 11.3 percent of sales, down from $562 million or 11.9 percent of sales a year ago.
Net income attributable to Cummins in the first quarter was $321 million ($1.87 per diluted share), compared to $387 million ($2.14 per diluted share) in the first quarter of 2015. The tax rate in the first quarter of 2016, was 28.4 percent.
“Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” said Rich Freeland Chief Operating Officer. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.”
Based on the current forecast, Cummins expects full year 2016 revenues to be down 5 to 9 percent, and EBIT to be in the range of 11.6 to 12.2 percent of sales, unchanged from our forecast three months ago.
Effective April 2016, we re-organized our business to combine our Power Generation Segment and our High Horsepower engine business creating the Power Systems Segment. Going forward we will present results for four operating segments: Engine, Distribution, Components and Power Systems. We will begin to report results for our new reporting structure in the second quarter of 2016 and will also reflect this change for historical periods. “The formation of the Power Systems Segment combines two businesses that are already strongly interdependent and will allow us to streamline business and technical processes to accelerate innovation, grow market share and more efficiently manage our supply chain and manufacturing operations,” said Chairman and CEO Tom Linebarger.
Other recent highlights:
- Our QSK95 diesel engine received Tier 4 Final certification from the EPA for the US locomotive market.
- We announced a joint venture with Olayan to expand access to markets and enhance the service and support provided to customers in the Middle East.
- Ethisphere Institute named Cummins to its list of the world’s most ethical companies for the 9th straight year.
- We returned $745 million to shareholders in the form of dividends and share repurchases in the first quarter, consistent with our plans to return 75 percent of Operating Cash Flow to shareholders in 2016.
First quarter 2016 detail (all comparisons to same period in 2015)
Engine Segment
- Sales – $2.3 billion, down 10 percent.
- Segment EBIT – $200 million, or 8.6 percent of sales, compared to $253 million or 9.7 percent of sales.
- Sales declined due to lower production in the North American heavy-duty truck market and weak demand in power generation, oil and gas, commercial marine and mining markets.
Distribution Segment
- Sales – $1.5 billion, down 1 percent.
- Segment EBIT – $95 million, or 6.5 percent of sales, compared to $88 million or 6.0 percent of sales.
- Increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency.
Components Segment
- Sales – $1.2 billion, down 5 percent.
- Segment EBIT – $173 million, or 14.0 percent of sales, compared to $195 million or 15.0 percent of sales.
- Lower sales in North America and the unfavorable impact of currency more than offset growth in China.
Power Generation Segment
- Sales – $550 million, down 19 percent.
- Segment EBIT – $31 million, or 5.6 percent of sales, compared to $49 million, or 7.2 percent of sales.
- Weaker sales in most regions, with Asia and Latin America declining the most.
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