Cummins Inc. today (July 30) reported lower sales and profit in the second quarter 2009 compared to its record performance during the same period in 2008, as the global recession continued to dampen demand around the world.
Compared to the first quarter, the company increased its profit and improved cash flow on essentially flat sales, as a result of its ongoing efforts to reduce costs and align manufacturing capacity to the lower demand.
Sales for the quarter were $2.43 billion, 37% lower than $3.89 billion in the second quarter of 2008. Earnings Before Interest and Taxes (EBIT) were $109 million, or 4.5% of sales, compared to $469 million, or 12.1% of sales, in the second quarter 2008. Net income attributable to Cummins Inc. was $56 million, down from $293 million a year ago.
The second quarter results include a $7 million charge associated with the cost of job-reduction actions taken at several company manufacturing facilities during the quarter.
“The economic climate continues to be extremely challenging, and we are managing our business under the assumption that we won’t see any recovery in our markets in 2009,” said Tim Solso, Cummins chairman and CEO. “Still, our aggressive efforts to reduce costs and align manufacturing capacity with demand have allowed us to perform well under the circumstances and to position ourselves to emerge from the downturn an even stronger company.”
The decline in profitability was primarily due to the sharply lower volumes. The Engine and Components segments continue to see the most severe reductions in demand, while the pace of the sales decline in the Power Generation segment increased rapidly in the quarter. Profitability in all three segments was significantly affected by the lower volumes.
Despite significant weakness in almost all end-markets and geographic regions, the company improved its profitability from the first quarter, which – along with a significant reduction in inventory – contributed to the positive cash flow of $181 million in the quarter.
The company continued to make capital expenditures on the most critical projects, especially those associated with the launch of new emission-compliant products in 2010 and with fuel economy improvements.
Based on the second quarter results and company forecasts for the remainder of the year, Cummins reaffirmed its sales and profit guidance for 2009. The company still expects 2009 sales to be slightly more than 30% lower than 2008 and anticipates EBIT of 5% of sales for the year, excluding the restructuring charges.