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Cummins Posts 2nd Quarter Results

COLUMBUS, Ind. — Cummins Inc. (NYSE: CMI) reported results for the second quarter of 2019 on July 30, 2019.

Second-quarter revenues of $6.2 billion increased 1 percent from the same quarter in 2018. Increased truck production in North America and stronger demand in North American power generation markets was partially offset by lower demand in oil and gas and international truck markets. Currency negatively impacted revenues by 2 percent, primarily due to a stronger US dollar.

“While we do expect to see a moderation in demand in the second half of the year, our financial strength combined with our diversified geographic and end market exposure will enable us to generate strong profits, continue to invest in future growth, and return cash to shareholders.”

Second-quarter sales in North America set a new record and improved by 7 percent while international revenues decreased by 6 percent. Sales in North America increased in all segments except Power Systems, which was negatively impacted by lower demand in oil and gas markets. International revenues declined primarily due to lower truck demand in China, Europe, Brazil and India.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second quarter were a record $1.1 billion, or 17.0 percent of sales, compared to $897 million or 14.6 percent of sales a year ago. Net income attributable to Cummins in the second quarter was $675 million ($4.27 per diluted share), compared to net income of $545 million ($3.32 per diluted share).

“We achieved record revenues, EBITDA, and operating cash flow in the first half of 2019, extending our track record of raising performance cycle over the cycle,” said Chairman and CEO Tom Linebarger. “While we do expect to see a moderation in demand in the second half of the year, our financial strength combined with our diversified geographic and end market exposure will enable us to generate strong profits, continue to invest in future growth, and return cash to shareholders.”

2019 Outlook

Cummins now expects 2019 revenue to be flat, which places the forecast at the low end of our previous guidance range of flat to 4 percent. This lower outlook is driven by reduced truck demand in international markets, moderating parts demand in North America, and the impact of a stronger US dollar.

The company continues to expect EBITDA to be in the range of 16.25 to 16.75 percent of sales and plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

The Cummins outlook does not include any potential impact of the company’s review of its emission certification process and compliance with emissions standards or acquisition of Hydrogenics Corporation.

Second Quarter 2019 Highlights:

  • The Board of Directors approved a 15 percent increase in the company’s quarterly cash dividend from $1.14 per share to $1.311 per share
  • Cummins entered into a definitive agreement to acquire the majority of shares of fuel cell systems provider Hydrogenics Corporation. The agreement is subject to customary closing conditions and Hydrogenics’ shareholder approval
  • Cummins and Gillig announced that the GILLIG zero-emission battery-electric bus, powered by Cummins, is now available for commercial orders by customers

Second-Quarter 2019 Detail (all comparisons to the same period in 2018)

Engine Segment

  • Sales—$2.7 billion, flat versus the prior year
  • Segment EBITDA—$416 million, or 15.4 percent of sales, compared to $362 million or 13.4 percent of sales
  • On-highway revenues increased 2 percent and off-highway revenues decreased by 7 percent
  • North America revenues increased by 7 percent due to higher demand in on-highway markets while international revenues declined 15 percent primarily due to lower demand in China

Distribution Segment

  • Sales—$2.0 billion, up 2 percent
  • Segment EBITDA—$172 million, or 8.5 percent of sales, compared to $145 million or 7.3 percent of sales
  • Revenues in North America increased by 2 percent and international sales were flat
  • Strong demand for power generation equipment in North America, especially data centers, was partially offset by lower demand in oil and gas markets and the unfavorable impact from a stronger US dollar, which impacted sales by 2 percent

Components Segment

  • Sales—$1.8 billion, down 2 percent
  • Segment EBITDA—$297 million, or 16.1 percent of sales, compared to $237 million or 12.6 percent of sales
  • Revenues in North America increased by 5 percent due to higher heavy and medium-duty truck production while international sales declined by 12 percent due to lower demand in Europe, China and India

Power Systems Segment

  • Sales—$1.2 billion, down 3 percent
  • Segment EBITDA—$173 million, or 14.4 percent of sales, compared to $186 million or 14.9 percent of sales
  • Industrial revenues decreased 11 percent due to lower demand in North America oil and gas and global mining markets while power generation revenues were flat.

About Cummins

Cummins, Inc., a global technology leader, is a corporation of complementary business segments designing, manufacturing, distributing and servicing a broad portfolio of power solutions. The company’s products range from diesel and natural gas engines to hybrid and electric platforms, as well as related technologies. Those include transmissions, battery systems, fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems.

Headquartered in Columbus, Indiana, since its founding in 1919, Cummins employs approximately 62,600 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations, and over 7,600 dealer locations.

In 2018, the company earned about $2.1 billion on sales of $23.8 billion. See how Cummins is powering a world that’s Always On by accessing more information at https://www.cummins.com/always-on. Follow Cummins on Twitter at www.twitter.com/cummins and on YouTube at www.youtube.com/cumminsinc.

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