Despite lower earnings compared to the same quarter last year, Cummins reported a slight increase in third quarter profits thanks to improved revenues and cost reduction measures.
“Material cost savings, productivity gains and lower warranty expenses all contributed to the improvement,” Tom Linebarger, Cummins chairman and CEO, said in a prepared statement.
The company reported a 4-percent increase in third quarter revenues over the same period in 2012 to $4.3 billion. Most of that momentum was attributable to an 11-percent increase in North American revenues as international revenues fell 4 percent. The company reports that growth in China and Brazil was offset by weaker demand in India, Australia and Europe.
“Revenues were below our expectations as we continue to face an environment of weak demand for capital goods in most of our major markets,” Linebarger said. “Our focus on lowering costs in all parts of our business positions us well to deliver strong earnings growth as market conditions improve.”
The company reported earnings before interest and taxes (EBIT) of $536 million. That’s 12.6 percent of third quarter sales and an 8-percent decline from the same period last year. Profits rose slightly by 0.8 percent to $355 million.
In light of the quarter, Cummins has cut its forecast for the rest of the year, expecting revenues to be down 3 percent compared to 2012
Based on the current forecast, the Company expects full year revenues to be down 3 percent compared to 2012 with EBIT to be in the range of 12.5 to 13 percent of sales. Cummins previously expected revenues to be flat compared to 2012 with EBIT to finish in the range of 13 to 14 percent.
The company’s Engine segment saw sales decrease 1 percent to $2.5 billion from the same period last year with $272 million in EBIT. The company cites lower demand in global mining, stationary power and the light duty on-highway market in the US for the decrease. The company noted increased demand for medium duty truck engines in North American and Brazil.
The Components segment saw sales increase 14 percent to $1.1 billion with a 48-percent increase in EBIT to $132 million. The company cites higher on-highway demand in North America, Eurpoe and China for the increases.
Cummins Power Generation sales dropped 13 percent to $712 million with EBIT down 38 percent to $45 million. Distribution sales were up 2 percent to $944 million when excluding acquisitions with EBIT down 13 percent to $86 million.