Cummins Enjoys 4th-Quarter Boost in Engines
This story appears in the Feb. 8 print edition of Transport Topics.
Two manufacturers that supply parts to international truck makers reported improved results for the fourth quarter, with engine maker Cummins Inc. increasing profits and component maker ArvinMeritor Inc. eliminating a large loss and breaking even.
Cummins’ gain included a strong performance by its truck engine business ahead of the Jan. 1 change in federal limits on emissions. The company warned, though, that the activity would drop substantially during the first half of 2010.
Cummins also was profitable for the year, but less so than in 2008.
For the fourth quarter, Cummins earned $270 million, or $1.36 a share, on revenue of $3.4 billion. In
the 2008 quarter, the Columbus, Ind., company had net income of $43 million, or 22 cents a share, on revenue of $3.29 billion.
Cummins earned $428 million, or $2.16 a share, on revenue of $10.8 billion for the full year. In 2008, the company had net income of $755 million, or $3.84 a share, on revenue of $14.34 billion.
“In many ways, the first half of 2010 will be more challenging than the environment we faced in the early part of the recession,” Cummins Chief Operating Officer Tom Linebarger said in the statement.
“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,” he added.
The last quarter of 2009 was Cummins’ best quarter of the past eight for heavy- and medium-duty engine sales and heavy-duty engine shipments and the best quarter of 2009 for midrange engine shipments.
The engines built by Dec. 31 can stay in inventory and be installed in 2010 trucks, though they lack the latest selective catalytic reduction technology. Engines made after Jan. 1 must meet the tighter standards for nitrogen oxide emissions.
“Based on current orders and forecasts for the first part of this year, North American truck and bus engine shipments could fall by as much as 80% in the first half of 2010, compared to the second half of 2009. This translates into a 50% drop in externally reported revenue for heavy-duty truck and medium-duty truck and bus in the first half of 2010, compared to the second half of 2009,” Cummins said in the statement.
ArvinMeritor, Troy, Mich., eliminated a $961 million quarterly loss from a year ago, or $13.29 a share, but found that its profit from discontinued light vehicle operations was precisely nullified by its loss from continuing operations in commercial vehicles. Sales for the company’s first fiscal quarter ended Dec. 31 declined 6.6% to $1.14 billion from $1.22 billion in the 2008 quarter.
Most of the 2008 quarterly loss was related to an $856 million noncash impairment charge.
“Our financial results for the first quarter demonstrate that, as we experience growth in our global markets, we are successfully retaining the benefits of our previously executed cost reductions,” said Charles “Chip” McClure, ArvinMeritor chairman and CEO.
“This quarter, we were able to convert on incremental revenue while maintaining structural cost improvements and reinstating full salaries to our employees,” he added.
In an interview with Transport Topics during Heavy-Duty Aftermarket Week last month, McClure said the company is doing better by concentrating on manufacturing parts, components and systems for commercial vehicles, but on a global basis.
He said that, while North America and Europe are only starting to recover economically, business is more robust in China, India and Latin America, where ArvinMeritor also operates. McClure mentioned Brazil as an underreported bright spot that is often ignored because the Chinese and Indian economies are so much larger.
Most of its light-vehicle businesses have been sold, but about 25% of the original portfolio remains and ArvinMeritor is still looking for buyers, McClure said.
