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Cummins Inc. reported first-quarter net income and revenue soared with recoveries in the North American truck and global construction markets.
Net income for the period ended March 31 rose to $603 million, or $4.07 per diluted share, compared with $511 million, $3.41, a year earlier. Revenue jumped to $6 billion compared with $5 billion a year earlier.
“Demand accelerated in the first quarter, as the global economy continued to improve, driving strong sales growth across most businesses and regions and resulting in solid profitability,” Chairman and CEO Tom Linebarger said in a release. “The strength and breadth of the rebound in demand has surpassed our original expectations and we have raised our full-year outlook.”
The Columbus, Ind.-based company increased its full-year revenue growth outlook to 20% to 24% from 8% to 12%, citing stronger demand across all markets.
At the same time, order backlogs grew amid persistent supply chain issues and disruptive U.S. winter weather.
“The ability to supply is our key focus now and we are doing everything we can to mitigate the impact,” Linebarger said.
Linebarger also said he was optimistic that continued vaccination distribution globally will reduce the impact of the virus in the second half of the year. However, he warned that new variants could still surface, leading to reduced customer demand, shutdowns and more supply chain bottlenecks.
Linebarger said during the earnings call getting enough semiconductors was a key challenge in the quarter.
“Our profitability, especially in the engine business, was impacted more than expected by supply chain disruptions due to the extraordinary measures we had to take to meet customer commitments,” Linebarger said.
He added: “We ended up buying chips on the market through the aftermarket and bring them back into production. We rescheduled and rescheduled and rescheduled to meet our customers' demand. Our customers, after a pretty tough first half of last year, are finally seeing demand go up and really want to ship trucks to their customers and we really want to help them do that.
"So frankly, we took it on the chin. We basically brought in everything we could as fast as we could and shipped it out to them and didn't raise prices or didn't do any of those things. We just shipped them, and we took it hard this quarter. And that's just the honest truth.”
The Cummins engine segment posted leading Q1 revenue of $2.5 billion, up 14% from the 2020 period. Sales increased 10% in North America and 24% in international markets.
On-highway revenues increased 15% driven by strong demand in the North American truck and pickup markets, while off-highway revenues rose 9% on the strength of demand in international construction markets.
Cummins forecast North American Class 8 production in 2021 will grow to 264,000 units, an increase of 45% compared with a year earlier. The company last year supplied 66,648 Class 8 engines out of a total 196,153 in North America, good for a leading 34.9% share, WardsAuto.com reported earlier.
Classes 6-7 production will grow to 140,000 units, up 35% from the previous year, Cummins predicted.
In its new power segment, revenue jumped 250% to $35 million compared with a year earlier, but EBITDA (earnings before interest taxes depreciation and amortization) came in at a loss of $51 million. The revenue gain was attributed to greater demand in transit and school bus markets in addition to the commissioning of electrolyzer projects and shipments of fuel cell systems to the rail market, the company noted. Costs associated with the development of fuel cells and electrolyzers as well as products to support battery-electric vehicles contributed to EBITDA losses in the segment.
Among the quarter’s highlights it reported were:
- A global strategic partnership with Daimler to provide medium-duty powertrain systems for Daimler Trucks and Buses, “allowing both companies to be more competitive, drive global innovation, expand offerings to customers and reduce emissions,” Cummins said.
- Cummins Vice Chairman Tony Satterthwaite testified before Congress on Cummins’ commitment to achieve a net-zero carbon emissions future through continued innovation in advanced internal combustion, battery and fuel cell technologies. Satterthwaite urged the government to make the infrastructure investments required to support the successful market adoption of zero-carbon emission technologies.
Cummins has a global workforce of 58,000 and earned about $1.8 billion on sales of $19.8 billion in 2020.
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