Revenue’s up for Cummins, but profits took some hits

November 4, 2022

Chuck Robinson

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Revenue climbed in the third quarter for Columbus, Ind.-based engine maker Cummins Inc., but company profits took hits from acquisition costs and one-time bonuses to employees.

The manufacturer’s third-quarter revenue was $7.3 billion, up from $6 billion during the same period in 2021.

Third-quarter expenses included $56 million spent in paying one-time bonuses to employees. The bonuses were appropriate because of the great effort put forth by employees over the past 18 months, CEO Jennifer Rumsey said during an earnings call.

Other costs last quarter included $25 million associated with the acquisition and integration of Meritor Inc., a global supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. The Meritor acquisition was finalized Aug. 3.

The acquisition of Meritor is expected to generate annual pre-tax run-rate synergies of approximately $130 million by year three after closing.

Cummins also cited $16 million in costs related to its plans to spin off its filtration business into a separate company.

The company’s third quarter revenue in total was $7.3 billion. Excluding the contribution of the Meritor, third quarter revenue was $6.6 billion, 11% more than the same quarter in 2021.

North American sales up

Overall sales in North America increased 19% compared to the same quarter in 2021, according to an earning statement from the company. International revenues decreased 1%. Income was affected by a market slowdown in China and by indefinitely suspending operations in Russia because of war, the company said.

Sales for Cummins’ Engine Segment were $2.8 billion for the third quarter, 8% higher than the third-quarter 2021. North American sales were up 14% from the same period a year before, offsetting an 8% decrease in international sales. On-highway engine sales increased 10% in North America. A construction slowdown in China cut off-highway sales, which decreased 3%.

Sales in the company’s New Power Segment were $50 million without Meritor revenue, up 96%. However, costs far exceeded that amount. The earnings loss was $96 million, the company reported. Costs associated with the development of fuel cells and electrolyzers, as well as products to support battery electric vehicles, were cited as contributing factors for the earnings losses.

Electrolyzers produce hydrogen fuel. Cummins plans to begin producing electrolyzers for the first time in the U.S. in Fridley, Minn. Initial manufacturing capacity of 500 megawatts annually is expected, with the capacity to scale up production to 1 gigawatt annually.

Cummins also plans to expand electrolyzer manufacturing capacity at its plant in Belgium.

Sales in the company’s Distribution Segment were up 14% in the third quarter compared to the previous year. Sales for the Component Segment were up 10% in the third quarter compared to the previous year. The Power Systems Segment sales were up 16%.

The company has lowered its full-year 2022 outlook for earnings before interest, taxes, depreciation and amortization from 15.5% to 15% of sales, excluding Meritor business.

Cummins stock is traded on the New York Stock Exchange. LL

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Chuck Robinson formerly was senior copy editor for a weekly trade publication serving the fresh produce industry. He has served trade publications, horticultural journals and community newspapers for 25 years.