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According to the current severe global economic trend, Cummins lowered its annual sales and earnings expectations accordingly
April 30, 2009 The global economic recession triggered a decline in market demand, leading to a decline in sales and profits of Cummins in the first quarter of 2009. Cummins achieved sales of US$2.44 billion in the first quarter, a decrease of 30% from the same period in 2008. The pre-tax income was $28 million, and the yield was 1.1% of sales, which was 91% lower than the first quarter of 2008. The net profit was 7 million U.S. dollars, which was 96% lower than last year.
The net profit data for the first quarter of 2009 deducted the related expenses of US$66 million due to layoffs during the quarter. Cummins had to cut 4,100 formal employees and contractors during the quarter due to a downturn in the global economic downturn. If this agency adjustment fee is not deducted, Cummins’ net income this quarter is US$51 million, and EBIT is US$94 million, accounting for 3.9% of sales.
Based on the market conditions in the first quarter and forecasting the economic situation for the full year, Cummins lowered its 2009 full-year sales and EBIT forecasts accordingly. According to the new forecast, Cummins’ sales in 2009 will be 30% lower than in 2008, and the pre-tax EBITDA will be 5% (excluding the costs of agency adjustment).
Tim Solso, Cummins Chairman and Chief Executive Officer, said: “The situation in the first quarter was very serious and there is no sign yet that the economy will pick up in 2009. As this crisis has engulfed various markets around the world, we are taking action to a large extent. Reduce costs and improve efficiency, help the company to maintain a reasonable level of profitability in 2009. At the same time to ensure adequate cash flow to continue to invest in key products and technology development, to prepare for future development."
The company has achieved remarkable results in reducing expenditures, and further optimized capital expenditures, focused on investing in key projects, supported new product platforms related to future development, and developed related products that meet the 2010 emission standards.
Despite the negative impact of the external economic environment, Cummins’ fundamentals remain very solid - the debt ratio is low and the liquidity is sufficient. Although the economic situation is extremely challenging, Cummins does not need to use a $1.1 billion revolving credit facility. As of the end of the first quarter, Cummins had $353 million in cash and cash equivalents, with a total liquidity of $1.8 billion.
The Chinese market is still the focus of Cummins business development. Despite the external impact of the economic crisis, Cummins has consistently adhered to its development strategy in China. In 2009, several key Cummins projects are progressing as scheduled:
The Foton Cummins ISF 3.8-liter engine project has begun limited production. At the Shanghai Auto Show on April 20th, the Futian Omar C high-end light truck equipped with the ISF3.8L engine was officially unveiled. ISF 2.8-liter engine development matching work is also carried out in an orderly manner
Cummins Wuhan unit plant project is about to be completed and put into production. Cummins Power's localized production capacity in China will be upgraded
Chongqing Cummins QSK19/QSK38 All-electronic High-horsepower Diesel Engine Platform Introduction Project
Dongfeng Cummins ISD/ISL Euro IV product development has made good progress, new products are expected to further improve the performance of fuel economy
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