Cummins Inc. announced that its second quarter revenues fell 38% from the same period in 2019.
Second quarter revenues were $3.9 billion as COVID-19 related customer shutdowns and weak economic activity led to lower demand in most end markets and regions except China. Sales in North America declined by 48% while international revenues decreased 22%. Currency negatively impacted revenues by 2% primarily due to a stronger dollar, the company said.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $549 million (14.3% of sales) compared to $1.1 billion (17% of sales) a year ago. Net income was $276 million compared to $675 million in 2019.
Cummins said it expects third quarter revenues to improve from second quarter levels, though there remains significant uncertainty around how COVID-19 will impact end market demand and customer and supplier operations. Due to that uncertainty the company continuing to withhold full-year revenue or profitability guidance for 2020.
“Our people demonstrated remarkable flexibility as did our operations and supply chain,” said Cummins Chairman and CEO Tom Linebarger. “A pronounced example of our organization’s agility in this challenging period was our ramp-up in China, where many of our facilities went from complete shutdown in February and March to producing record volumes in the second quarter.
“While customer demand did improve in some regions as the quarter progressed, significant uncertainty around the pace of recovery in our markets remains, requiring a continued strong focus on managing expenses and cash flow. Our strong financial position will enable us to continue to prioritize our investments in technology and new products including advanced diesel engines, battery electric powertrains, fuel cells, and hydrogen electrolyzers that will help drive future profitable growth.”
Second Quarter Highlights
Cummins announced a joint venture with NPROXX, a specialist in hydrogen storage and transportation, for hydrogen storage tanks. The transaction is expected to close by the end of the first quarter of 2021.
The company paid a $1.311 dividend to shareholders. Cummins said it has paid a dividend for more than 70 years.
Second Quarter Results
Engine Segment: Sales fell to $1.4 billion, down 47% over Q2 2019 results. On-highway revenues decreased 55% and off-highway revenues slipped 15%. Sales declined in all regions except China, where sales increased by 40% due to higher demand in construction markets
Distribution Segment: Sales fell 21% versus 2019, ending at $1.6 billion. Revenues in North America were down 25% percent and international sales declined by 12%. Demand declined in all lines of business and a stronger dollar negatively impacted revenues by 1%.
Components Segment: Sales were $1.2 billion, down 38% versus the same period last year. Revenues in North America decreased 55% and international sales declined by 9% percent due to lower demand in Europe, India and Brazil. Sales in China increased 63% driven by record levels of truck production.
Power Systems Segment: Sales fell 35% to $777 million. Power generation revenues decreased by 37% while industrial revenues dropped 33% due to lower demand in mining and oil and gas markets.
New Power Segment: Sales were $10 million and the segment reported an EBITA (earnings before interest, taxes, depreciation and amortization) loss of $38 million. Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles are contributing to EBITDA losses, the company said.