Cummins Inc. (NYSE: CMI) reported lower sales and profit in the first quarter 2009 as the global recession affected demand for the Company’s products around the world.
Sales for the quarter were $2.44 billion, down 30 percent from $3.47 billion during the same period in 2008. Earnings Before Interest and Taxes of $28 million, or 1.1 percent of sales, fell 91 percent from $315 million, or 9.1 percent of sales, in the first quarter 2008. Net income attributable to Cummins Inc. was $7 million, or $0.04 a share, a 96 percent decrease from $190 million ($0.97 a share) a year ago.
The first quarter results include a $66 million charge to cover the costs associated with job reduction actions taken in the quarter. Cummins announced plans to reduce its workforce by more than 4,100 employees and contract workers during the quarter in response to lower demand for its products. Excluding the restructuring charge, net income attributable to Cummins Inc. was $51 million, or $0.26 a share, and EBIT was $94 million, or 3.9 percent of sales.
All four of the Company’s business segments experienced sales decreases compared to the first quarter 2008, with the largest declines coming from the Engine and Components segments.
Based on the first quarter results and Company forecasts for the remainder of the year, Cummins today revised its sales and earnings guidance downward for 2009. The Company now expects 2009 sales to be slightly more than 30 percent lower than 2008 and anticipates EBIT of 5 percent of sales for the year, excluding the restructuring charge.
“The first quarter was, as we expected, extremely challenging and we do not see the economy or our markets improving for the remainder of 2009,” said Cummins Chairman and Chief Executive Officer Tim Solso. “We have taken significant actions to lower our costs and improve our productivity in response to the global recession, which has affected virtually every market in which we operate around the world.
“We are confident that those actions, which will continue as necessary, will allow us to earn a reasonable profit in 2009, generate positive cash flow and enable us to continue to invest in the products and technologies vital to our future success.”
In addition to reducing its workforce worldwide, the Company has made significant reductions in discretionary spending and has further prioritized capital expenditures to focus on the most critical projects, especially those associated with the launch of new emission compliant products in 2010. Capital spending in the first quarter was $64 million, compared to $90 million in the same period a year ago and $213 million in the fourth quarter 2008.
“Cash management is a top priority for the Company this year,” said Pat Ward, Chief Financial Officer. “We remain well positioned with a strong balance sheet, low debt and significant liquidity. Despite the challenging economic conditions, the Company did not need to use any of the $1.1 billion credit facility that was put in place last summer.”
At the end of the first quarter, Cummins had $353 million in available cash and cash equivalents and a total available liquidity of $1.8 billion.