Cummins’ third quarter revenues of $5.8 billion decreased 3 percent from the same quarter in 2018. Lower demand for trucks and construction equipment drove the majority of the decline. Sales in North America were flat while international revenues decreased 8 percent. Currency negatively impacted revenues by 1 percent, primarily due to a stronger U.S. dollar.
Net income attributable to Cummins in the third quarter was $622 million, compared to net income of $692 million last year. Third quarter results were positively impacted by $23 million in discrete tax items and gains of $28 million from closing out certain derivative contracts associated with the company’s foreign exchange hedging program.
Third quarter net income included expenses of $35 million related to one-time actions taken to cease development and production of certain products, which will benefit future financial performance.
“Despite weakening conditions in a number of our largest markets, Cummins delivered strong profits, record operating cash flow, and returned a record $910 million of cash to shareholders in the third quarter,” said Chairman and CEO Tom Linebarger. “While we expected to see a moderation of demand in the second half of the year, sales have weakened even faster than we anticipated. Cummins is taking actions to align our cost structure with the lower revenues while maintaining investment in products that will deliver sustainable growth and profitability.”
Based on the current forecast, Cummins now expects 2019 revenue to decline 2 percent compared to prior guidance of flat. The reduction in our revenue forecast is driven by lower truck production in North America, India, Brazil, and Europe, as well as lower demand in off-highway markets, including North America construction and global mining markets.
The company’s new 2020 X15 Efficiency Series engine will meet 2021 greenhouse gas standards one year early in North America, delivering up to 5 percent better fuel economy than the prior X15 Efficiency Series. The X15 Efficiency Series is paired with a 12-speed Cummins Eaton Joint Venture Automated Manual Transmission and delivers both improved fuel economy and reliability for customers, while lowering greenhouse gas emissions.
Cummins closed on its previously announced acquisition of fuel cell and hydrogen production technologies provider Hydrogenics Corporation. The acquisition was completed for $15 per share, representing an enterprise value of $291 million.
Cummins and Freightliner announced the increased availability of the Cummins X12 engine. The X12 will be available in a Freightliner Cascadia day cab in 2020. This is the first time the X12 will be utilized in regional haul applications in North America. The X12 combined with the Cummins Eaton Joint Venture transmission delivers substantial value to weight sensitive customers as it is the lightest powertrain available for the Class 8 on-highway market, weighing only 2,700 pounds.
Engine segment sales were $2.4 billion, down 11 percent.