By Brenda Showalter, The Republic
bshowalter@therepublic.com
Cummins Inc. posted record sales and earnings in 2007, marking the fourth consecutive year of record financial performance.
"It was the best year in the history of the company," said Tim Solso, chairman and chief executive office.
Solso shared the good news with workers at the Columbus Fuel Systems Plant during a visit by U.S. Secretary of Commerce Carlos M. Gutierrez on Friday.
"I've never felt better about the future of the company," Solso added.
Cummins' sales rose 15 percent in 2007 to $13.05 billion, and net income was $739 million or $3.70 a share - a 3 percent increase compared to $715 million, or $3.55 a share in 2006.
The record results came despite a drop in the North American heavy-duty truck market as a result of emissions changes that took effect Jan. 1, 2007.
Industrywide, sales in this market decreased, but Cummins offset the decline with increased market share and strong growth in the company's other businesses.
"This record-setting performance in the face of significant challenges validates our message that Cummins truly has become a more diversified, global power leader," Solso said.
He added that the efforts have resulted in an average annual return of over 55 percent on investments over the past five years for shareholders.
Fourth-quarter sales of $3.5 billion were a quarterly best for Cummins and were 16 percent higher than the same period of 2006.
Net earnings for the quarter increased 5 percent to $198 million, up from $189 million a year ago.
Cummins' strong performance in the fourth quarter was led by gains in the Power Generation and Distribution segments, although all of the company's operating segments reported record sales for the fourth quarter and for all of 2007.
Although revenues were higher in the Engine segment, profits were lower due to costs associated with the release of new products in North America to meet the 2007 EPA emissions regulations.
The engine business also invested heavily around the world, including the new light duty diesel engine program in Columbus that will be at Plant 1 on Central Avenue.
Cummins also announced on Jan. 23 that it would move 500 office workers into the Commons Mall by March 2009.
Fourth-quarter details
The engine segment generated record sales of $2.16 billion, up 10 percent from a year earlier.
Operating earnings, which are earnings before interest and taxes, were $120 million, down 34 percent.
In North America, heavyduty truck engine shipments decreased 47 percent due to softness in the heavy-duty pickup truck market.
Medium-duty truck engine shipments increased 21 percent, led by strong growth in Latin America.
Construction market shipments rose 17 percent compared to a year ago.
Power Generation business recorded sales of $840 million, up 28 percent, while operating earnings increased 39 percent to $86 million.
The segment saw strong sales gains in virtually every line of business, led by a 31 percent increase in commercial sales and a 34 percent increase in alternator sales.
Distribution business sales rose 21 percent to $468 million, while operating earnings, at $56 million, were up 44 percent.
Sales of engines and power generation products were sharply higher - especially in Europe, the Middle East and Africa - and the segment reported record earnings from its joint ventures.
The Components segment posted sales of $777 million, up 30 percent, while operating earnings rose 104 percent to $47 million.
Performance of the segment, which consists of the company's filtration, turbocharger, exhaust, aftertreatment and fuel systems businesses, was led by the filtration business.
2008 outlook
Cummins expects to extend its record financial performance to a fifth straight year with sales forecast to increase 12 percent.
Cummins expects to spend between $550 million and $600 million on capital projects this year.
Despite the uncertainty in the economy, Cummins expects the North American truck engine markets to rebound somewhat from 2007.
The company also expects to maintain its market share gains from 2007 in key segments, such as the heavy-duty and medium-duty truck and bus.
"We are extremely pleased with our 2007 performance and are excited about the prospects for 2008," Solso said.
"All the pieces are in place for Cummins to take advantage of the many profitable growth opportunities in front of us - now and in the years to come."
Cummins shares closed Friday at $46.94.