Cummins
Cummins is a global manufacturer of diesel, gas, electric and hybrid engines.
They sell their products to Original Equipment Manufacturers (OEMs), distributors, dealers and other customers worldwide.
They serve their customers through a network of 500 wholly-owned, joint venture an independent distributors and more than 10,000 Cummins certified dealer locations in 190 countries and territories.
Employees: 60,000
Revenue: $28.1 Billion FY2022
HQ Location: Columbus, Indiana, US
What they do:
They manufacture engines and supporting components and service.
They have five operating segments:
Engine
Distribution
Components
Power Systems
New Power
Each segment shares technology, customers, strategic partners, brand recognition and dealer network.
Their vision and priorities:
Why we exist (Our Mission):
Making people’s lives better by powering a more prosperous world
What we want to accomplish (Our Vision):
Innovating for our customers to power their success
How we will do it (Our Values)
INTEGRITY - Doing what you say you will do and doing what is right
DIVERSITY AND INCLUSION - Valuing and including our differences in decision making is our competitive advantage
CARING - Demonstrating awareness and consideration for the wellbeing of others
EXCELLENCE - Always delivering superior results
TEAMWORK - Collaborating across teams, functions, businesses and borders to deliver the best work
Financial and Business Goals
FY2023 guidance:
Consolidated revenue up 12-17% on prior year
EBITDA margin 14.5%-15.2%
Capital expenditures $1.2bn to $1.3bn
Things to know right now
Backlog
As they adjust to the recovery from the COVID-19 pandemic and the rapid return of demand in many manufacturing industries, they are experiencing supply chain disruptions, incremental costs and related challenges throughout the supply chain.
Destination Zero and PLANET 2050
The company has declared visionary environmental aspirations out to 2050, with quantifiable goals for 2030, including reducing there Scope 1 and 2 emissions by 50% and reduce Scope 3 emissions from products in the field by 25%
Acquisition of Meritor Inc
In August 2022 Cummins completed the acquisition of Meritor, a leading supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions.
Meritor supports Cummins’ shift towards advanced environmentally friendly power for their customers.
What does each business unit do?
Engine Segment
The Engine segment manufactures and markets a broad range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive, construction, mining, marine, rail, oil and gas, defense and agricultural markets.
The segment is organised by engine displacement size and serves these end-user markets:
Heavy-duty truck
Medium-duty truck and bus
Light-duty automotive (Pick-up and light commercial vehicle (LCV))
Off-highway
Distribution Segment
This is the company’s primary sales, service and support channel.
The segment serves our customers and certified dealers through a worldwide network of wholly-owned, joint venture and independent distribution locations.
The Distribution segment is organized and managed as eight geographic regions, including North America, Asia Pacific, Europe, Russia, China, Africa and Middle East, India and Latin America.
Components Segment
The Components segment supplies products which complement the Engine and Power Systems segments, including aftertreatment systems, turbochargers, transmissions, filtration products, electronics and fuel systems for commercial diesel and natural gas applications
The segment is organised around the following businesses:
Emission solutions
Turbo technologies
Filtration
Electronics and fuel systems
Automated transmissions
Power Systems Segment
The Power Systems Segment is organised around the following product lines:
Power generation - standby and prime power generators
Industrial - engines for use in mining, rail, defence, oil and gas and marine applications
Generator technologies - A/C generator/alternator products for internal consumption and for external generator set assemblies.
New Power Segment
The New Power Segment produces hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid.
The New Power segment is currently in the development phase with a primary focus on research and development activities for their power systems, components and subsystems.
Key Risks
Government regulation related to emission certification and compliance
Global trade laws and taxation rates could change
Supply chain issues and costs impact ability to deliver on orders
Challenge of aligning capacity with demand
Significant earnings come from joint ventures that Cummins doesn’t control
Quality control in delivered products
Separation of filtration business may not be completed on schedule
Significant competition in the regions they serve
Their Competitors
Weichai Power Co Ltd
Caterpillar Inc
Deutz AG
Robert Bosch GmbH
Parker-Hannifin
Rolls-Royce Power Systems
Their Financial Calendar
Q1: January-March - Earnings 3rd May 2022
Q2: April-June - Earnings 2nd August 2022
Q3: July-September - Earnings 3rd November 2022
Q4: October-December - Earnings 6th February 2023
Next Earnings Report:
Around 3rd May 2023
Positives from the Q4FY22 earnings report:
Fourth quarter revenues of $7.8bn ($6.6bn excluding Meritor business)
Revenues up from $5.85bn same period last year
Gross margin 26.3% up from 22.5% same period last year
Diluted Earnings Per Share $4.63 up from $2.73 same period last year
Challenges from the Q4FY22 earnings report:
International revenues were down 1% compared to 25% increase for North America
Strong demand across all global markets was offset by market slowdown in China and indefinite suspension of all operations in Russia.