Cummins Profit Falls Less Than Expected

By Joshua Jamerson 

Cummins Inc.'s profit fell less than expected in the latest quarter, as the diesel engine maker continued to cut costs amid weak market conditions.

Lower production in the North American heavy-duty truck market, as well as weak global demand for off-highway and power generation equipment, dented sales. The company has also been weighed by a stronger U.S. dollar that makes its products more expensive overseas. Currency effects shaved 3% off its top line in the quarter ended April 3.

Cummins has been pressured by sliding demand for trucks in North America, anemic commodity prices and weak economic growth in some developing overseas markets. Cummins, which supplies diesel engines for Ram and Nissan Motor Co. pickup trucks, has faced tough business conditions in markets such as China and Brazil.

Rich Freeland, Cummins's chief operating officer, said that "benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales."

Research, development and engineering expenses fell 15% in the quarter while selling, general and administrative expenses fell 5.2%.

Over all, Cummins reported a profit of $321 million, or $1.87 cents a share, down from $387 million, or $2.14 a share, a year earlier.

Revenue declined 9% to $4.29 billion. Analysts expected $1.78 in per-share earnings and $4.31 billion in revenue.

Sales in Cummins' engine segment, its largest, declined 10%, while sales in its smaller power distribution segment declined 19%. Sales in the components unit slipped 5% while revenue from its distribution division fell 1%.

In October, the company said it would trim about 2,000 white-collar jobs, and has said it would evaluate whether more aggressive action were needed. In February it scaled back the range of its light-duty engines it planned to manufacture in North America.

Cummins on Tuesday backed its revenue forecast for the year, projected a sales decline between 5% and 9%.

Shares were unchanged in premarket trading.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

May 03, 2016 09:39 ET (13:39 GMT)

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