The record results came despite the expected significant drop in the North American heavy-duty truck market as a result of emissions changes that took effect on January 1, 2007. Industry-wide sales in that market declined nearly 50 per cent in 2007, but Cummins’ increased share in that market as well as strong growth across most of the rest of the company’s businesses and regions more than offset the decrease.
“2007 was an outstanding year for Cummins,” said Chairman and Chief Executive Officer Tim Solso. “This record-setting performance in the face of significant challenges validates our message that Cummins truly has become a more diversified, global power leader. Most importantly, our efforts continue to benefit our shareholders who have enjoyed an average annual return of over 55 per cent on their investment over the past five years.”
Although revenues were higher in the engine segment, profits were lower for both the fourth quarter and the full year 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 globe for capacity expansion and new products. Notable investments include the light duty diesel engine program in Columbus, Indiana, and the two light commercial vehicle engine platforms for the Chinese truck market. These two new platforms for this rapidly growing 1.1 million unit market in China will be manufactured as part of the company’s joint venture partnership with Foton.
At the same time, Cummins also gained a significant share in key engine markets during 2007 – especially in the North American heavy-duty truck engine market, where its market share exceeded 40 per cent for the last nine months of the year. The company’s 2007 product, which is based on Cummins’ proven cooled exhaust gas recirculation technology, has performed as well as expected and has been well-received by customers.
Outlook
The company expects to extend its record financial performance to a fifth straight year in 2008. Sales are forecast to increase 12 per cent from 2007 levels and the company expects to generate EBIT of 10 per cent of sales in 2008.
The company’s financial performance over the last four years has resulted in a strong balance sheet, which has given Cummins the flexibility to invest in the people, products, facilities and technologies necessary to take advantage of growth opportunities around the world. It expects to spend between $550-600 million on capital projects in 2008.
