Cummins Revises 2008 Outlook to Reflect Worsening Economic Conditions
COLUMBUS, Ind. December 11, 2008: Cummins Inc. today revised its outlook for 2008 due to the continuing decline in many of its key markets around the world.
The Company now expects 2008 sales to increase by 9 percent over 2007, compared to its previous guidance of a 12 percent increase. Earnings Before Interest and Taxes (EBIT) is forecast to be slightly more than 9 percent of sales, compared to the Company’s earlier guidance of 10 percent.
“Like many other companies, Cummins is experiencing the negative impact of the global economic downturn,” said Tim Solso, Cummins Chairman and Chief Executive Officer. “Our Engine and Components segments are seeing the most significant declines with revenues for the fourth quarter down 15 percent compared to what we anticipated in our previous guidance at the end of October."
“We are taking aggressive steps to manage costs and production levels to reflect current economic conditions,” Solso added. “We do not expect market conditions to improve significantly in the immediate future.”
The Company’s heavy-duty and medium-duty truck and construction markets were hardest hit in recent weeks, with drops in demand in North America and Europe. In addition, truck markets in China, Brazil and India also have weakened.
As a result of the rapid decline in sales, the Engine and Component segments are expected to report sharply lower EBIT margins in the fourth quarter, compared to the same period a year ago.
Cummins has taken a number of steps to address the slowing demand over the past month, including:
The Company also announced last week that it will reduce its professional workforce worldwide by at least 500 employees by the end of 2008. The costs associated with the employee reductions are estimated to be between $30-$40 million and will be recognized in the Company’s fourth quarter earnings. The revised guidance for 2008 excludes the severance costs associated with these actions.
Many of these measures are expected to continue into next year. The Company will provide sales and EBIT percentage guidance for 2009 when it reports fourth-quarter earnings on February 3, 2009.
“These are very challenging times, but Cummins is well positioned to weather this downturn,” Solso said. “2008 will be our fifth consecutive year of record sales and profits. The Company is more diversified than at any time in its history, we have grown market share in many markets and our balance sheet is strong, which allows us to invest in our critical growth opportunities. We are prepared to do the hard work necessary to not only manage through this difficult period, but to emerge an even stronger company.”