Cummins has reported second quarter revenues of $6.1 billion, an increase of 59 percent from the same quarter in 2020, and its Board has begun to explore “strategic alternatives” for its Filtration business unit, including the separation of the business as a stand-alone company.
Second quarter sales and income
Sales in North America increased 74 percent while international revenues increased 42 percent driven by strong demand across all global markets compared to the same quarter in 2020, which was impacted significantly by the pandemic. Currency positively impacted sales by 3 percent primarily due to a weaker US dollar.
“Strong demand across many of our key markets drove continued sales growth in the second quarter, particularly in North America, and resulted in solid profitability,” said chairman and CEO Tom Linebarger. “The strength of the order board reflects robust underlying demand in many of our markets which is remarkable considering the challenges and uncertainty we faced during this same period last year. I cannot thank our employees and the employees of our supply base enough for their unwavering contributions during these challenging times given the significant supply chain constraints we continue to experience in our industry.”
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $974 million (15.9 percent of sales), compared to $549 million (14.3 percent of sales) a year ago.
Net income attributable to Cummins in the second quarter was $600 million ($4.10 per diluted share) compared to $276 million ($1.86 per diluted share) in 2020. The tax rate in the second quarter was 21.4 percent including $7 million, or $0.05 per share, of unfavorable discrete items.
Possible Filtration spinoff
Cummins is also announcing today its exploration of strategic alternatives for its Filtration business unit. Potential strategic alternatives to be explored include the separation of the business into a stand-alone company.
Cummins Filtration, founded by Cummins in 1958, has grown consistently, and as an independent company, would have the opportunity to accelerate growth as it further diversifies into new products and end markets. Cummins Filtration is a premier filtration platform with a broad portfolio of products for use in on-highway, heavy, medium, and light-duty trucks, off-highway industrial equipment, and power generation systems. The business benefits from a large installed base with comprehensive aftermarket coverage driving recurring revenue and cash flow visibility; and has a leading global footprint across many key regions; including North America, India, and China. Cummins Filtration is well-positioned for continued growth, sustained margin performance, and strong free cash flow generation. In 2020, the business had sales of approximately $1.2 billion.
The Cummins Board, along with management, believes a separation could realize value for Cummins and its stakeholders by, among other things, unlocking value for shareholders, enabling further enhanced focus on key strategic initiatives.
Source: Cummins
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