Cummins Reports Fourth Quarter And Full Year 2021 Results
Revenues for the full year were $24 billion, 21 percent higher than 2020. Sales in North America increased 17 percent and international revenues increased 27 percent. Sales increased in all major regions compared to the prior year, which was severely impacted by the height of the COVID-19 pandemic.
EBITDA for the year was $3.5 billion (14.7 percent of sales) compared to $3.1 billion (15.7 percent of sales) in 2020.
Net income attributable to Cummins for the full year was $2.1 billion ($14.61 per diluted share), compared to net income of $1.8 billion ($12.01 per diluted share) in 2020. The tax rate for 2021 was 21.3 percent.
Fourth quarter revenues of $5.9 billion were flat with the same quarter in 2020. Sales in North America decreased 4 percent while international revenues increased 6 percent driven by strong demand across most global markets, with the exception of China, compared to the same quarter in 2020.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter were $705 million (12.1 percent of sales), compared to $837 million (14.4 percent of sales) a year ago.
Net income attributable to Cummins in the fourth quarter was $394 million ($2.73 per diluted share) compared to $501 million ($3.36 per diluted share) in 2020. The tax rate in the fourth quarter was 22.2 percent.
“Strong economic recovery combined with high demand for our products resulted in record full year revenues in 2021. Our industry continues to experience significant supply chain constraints resulting in elevated manufacturing, logistics, and material costs resulting in margins below our expectations, particularly in the fourth quarter,” said Chairman and CEO Tom Linebarger. “We have taken actions to improve margins in 2022 and expect to generate strong incremental margins through increased pricing, surcharges, a number of cost reduction initiatives and operational improvements. Having effectively managed through a challenging 2021, Cummins is in a solid position to keep investing in future growth while continuing to return cash to shareholders. The transition to low carbon power across industries will be a significant driver in the fight against climate change and will require a broad mix of innovative technologies to achieve these goals. This decarbonization effort represents a significant growth opportunity for Cummins as many of our OEM partners and end customers look to achieve their climate goals, while still having power solutions that fulfill their needs. Cummins key capabilities uniquely position us to lead in the transition to zero emissions.”
Based on the current forecast, Cummins projects full year 2022 revenues to be up 6 percent, and EBITDA to be approximately 15.5 percent of sales. We expect revenues to increase in all regions and major markets except China where we expect demand to moderate after a record year in 2021.
The company plans to continue to generate strong operating cash flow and returns for shareholders.
Cummins increased its cash dividend for the 12th straight year and returned a total of $2.2 billion to shareholders in the form of dividends and share repurchases. The Board of Directors authorized the repurchase of up to $2 billion in shares of common stock upon completion of the company’s 2019 $2 billion share repurchase program, reinforcing the company’s commitment to deliver strong returns to shareholders and confidence in long-term performance.
Cummins announced that it will bring to market a 15-liter natural gas engine for heavy-duty trucks. The 15-liter natural gas engine is an important part of Destination Zero, Cummins strategy for the best way to decarbonize our industry, focusing on reducing carbon from the technologies that are widely available today, while investing in the infrastructure capabilities and technologies with the potential to reach zero. The strategy focuses on new powertrains including advanced diesel, natural gas, hydrogen engines, hybrids, battery electric, and fuel cells along with an increased use of low carbon fuels and renewable electricity. The expanding product lineup will help achieve Cummins’ PLANET 2050 environmental goals which include lowering emissions from newly sold products by 30% by 2030 and a goal of carbon neutrality by 2050, aligned with the Paris Climate Accord targets.
Cummins and Sinopec announced the formation of a 50:50 joint venture, Cummins Enze, to accelerate the affordability and availability of green hydrogen in China. The joint venture will invest in an electrolyzer plant with annual capacity starting at 500 megawatts in 2023, and scalable to one gigawatt within 5 years after completion. Cummins Enze will also provide a variety of hydrogen generation system solutions to meet diversified application requirements for both small and large scale hydrogen production.
In August, the company announced its exploration of strategic alternatives for its Filtration business unit. The company believes the separation will create value for both companies by enabling enhanced focus on key strategic initiatives, continued innovation in core and new technologies for Cummins, and greater focus and operating flexibility for the Filtration business. The method and timing of the separation are under evaluation.
In response to the COVID-19 pandemic, the company launched an aggressive global effort to acquire vaccines and provide them onsite or near-site to our employees, their families and other stakeholders. By partnering with governments and health care providers, we facilitated the delivery of over 45,000 doses of approved vaccines to employees. This includes over 5,000 shots in the U.S., over 30,000 shots in India and over 10,000 shots in Mexico.
In October 2021, Cummins was named to the S&P Dow Jones World and North American Sustainability Indexes. It was the 16th consecutive time the company was named to the North American index and the first time on the world index since 2013. The prestigious indices rate companies on their environmental, social and governance performance.
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Fourth quarter 2021 detail (all comparisons to same period in 2020):
Sales - $2.4 billion, up 4 percent
Segment EBITDA - $264 million, or 10.9 percent of sales, compared to $338 million or 14.5 percent of sales
On-highway revenues increased 5 percent and off-highway revenues increased 2 percent
Sales in North America decreased 4 percent while international sales increased 26 percent driven by demand across Australia, Europe, and Latin America
Sales - $2.1 billion, up 3 percent
Segment EBITDA - $178 million, or 8.6 percent of sales, compared to $165 million or 8.3 percent of sales
Revenues in North America were down 1 percent while international sales increased by 10 percent driven by strong demand in Russia
Increased engine and aftermarket demand offset a decline in power generation
Sales - $1.7 billion, down 6 percent
Segment EBITDA - $205 million, or 11.9 percent of sales, compared to $280 million or 15.3 percent of sales
Revenues in North America increased 1 percent and international sales decreased 12 percent due to lower demand in China
Power Systems Segment
Sales - $1.1 billion, up 10 percent
Segment EBITDA - $97 million, or 8.9 percent of sales, compared to $74 million, or 7.5 percent of sales
Power generation revenues decreased by 6 percent while industrial revenues increased 37 percent driven by strong mining demand
New Power Segment
Sales - $34 million, flat with the same quarter last year
Segment EBITDA loss - $54 million
Continued investment in the development of fuel cells and electrolyzers as well as products to support battery electric vehicles is expected to support strong growth in 2022 and beyond and is contributing to current EBITDA losses.
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