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Cummins Inc, USA
COMPANY WATCH
H2O Innovation Inc, Canada
Cummins Inc, USA Key Figures (US$ million) First quarter ended 3.4.2016
29.3.2015
Net Sales Of Which: Components Distribution
4291
4709
1237 1463
1299 1476
Cost of Sales
3235
3514
Gross Margin
1056
1195
Operating Income
470
548
Segment EBIT Of Which: Components Distribution
484
562
173 95
195 88
Income before Income Taxes
465
548
Net Income
333
404
COMMENT Cummins Inc has posted first quarter fiscal 2016 sales of US$4.3 billion, down 8.9% on the year earlier. The company reported that lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3% compared to the earlier period, primarily due to a stronger US dollar. Earnings before interest and taxes (EBIT) in the first quarter were US$484 million, or 11.3% of sales, down from US$562 million or 11.9% of sales. Net income for the period fell to US$333 million, down 17.6% on the comparator. The company’s Components segment saw sales drop 4.8% on the 2015 figure to US$1.2 billion, with filtration revenues easing 1.2% to US$252 million. Segment profitability was also down, falling 11.3% to US$173 million. Cummins said the results reflected lower sales in North America and unfavourable currency impacts
10
Filtration Industry Analyst
that more than offset growth in China. In Cummins’ Distribution segment revenues fell 0.9% on the year earlier to US$1.5 billion, although sales in its Parts & Filtration business unit were up 12.9% at US$647 million. Overall in the segment, increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency. Segment EBIT was up 8.0% on the year earlier at US$95 million. “Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” Rich Freeland, Cummins chief operating officer, said. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.” Cummins expects full year 2016 revenues to be down 5% to 9% on the 2015 figure. Q www.cummins.com
Key Figures (C$ thousand) Three months ended 31.3 2016
2015
14 199.9
12 121.6
4522.6
3887.5
356.2
281.8
Revenues Gross Profit before Depreciation and Amortization Operating Expenses Selling Expenses
1679.7
1293.9
Administrative Expenses
1289.7
1347.8
24.1
78.3
646.4
150.5
Nine months ended 31.3 2016
2015
Revenues
39 624.8
37 029.8
Gross Profit before Depreciation and Amortization
11 853.7
10 091.9
R&D Expenses – Net Net Earnings
Operating Expenses
1009.0
715.1
Selling Expenses
4648.8
3269.5
Administrative Expenses
3521.4
3461.6
R&D Expenses – Net
144.3
167.8
Net Earnings
873.0
550.6
COMMENT During the third quarter of 2016, H2O Innovation Inc’s revenues increased by 17.1% to C$14.2 million, up from C$12.1 million for the same quarter of fiscal year 2015. The rise in revenues mainly came from the company’s specialty products and services (SP&S) business line, which reached 66.3% of the revenues of the quarter, compared to 53.6% a year earlier. SP&S revenues were a record high of C$9.4 million, versus C$6.5 million last year, reflecting investments in sales efforts and in the development of new proprietary technologies. Revenues from water treatment projects fell 15.0% to C$4.8 million. The increase in net earnings from last year’s C$150 490 to C$646 422 in the 2016 third quarter reflects the growth
in revenues and higher gross profit before depreciation and amortization. “The outstanding financial results presented quarter over quarter proves the scalability of our business model and the value created by our proprietary technologies,” said Frédéric Dugré, president and CEO of H2O Innovation. H2O Innovation secured C$5.5 million in new bookings for water treatment projects over the quarter. These new bookings, combined with realised revenues from water treatment projects during the quarter and the weakening of the Canadian dollar against the US dollar, brought the backlog to C$42.1 million at 31 March 2016 compared to C$40.4 million at the same point last year. Q www.h2oinnovation.com
June 2016
H2O Innovation Inc, Canada
Cummins Inc, USA Key Figures (US$ million) First quarter ended 3.4.2016
29.3.2015
Net Sales Of Which: Components Distribution
4291
4709
1237 1463
1299 1476
Cost of Sales
3235
3514
Gross Margin
1056
1195
Operating Income
470
548
Segment EBIT Of Which: Components Distribution
484
562
173 95
195 88
Income before Income Taxes
465
548
Net Income
333
404
COMMENT Cummins Inc has posted first quarter fiscal 2016 sales of US$4.3 billion, down 8.9% on the year earlier. The company reported that lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3% compared to the earlier period, primarily due to a stronger US dollar. Earnings before interest and taxes (EBIT) in the first quarter were US$484 million, or 11.3% of sales, down from US$562 million or 11.9% of sales. Net income for the period fell to US$333 million, down 17.6% on the comparator. The company’s Components segment saw sales drop 4.8% on the 2015 figure to US$1.2 billion, with filtration revenues easing 1.2% to US$252 million. Segment profitability was also down, falling 11.3% to US$173 million. Cummins said the results reflected lower sales in North America and unfavourable currency impacts
10
Filtration Industry Analyst
that more than offset growth in China. In Cummins’ Distribution segment revenues fell 0.9% on the year earlier to US$1.5 billion, although sales in its Parts & Filtration business unit were up 12.9% at US$647 million. Overall in the segment, increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency. Segment EBIT was up 8.0% on the year earlier at US$95 million. “Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” Rich Freeland, Cummins chief operating officer, said. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.” Cummins expects full year 2016 revenues to be down 5% to 9% on the 2015 figure. Q www.cummins.com
Key Figures (C$ thousand) Three months ended 31.3 2016
2015
14 199.9
12 121.6
4522.6
3887.5
356.2
281.8
Revenues Gross Profit before Depreciation and Amortization Operating Expenses Selling Expenses
1679.7
1293.9
Administrative Expenses
1289.7
1347.8
24.1
78.3
646.4
150.5
Nine months ended 31.3 2016
2015
Revenues
39 624.8
37 029.8
Gross Profit before Depreciation and Amortization
11 853.7
10 091.9
R&D Expenses – Net Net Earnings
Operating Expenses
1009.0
715.1
Selling Expenses
4648.8
3269.5
Administrative Expenses
3521.4
3461.6
R&D Expenses – Net
144.3
167.8
Net Earnings
873.0
550.6
COMMENT During the third quarter of 2016, H2O Innovation Inc’s revenues increased by 17.1% to C$14.2 million, up from C$12.1 million for the same quarter of fiscal year 2015. The rise in revenues mainly came from the company’s specialty products and services (SP&S) business line, which reached 66.3% of the revenues of the quarter, compared to 53.6% a year earlier. SP&S revenues were a record high of C$9.4 million, versus C$6.5 million last year, reflecting investments in sales efforts and in the development of new proprietary technologies. Revenues from water treatment projects fell 15.0% to C$4.8 million. The increase in net earnings from last year’s C$150 490 to C$646 422 in the 2016 third quarter reflects the growth
in revenues and higher gross profit before depreciation and amortization. “The outstanding financial results presented quarter over quarter proves the scalability of our business model and the value created by our proprietary technologies,” said Frédéric Dugré, president and CEO of H2O Innovation. H2O Innovation secured C$5.5 million in new bookings for water treatment projects over the quarter. These new bookings, combined with realised revenues from water treatment projects during the quarter and the weakening of the Canadian dollar against the US dollar, brought the backlog to C$42.1 million at 31 March 2016 compared to C$40.4 million at the same point last year. Q www.h2oinnovation.com
June 2016