Cummins Inc, USA

COMPANY WATCH

Cummins Inc, USA

ITT Industries Inc, USA

Key Figures (US$ million) Fourth quarter ended 31.12 2008

2007

Key Figures (US$ million) Fourth quarter ended 31.12 2008

Net Sales Of Which: Components

3288

3516

676

777

Cost of Sales

2672

2834

Gross Margin

616

682

Operating Income

175

302

Earnings before Interest and Taxes Of Which: Components

129

324

2

47

89

198

Net Income

Sales and Revenues

2945.0

2007 2528.7

Of Which: Fluid Technology

984.3

985.2

2128.3

1828.1

71.8

52.4

2701.8

2279.7

Operating Income

243.2

249.0

Net Income

185.5

158.3

2008

2007

11 694.8

9003.3

3840.6

3509.1

8439.4

6435.0

244.3

182.3

10 484.7

8026.1

Cost of Sales and Revenues R&D Expenses Total Costs and Expenses

Year ended 31.12 Year ended 31.12 2008

2007

Net Sales Of Which: Components

14 342

13 048

3152

2932

Cost of Sales

Sales and Revenues Of Which: Fluid Technology Cost of Sales and Revenues

11 320

10 492

Gross Margin

3022

2556

Total Costs and Expenses

Operating Income

1345

1158

Operating Income

Earnings before Interest and Taxes Of Which: Components

1293

1227

Net Income

177

153

801

739

Net Income

COMMENT Cummins enjoyed its fifth straight year of record sales and earnings in fiscal 2008, although the global economic challenges saw a sharp decline in fourth quarter performance. For the full year, sales were up 10% on the year earlier at US$14.3 billion, while net income was 8% stronger at US$801 million. In the fourth quarter, meanwhile, sales fell 6% to US$3.3 billion and net income down 55% at US$89 million. Cummins’ Components segment, home to its filtration, turbocharger, exhaust after-treatment and fuel systems businesses, saw full-year sales increase 8% on 2007 to reach US$3152 million while

10

Filtration Industry Analyst

its EBIT rose 16% to US$177 million. It was a bleaker picture for the segment in the fourth quarter, however, with sales down 13% on a year earlier at US$676 million and EBIT plunging 96% to US$2 million. Filtration sales decreased 11% as the segment felt the effects of the demand drop in truck and construction equipment markets around much of the world. “Given our record-setting performance during the first nine months of the year, the rapid drop in demand in the fourth quarter as a result of the global recession was a major disappointment,” Cummins chair and CEO, Tim Solso, said. ■ www.cummins.com

R&D Expenses

1210.1

977.2

794.7

742.1

COMMENT ITT completed a good fiscal 2008 with a solid fourth quarter performance that saw revenues up 17% on the previous year at US$2.9 billion and net income also 17% stronger at US$185.5 million. The company’s Fluid Technology segment reported fourth quarter revenue of US$984 million, roughly flat on a year-over-year basis, with solid organic revenue growth of 7% offset by the negative impact of foreign currency exchange. The segment’s operating income for the quarter was US$96 million, down 24% from the 2007 comparator due primarily to higher costs associated with aggressive restructuring activity during the quarter. For the full-year 2008, Fluid Technology’s revenues grew 9% on the previous year to reach

US$3.8 billion, including solid organic revenue growth of 8%. The segment generated operating income of US$469 million, up 8%on a comparable basis, as organic growth and productivity improvements more than offset negative impacts from restructuring costs and currency effects. “Despite a global economic environment that deteriorated as the year progressed, our business continued to perform on the strength of a well-balanced portfolio and teams that met the adversity in their markets head on” Steve Loranger, ITT’s chair, president and CEO, said. “And while we expect 2009 to be more difficult, we take great pride in having achieved another record year of revenue and earnings growth in 2008.” ■ www.itt.com

March 2009