Cummins sees record 2023 revenue despite rough Q4

Full year 2023 revenue rose 21% y/y to a record $34.1 billion

U.S. regulatory claims that came to a head in the latter part of 2023 produced a negative impact on Cummins Inc.’s fourth quarter results but failed to overshadow its earnings for the year.

“High global demand for Cummins’ diverse set of innovative products drove record full-year revenues and operating cash flow in 2023,” said Jennifer Rumsey, Chair and CEO. “Excluding the impacts related to the agreement to resolve U.S. regulatory claims, 2023 was a record year for EBITDA, Net Income and EPS for Cummins. Also, EBITDA percent improved year over year in the Components, Distribution and Power Systems segments.”

Regulatory woes in Q4

The end of 2023 saw Cummins agreeing to a pay a record fine along with related costs totaling $2.04 billion in response to U.S. regulatory claims that the company installed “defeat devices” to bypass or disable emissions controls on its pickup truck engines. Cummins denied any wrongdoing under the settlement agreement.

As a result of these and other unrelated costs, Cummins saw a net loss of $1.4 billion for the fourth quarter despite a 10% year-over-year increase in revenues of $8.5 billion compared to the same period in 2022. All business segments reported sales growth:

  • Components Segment sales were up 3% to $3.2 billion with EBITDA of $406 million;
  • Engine Segment sales rose 5% to $2.8 billion with EBITDA of $353 million;
  • Distribution Segment sales jumped 17% to $2.7 billion with EBITDA of $269 million;
  • Power Systems grew 8% to $1.4 billion with EBITDA of $182 million.

The Accelera Segment, which was formed early last year, saw sales grow 8% to $81 million due to higher demand for battery-electric systems and the addition of the Siemens Commercial Vehicle business that was acquired in Q4 2022. However, the segment continued to see an EBITDA loss ($121 million), which the company attributes to the costs of development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery-electric vehicles.

Total sales for Cummins rose 8% in North America and 13% internationally, reflecting strong demand across most of the company’s global markets. Earnings before EBITDA were a negative $878 million, or -10.3% of sales, compared to a positive $1.1 billion, or 14.2% of sales, in Q4 2022.

Full year ends strong

Despite the negative impacts of the fourth quarter, Cummins reported record 2023 full-year revenues of $34.1 billion, 21% higher than 2022. Sales in North America were up 22% and international revenues increased 20%, thanks to the addition of the Meritor business and strong demand across most global markets, the company said.

Net income for the full year was $735 million. EBITDA was $3.0 billion, or 8.9% of sales, compared to $3.8 billion, or 13.5% of sales, a year ago.

Operating cash flow for 2023 was a record inflow of $4.0 billion, compared to $2.0 billion in 2022, as Cummins continued to focus on working capital management within the business.

2024 outlook

Based on its current forecast, Cummins projects full-year 2024 revenues to decline 2% to 5% on a year-over-year basis, and EBITDA to be in the range of 14.4% and 15.4% of sales.

“In 2024, we anticipate that demand will slow particularly in the North America heavy-duty truck market, partially offset by strength in other key markets, and have already taken some actions to reduce cost. We will continue to monitor global economic indicators closely and will ensure we are prepared to adjust our business should economic momentum slow further,” said Rumsey.

She went on to state that Cummins plans to continue to invest in new technologies and products in 2024 in alignment with its Destination Zero strategy.

“This sustained investment will ensure that the company will be positioned to generate strong growth and profitability in both the near and long terms,” she added.

Full details of the earnings report can be found by clicking here.

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