Revenue Reports Shine Light On Covid-19 Havoc

Two major US manufacturers that produce engines reported dramatic sales drops in the first quarter, driven in large part by the ongoing Covid-19 pandemic.

Cummins reported that its first-quarter revenues of US$5.0 billion were down 17% from the same quarter in 2019. Caterpillar said its first-quarter 2020 sales and revenues of US$10.6 billion were down 21% compared with the first quarter of 2019. Caterpillar’s Energy & Transportation segment saw sales drop 17% in the first quarter, with the biggest decline coming from the Latin America region.

In that segment, Oil and Gas sales were lower mainly in North America. The sales decline was largely due to lower demand for reciprocating engines used in gas compression and well servicing, the company said. Power generation sales decreased primarily due to lower sales in Asia/Pacific and North America for both reciprocating engines and turbine-related projects. Industrial sales decreased due to lower demand across all regions. Transportation sales declined in both rail and marine applications. Energy & Transportation’s profit was US$602 million in the first quarter of 2020, a decrease of US$236 million, or 28%, compared with US$838 million in the first quarter of 2019.

For Cummins, lower truck production in North America and weaker demand in global construction, mining, and power generation markets drove the majority of the revenue decrease. In the company’s engine segment, sales of US$2.2 billion were off 19% in the quarter. In its Power Systems Segment, sales of US$884 million were down 18%.

Both companies, citing the uncertainty related to the coronavirus pandemic, are not providing revenue or profitability guidance for 2020.

“While customer operations have begun to resume activity, the company does expect a significant impact to its second-quarter results due to disruptions across customer and supplier operations and lower end market demand,” Cummins said in a statement. “For now, the company is planning for weak demand levels to persist for some time.”

“During our 100-year history, we have encountered several unforeseen crises, and I am confident we will successfully navigate this one as we have done before, to emerge stronger. Cummins enters this period of uncertainty in a position of strength with an experienced leadership team that has led through multiple cycles and a strong balance sheet,” said Chairman and CEO Tom Linebarger. “Our deep customer and supplier relationships combined with our leading positions in global markets leave us well-positioned to deliver strong growth when the global economy recovers.”