Cummins 3Q15 Earnings Call Notes

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Cummins’ (CMI) CEO Tom Linebarger on Q3 2015 Results

Worse than expected slowdown in Brazil and China

“Revenues and earnings in the third quarter declined from a year ago as a result of very weak demand in global off-highway and power generation markets and a continued slowdown in Brazil and China. Although we anticipate lower demand in these markets, orders have fallen further than expected, causing disappointing results for the company”

Reducing headcount

“we will reduce our professional headcount by approximately 2,000 people, with the majority of these reductions to be completed by the end of year.”

Competitors in the Euro are benefit from low Euro

“in the power gen segment we have now seen some pricing competition come in, primarily as a result of low Euro. So there is just a number of competitors in the European area that are Euro based costs and so areas where Eurozone exporters can compete with us, we are seeing some price competition in the gen set”

We had a slowdown in August, what was surprising is that continued into September

“We did start to see a bit of a slowdown in August, mainly in the components and engine segments. That’s not unusual. So having that slowdown in August is not the first time that’s happened. What was surprising and disappointing was the slowdown continued into September, again primarily in those two segments. ”

We thought emerging markets were starting to bottom, but they’ve weakened further

“we have set our plan not expecting a whole bunch of improvements in those markets, but they were starting to bottom, just as you suggest and if anything would be level or coming up. And in fact, what’s happened is they have gone down further. And that’s, I think, what maybe is the thing that says we haven’t clearly bottomed in most of those markets. We thought we had and we have not and where the bottom is, we are not exactly sure, but it doesn’t look like we have reached it. “