Cummins 4Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Lots of positives but risks remain

“Although there are a lot of positives to look forward to in 2015 risk remain, particularly in the global off-highway markets and emerging markets. Weaker infrastructure spending in China and Latin America, declining commodity prices and the transition to new emission standards in developing economies all present risks to off-highway market demand. I am confident that our market position will improve in 2015 as our leadership in tier four final emissions regulations and the introduction of new products will enable us to outgrow weak end markets.”

Strong dollar is not ideal

“I think the simplest way to think about currency for Cummins is that we have — we built a lot of natural hedges in our business because we manufacture in lots of locations. But places where we have more costs than revenues as you guess would be in the U.S so strong U.S dollar is not ideal for us. That said we use a lot of global sourcing, we sourced products — materials from all over the world almost no matter where we assemble which helps us on that. The business unit that’s most exposed to currency is distribution business because we have revenues and profits in all of these countries and so we get translation hits as they come back to the U.S we translate them into U.S dollars and those are hard things to figure out and naturally hedge too.”

A new product innovation engine

“we are launching north of 70 new and improved products a year now. So our company on a global basis, we are basically in a new product introduction business. And that’s the way our customers can get ahead of their competitors is because they have new and improved products to go against them with. And so what we tried to build over the last decade is this new product introduction machine where we can launch new products that come out at quality levels that are better as good or better than the ones that they are replacing, which if you go back to the 90s was not our history, and so that’s the activity that I have been talking about.”