Daimler, Cummins 1Q Earnings Increase, Show Gains in North American Market
This story appears in the May 7 print edition of Transport Topics.
Original equipment manufacturers Daimler AG and Cummins Inc. reported more success in North American truck markets during the year’s first quarter, compensating for problems in other parts of the world.
Daimler earnings rose 20% to 1.42 billion euros, the equivalent of $1.86 billion. Revenue rose 9% to the equivalent of $35.44 billion. The Stuttgart, Germany, corporation’s truck division generated more revenue and sold more vehicles — especially in North America — year-over-year, but division profits declined because of increases in capital expenditures and product development.
Engine maker Cummins, Columbus, Ind., earned $475 million on global revenue of $4.47 billion. In the same quarter last year, it earned $365 million on revenue of $3.86 billion. Quarterly sales of heavy-duty truck engines rose to $892 million from $485 million.
“Revenues in North America were very strong, increasing 40% from a year ago,” said Thomas Linebarger, Cummins’ chairman and CEO.
“The engine and components businesses delivered strong growth in non-highway markets. We benefited from strong market share for our engines in the North American heavy-duty truck market in the first quarter, with our share reaching 45% compared to 33% a year ago. We shipped more than 20,000 15-liter engines to the North American market, setting an all time record,” Linebarger said in a May 1 conference call.
The company also brought in more revenue from midrange engine sales, although the number of units shipped dipped.
Cummins sells a plurality of North America’s heavy-duty truck engines, and shipped 36,000 of them during the quarter, up from 20,000 a year ago. Revenue per engine shipped increased to $24,778 from $24,250.
Midrange sales rose to $526 million from $474 million, as volume declined to 109,000 units from 109,400, with yield improving to $4,826 from $4,333.
“Overall, Cummins had a solid quarter in North American truck markets and aims to maintain its leading market share,” stock analyst Ann Duignan wrote to clients of J.P. Morgan Securities. “However, the near-term emerging-market outlook and potential head winds in oil and gas end markets keep us cautious on Cummins at this time,” she added.
Cummins’ Linebarger said of the North American heavy truck market, “We now expect our market share to reach 40% for the full year, the top end of the range of our previous guidance, and we are maintaining our forecast for the market sides for heavy-duty trucks in 2012 at 278,000 units.”
Cummins is a major supplier to Paccar’s two main North American brands, Kenworth Trucks and Peterbilt Motors, although Paccar also makes its own truck engines.
Rich Freeland, president of the Cummins engine business, said the company is also exporting more engines made here to South America and Australia.
Daimler Trucks ranks No. 2 behind Mercedes-Benz cars as a producer of sales and profits among Daimler’s four manufacturing divisions. The bus and van divisions are smaller.
Global truck revenue rose 18% to the equivalent of $9.69 billion for the quarter, but operating profit declined by 7% to $502.5 million. North American sales — including Freightliner and Western Star Trucks — boomed the most strongly of any geographical region, soaring 42% to 27,432 trucks sold.
The April 27 Daimler report said worldwide truck profits declined because of “expenses relating to the current product offensive,” most of which is outside of North America.
Daimler makes trucks in China through a joint venture with Beiqi Foton Motor Co., and their Auman brand trucks will come to market in the third quarter, the report said. The company also opened a factory in India to build its new BharatBenz brand (4-23, p. 1).
The Daimler report said management anticipates more growth in North American truck sales this year.
“We see a high demand for replacement vehicles and thus expect a renewed increase in unit sales in the Nafta market,” the report said. The profit margin for the truck division narrowed to 5.2% from 6.6% a year ago.
Truck OEMs Paccar Inc. and Volvo Group reported first-quarter results earlier with similar results (4-30, p. 29). U.S.-based Paccar posted strong improvements because of its home market, while Sweden’s Volvo used North American gains to mitigate European difficulties.
The most recent quarter for Navistar International Corp. ended April 30, and the company has not yet announced a reporting date for results.
