Truck Suppliers Report Lower Profits on Sluggish 2nd-Qtr. Heavy-Duty Sales

This story appears in the Aug. 5 print edition of Transport Topics.

Continuing weakness in North American heavy-duty truck sales took a toll on second-quarter earnings for a group of major truck suppliers, most of which remained profitable but at lower levels than the same quarter in 2012.

Engine maker Cummins Inc. and truck dealership Rush Enterprises reported declines in net income, year-over-year, citing truck sales as a main reason. The commercial vehicle division of Dana Holding Corp. had a decline in sales and cash flow, while Meritor Inc. and Commercial Vehicle Group posted net losses.

Trailer maker Wabash National Corp. had a sharp improvement in net income for the quarter because the company had a substantial one-time charge related to an acquisition last year. Although it shipped fewer dry and refrigerated vans and flatbeds this quarter than in last year’s period, yield, or revenue per trailer, increased.

Cummins said July 30 that lower demand in the heavy-duty market in North America was a “significant driver of lower revenues” for its engine business. In contrast, shipments of medium-duty truck engines improved, especially in North America and Brazil.

The engine business generated operating income of $339 million on quarterly sales of $2.21 billion. In the 2012 second quarter, it earned $376 million on sales of $2.38 billion. Over the same time, operating margin declined to 12.8% from 13.2%.

Cummins is the market share leader among heavy-duty North American engine makers.

As a whole, the company earned $414 million, or $2.20 a share, on global revenue of $4.52 billion. In the 2012 second quarter, it earned $469 million, or $2.47 a share, on revenue of $4.45 billion.

“A lackluster new truck sales environment and increased overhead related to substantial investments made to support the continued growth of our organization made this a tough quarter,” Chairman and CEO W.M. “Rusty” Rush said in his company’s July 23 report.

Rush, the nation’s largest publicly traded truck dealership chain, specializes in Peterbilt Motors and Navistar International on the heavy-duty side.

Revenue from most Rush business lines improved during the quarter, except for new heavy-duty truck sales, which dropped to $292.7 million from $395.3 million. That led to overall declines in sales and net income for Rush.

The company earned $5.63 million, or 14 cents a share, on revenue of $789.7 million. In last year’s quarter, the result was net income of $17.4 million, or 44 cents, on revenue of $835.8 million.

Wabash earned $14.1 million, or 20 cents, on revenue of $413.1 million. In the year-ago period, net income was $1.94 million, or 3 cents, on revenue of $362.4 million.

Last year’s quarter included a one-time charge of $13.6 million related to the acquisition of Walker Group Holdings.

Wabash’s diversified products division, including tank trailers, contributed most of the new revenue, with sales rising to $135.5 million from $72.1 million.

Dana earned $85 million, or 44 cents, on quarterly revenue of $1.8 billion. In the same time during 2012, the company had net income of $79 million, or 40 cents, on revenue of $1.94 billion.

The company’s truck division products include axles, brakes and driveshafts, and it is Dana’s second-largest segment. Quarterly revenue declined to $498 million from $513 million.

Meritor reported a net loss of $38 million, or 39 cents, for its fiscal third quarter that ended July 31. In the same quarter of 2012, the manufacturer earned $49 million, or 50 cents a share. Quarterly revenue declined to $993 million from $1.11 billion.

The North American market hindered sales at both major divisions, Commercial Truck/Industrial and Aftermarket/Trailer. Revenue declined in both cases, but there was positive cash flow.

In two special quarterly ex-penses, the company had a $36 million charge for a pension settlement loss and $12 million for restructuring costs.

Meritor also makes axles, brakes, driveshafts and suspensions, and vehicle stability systems through its Meritor Wabco joint venture with Wabco Holdings.

Commercial Vehicle Group reported a net loss of $1.66 million, or 6 cents, on quarterly revenue of $198.9 million. In last year’s quarter, it earned $13.2 million, or 46 cents, on revenue of $242.7 million.

CVG makes in-cab products such as seats, wire harness assemblies, switches and interior trim. The loss was attributed to global construction and military markets.