Cummins Inc, USA

Cummins Inc, USA

COMPANY WATCH H2O Innovation Inc, Canada Cummins Inc, USA Key Figures (US$ million) First quarter ended 3.4.2016 29.3.2015 Net Sales Of Which: Com...

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COMPANY WATCH

H2O Innovation Inc, Canada

Cummins Inc, USA Key Figures (US$ million) First quarter ended 3.4.2016

29.3.2015

Net Sales Of Which: Components Distribution

4291

4709

1237 1463

1299 1476

Cost of Sales

3235

3514

Gross Margin

1056

1195

Operating Income

470

548

Segment EBIT Of Which: Components Distribution

484

562

173 95

195 88

Income before Income Taxes

465

548

Net Income

333

404

COMMENT Cummins Inc has posted first quarter fiscal 2016 sales of US$4.3 billion, down 8.9% on the year earlier. The company reported that lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales. Currency negatively impacted revenues by approximately 3% compared to the earlier period, primarily due to a stronger US dollar. Earnings before interest and taxes (EBIT) in the first quarter were US$484 million, or 11.3% of sales, down from US$562 million or 11.9% of sales. Net income for the period fell to US$333 million, down 17.6% on the comparator. The company’s Components segment saw sales drop 4.8% on the 2015 figure to US$1.2 billion, with filtration revenues easing 1.2% to US$252 million. Segment profitability was also down, falling 11.3% to US$173 million. Cummins said the results reflected lower sales in North America and unfavourable currency impacts

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Filtration Industry Analyst

that more than offset growth in China. In Cummins’ Distribution segment revenues fell 0.9% on the year earlier to US$1.5 billion, although sales in its Parts & Filtration business unit were up 12.9% at US$647 million. Overall in the segment, increased revenue from acquisitions and growth in international markets were more than offset by lower sales in off-highway markets in North America and the negative impact of currency. Segment EBIT was up 8.0% on the year earlier at US$95 million. “Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” Rich Freeland, Cummins chief operating officer, said. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.” Cummins expects full year 2016 revenues to be down 5% to 9% on the 2015 figure. Q www.cummins.com

Key Figures (C$ thousand) Three months ended 31.3 2016

2015

14 199.9

12 121.6

4522.6

3887.5

356.2

281.8

Revenues Gross Profit before Depreciation and Amortization Operating Expenses Selling Expenses

1679.7

1293.9

Administrative Expenses

1289.7

1347.8

24.1

78.3

646.4

150.5

Nine months ended 31.3 2016

2015

Revenues

39 624.8

37 029.8

Gross Profit before Depreciation and Amortization

11 853.7

10 091.9

R&D Expenses – Net Net Earnings

Operating Expenses

1009.0

715.1

Selling Expenses

4648.8

3269.5

Administrative Expenses

3521.4

3461.6

R&D Expenses – Net

144.3

167.8

Net Earnings

873.0

550.6

COMMENT During the third quarter of 2016, H2O Innovation Inc’s revenues increased by 17.1% to C$14.2 million, up from C$12.1 million for the same quarter of fiscal year 2015. The rise in revenues mainly came from the company’s specialty products and services (SP&S) business line, which reached 66.3% of the revenues of the quarter, compared to 53.6% a year earlier. SP&S revenues were a record high of C$9.4 million, versus C$6.5 million last year, reflecting investments in sales efforts and in the development of new proprietary technologies. Revenues from water treatment projects fell 15.0% to C$4.8 million. The increase in net earnings from last year’s C$150 490 to C$646 422 in the 2016 third quarter reflects the growth

in revenues and higher gross profit before depreciation and amortization. “The outstanding financial results presented quarter over quarter proves the scalability of our business model and the value created by our proprietary technologies,” said Frédéric Dugré, president and CEO of H2O Innovation. H2O Innovation secured C$5.5 million in new bookings for water treatment projects over the quarter. These new bookings, combined with realised revenues from water treatment projects during the quarter and the weakening of the Canadian dollar against the US dollar, brought the backlog to C$42.1 million at 31 March 2016 compared to C$40.4 million at the same point last year. Q www.h2oinnovation.com

June 2016