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Cummins’ Profits Take Hit In 2023

Tarun Veeraraghavan of Cummins Inc. explains the benefits of installing a new line at the Jamestown plant during a tour last May. The new line will begin manufacturing Cummins’ X15N engine this year. P-J file photo by John Whittaker

Cummins Inc.’s $2.04 billion federal fine to resolve discrepancies in emissions certifications is taking a big bite from Cummins Inc.’s 2024 profits.

The company recently released its fourth quarter and full 2023 financial statements earlier this week. Net income for the full year 2023 was $735 million, or $5.15 per diluted share, compared to $2.2 billion, or $15.12 per diluted share, in 2022. That includes a fourth quarter net loss of $1.4 billion compared to net earnings of $631 million, or $4.43 per diluted share, in 2022. Both results reflect the recording of a charge related to the agreement to resolve U.S. regulatory claims previously announced in December and reported in The Post-Journal.

Jennifer Rumsey, Cummins president and CEO, told investor analysts this week the company has worked to make sure the emissions certification issue doesn’t come up again.

“We were transparent about this in December when we announced that we reached an agreement in principle to resolve US regulatory claims regarding our emissions certification and compliance process for certain engines, primarily used in our pickup truck applications. After 4.5 years of working diligently with the regulators, reaching an agreement was the best way for us to achieve certainty on this matter and move forward with certifying our new products and advancing our Destination Zero strategy,” Rumsey said. “We have expanded and strengthened our emissions compliance program to help ensure our products comply with increasingly stringent emissions regulations around the world. Our product compliance and regulatory affairs organization, which we launched in 2019, has a reporting line directly to me and positions come as to meet global product compliance requirements and deliver solutions for our customers that are safe and lead to a cleaner environment.”

Rumsey was quick to point out that the lower yearly net income and fourth quarter net loss mask otherwise encouraging 2023 financial results. Fourth quarter 2023 revenues of $8.5 billion increased 10% from the same quarter in 2022 while full-year 2023 revenues $34.1 billion, 21% higher than 2022. Operating cash flow for 2023 was a record inflow of $4 billion, compared to $2 billion in 2022.

“In summary, 2023 was a record year for revenues and operating cash flow, excluding the impacts related to the agreement to resolve U.S. regulatory claims. 2023 was also a record year for EBITDA, net income, and earnings per share,” Rumsey said.

Based on its current forecast, Cummins projects full year 2024 revenues to decline 2% to 5% in 2024. That’s largely due to an anticipated decrease in demand, particularly in the North America heavy duty truck market. Early in 2024 the company expects the heavy duty market to continue at its current rate, which is slightly off the peak of the first half of 2023, with further softening in the second half of the year.

“In addition, we are taking steps to reduce costs, optimize our business and position Cummins for continued success in 2024. We are in a strong position to keep investing in the future, bringing new technologies to customers and returning cash to our investors,” Rumsey said.

Company officials also briefly discussed the upcoming launch of the X15N engine in North America. That engine is going to be manufactured at the company’s Jamestown Engine Plant, which has been undergoing a $542 million retooling to prepare for the new engine’s production.

Freightliner announced it is partnering with Cummins to offer the new Cummins X15N natural gas engine in its heavy-duty Freightliner Cascadia trucks while The Post-Journal also reported earlier this year that Knight Transportation Inc. successfully tested Cummins’ new X15N engine using renewable natural gas to realize reductions in nitrous oxides and greenhouse gas without compromising performance. The X15N, which will launch in North America in 2024, is the first natural gas engine to be designed specifically for heavy-duty and on-highway truck applications. The X15N has already been sold in China with strong customer demand and market penetration.

“Most notably, for our core business in 2023, we committed to investing more than $1 billion across our US engine manufacturing network to support the industry’s first fuel-agnostic engine and platforms, as well as unveiled the X10 fuel-agnostic series launching in North America in 2026,” Rumsey said. “Additionally, we initiated several collaborations with our natural gas X15 engine, which will launch in North America this year and further enables our customers to achieve their decarbonization goals. This is the industry’s first natural gas engine design specifically for heavy duty and on-highway truck applications, offering customers the opportunity to realize reductions in nitrous oxide and greenhouse gas without compromising performance. We are continuing to see strong interest from both OEMs and end users ahead of the launch later this year.”

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