Cummins reported declines in net sales and net income for the fourth quarter of 2008, but the company still was able to boast a fifth consecutive year of record sales and profits.
For the year, sales increased 10 percent to $14.34 billion, from $13.05 billion in 2007. Net income rose 8 percent to $801 million, or $4.08 per share, compared to $739 million or $3.70 per share the previous year.
Fourth-quarter sales fell 6 percent to $3.29 billion compared to $3.52 billion during the same period in 2007. Net income dropped to $89 million or 45 cents a share, from $198 million, or $1 a share a year ago.
Sales declines in the company’s engine and components segments, driven by sharp demand drops in the global truck and construction markets, more than offset gains in power generation and distribution.
“Given our record-setting performance during the first nine months of the year, the rapid drop in demand in the fourth quarter as a result of the global recession was a major disappointment,” chairman and CEO Tim Solso said in a statement. “At the same time, we moved quickly to lower our costs and tightly manage our capital spending, and already have taken further action in early 2009.”
Cummins began reducing its work force during the fourth quarter of 2008, and last month announced further cutbacks. By the end of March, the company will have reduced its global work force by more than 1,400 salaried professionals and more than 1,300 hourly manufacturing plant employees — or about 6 percent of its total workforce.
Besides the layoffs, Cummins initiated a number of other cost-cutting measures, including a hiring freeze, reducing the number of corporate officers by 10 percent, temporarily closing or shortening work weeks at a number of manufacturing plants, cutting discretionary spending, and reducing information technology spending.
Cummins expects sales in 2009 to be about 20 percent lower than 2008, with the largest decline in the components and engine segments. However, the company expects all business segments to be profitable in 2009.
“We are in an extraordinarily challenging period and, while we don’t expect overall economic conditions to improve in 2009, we entered this recession in the strongest financial position in the company’s history,” Solso said.