Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Cummins Inc. Fourth Quarter 2022 Earnings Conference. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Investor your Relations. my Vice Chris now of President is to host, introduce Clulow, It Thank you. ahead. go Please

Chris Clulow

Thank you Rumsey, Smith, the Officer. very our much. me and the Good morning everyone Mark Participating performance. and to XXXX well with Cummins’ Chief full of Officer; year teleconference are and Financial discuss results President quarter our for Jennifer Chief fourth today as as our today welcome to Executive

teleconference. will the the We be end answer available at questions all to of

please some forward-looking today the that, information strategies the XXXX. you start, forecasts, express the we given Before Such of be will note our on of regarding expectations, will that the of Securities Exchange meaning hear statements Act hopes, future. or statements intentions and beliefs of consist within and

our Securities Form results is differ such XX-K slide of statement quarterly filed the on report the risks and Risk and annual those projected future because a such XX-Q. our any actual most regarding with available subsequently section uncertainties Form information from could the particularly deck reports risks number in of materially and filed and in Factors uncertainties. of in Commission, statements forward-looking recently disclosure Our Exchange filings on forward-looking More the

of call, measures non-GAAP will will reconciliation measures. certain website to During we the course GAAP of this measures those financial our the we for and be discussing refer to financial you

Investor statements the at a on section webcast of Our of with website are financial and our Relations copy press the a release cummins.com. available presentations copy within today’s

our Jennifer to President way, the I CEO, kick of turn Rumsey, will over out that to you With us off. and

Jennifer Rumsey

a quarter year. of full take our you Good and forecast this with quarter year and our XXXX, our for discussion through year XXXX. Chris. discuss fourth of performance and morning. then summary Thank a of financial will details more I’ll full and for results finish start outlook Mark our with you, fourth

acquisitions Cummins for and made Siemens incredibly our Systems, exciting strategy, strides Last in growth was and Jacobs one inorganic Commercial significant the We Meritor our year an of through Vehicle stakeholders. business. notably Vehicles the most

navigated Tom We We our of from delivered as advanced global preparation the to transition our supply and for all separation XXXX. me business record filtration challenges, of this and earnings CEO. also share the EBITDA, accomplished revenues, per and in complex chain

planet. do growth and climate did so us our front opportunity that to business internal goals. for exciting emissions In opportunity to our a in XXXX, focus a by making the the meaningful a technologies best reductions the way to the the Cummins, carbon industry widely and advanced adoption. is on of long-term ahead emissions uniting for We advance zero so with widespread is of lead Decarbonization Destination broader clean and in our decarbonization in while and technologies stakeholders strategy, includes which market combustion invest accepted in we market today, launched growth economy continuing Zero, through

technology fuel-agnostic and platforms, production organic our combustion continue to electrolyzer momentum in and we growth the see we of green internal unified part first industry’s As powertrain our unveiled strategy, hydrogen opportunities.

our the in across billion. strong in revenues totaled fourth our quarter. for China, quarter of key all $X.X products remains exception regions resulting of strong notable the revenues and Demand Fourth with markets

Excluding the Meritor the business, of revenues fourth quarter for

in the by detail allow the business to the to quarter costs performance North of in fourth the XXXX will and his Mark provide clarity business of America guidance, XXXX, more of increased our fourth the in reported To quarter indefinite our XX% and from XXXX filtration the separation full the I’m operating markets. and with were $X.X the of operations prior costs, an excluding billion, comparison results and Meritor driven provide acquisition our associated results our suspension many Russia. related comments. of integration of associated on year demand increase costs the and primarily operational on

considered, exclusions these the reported and while EBITDA increase XX.X% XX.X% sales percentage million gross a pricing, or year $XXX improved with or of lower billion to $X.X ago. stronger With XX.X% above of an and was than positive our in guidance higher EBITDA volumes, margins QX, product increasing due costs to in EBITDA Gross by goals increases business which logistics XXXX. New in to the and coverage is material break transitioning long-term returns improvement in key of some costs, Power core of our costs. improvement our in meeting offset all business even our margin

and operating quarter, we improvement, and continue performance results across value the the showed accelerate opportunities In to Meritor capture financial fourth business.

excellent business. tax Our employees completion in synergies and operations in integrating We strides acquisition. we addition, ability of opportunities. to the continue Meritor achieve identifying in expect reduction upon in referenced cost the to as to people in have we incremental Cummins make million pretax confident job $XXX the the an and synergies remain integrate done within deliver we And our

better revenues X% costs Excluding record lower $XX.X compensation operations, higher separation the impact billion billion improved the year and EBITDA supply full business than of for material to planned Also the of filtration $X Meritor, the and more the income XXXX. Russia expenses, Improved our venture Meritor, year. environment compared of of excluding joint higher $X.X was increased XXXX than suspension price offset of billion, were the costs XX.X% sales realization or and a sales XX.X% related indefinite in chain or to volumes, XXXX. an

The business and and margin year-over-year another way full XX.X%, solid improved EBITDA year with Power Distribution quarter Engine, of Components XXX the XXXX segment, Systems, percent the delivered six segments. guidance improvement EBITDA performance was of Leading Components Power margin the is increased segment finished see by distribution EBITDA in EBITDA in this XXX in over the this from up delivered from months points year. business and Systems gains which in expansion. points. XX.X% will past that encouraging, further you expect last The basis we margins year. our basis

$X.X and $XX year revenue months include full reported million performance Meritor five or including EBITDA, of integration and of acquisition, related costs. for million of XXXX Our results $XXX billion accounting operational purchase of

then XXXX and on our and markets. Now, outlook let regions comment me provide for individual overall end

our Our with XXXX of and separation associated filtration the costs expected guidance the excludes the business of results Meritor the business. or includes benefits

are the We to on-highway XX% improvement continued year to company XX%, increase revenues to full to North XXXX in Meritor, and forecasting truck improved sales, the markets. market, XX.X% the power by compared for demand from of overall generation driven EBITDA China XXXX of improvement in and strength markets, total XX.X% a in slow be of pricing American sales to inclusion

to a to range of in XXX,XXX X% units the from XXXX, duty heavy year-over-year. for is size be decline up production flat in to Industry’s truck, trucks North XXX,XXX units, X% to XXXX. to medium-duty improvement XXX,XXX XXX,XXX a XX% expect to market be we projected America In

We engine expect the our phase partnerships to in continue market, deliveries as announced to in North in. XXXX America to outpace we continue the

Our America consistent Engine in XXXX. trucks shipments units for are pickup XXXX, be volume to expected levels North XXX,XXX XXX,XXX with in to

project the and light in total joint XX% duty to XXXX. including X% truck coming revenue demand China, off and low XX% ventures demand in duty to in increase to XX% truck XXXX. in improvement We medium heavy XX% the In levels we in improvement market, market project a

XXXX and digests XX% to are China emissions market in on expected in excavators of inventory hand. sales XX% to regulations decline the as adjusts Industry new to

recovery our as the a closely, events low China are to at first joint revenue change gauge. The COVID China our markets our ensuring up the with safety XXXX. people the in and we XXXX including operations out well-being point, watching could a are India, be make and within situation our We slow lockdown months. The priority. positively country’s in project current ventures the difficult in policy assumes coming impact of in to XXXX. In The in it close we as X% total guidance

We for to X% be for expect the the demand industry flat up to trucks year.

to XXXX. commodity chain by major oil engines global high-horsepower of of mining trajectory and strong to Demand prices supply X% and dependent the down in remain improvement. driven our by engines to expect we by X%, our XX% for more Revenues North sales We than markets XXXX, demand are upon be power gas in in In year driven in is data XX% center in doubling in be the expected Power, increase to to market. construction XXXX and XX%, expected increases full generation to $XXX million $XXX expected increase markets to New XX% up increased million, are project non-residential primarily improvements America. new revenues. global to Sales to

backlog which expect XX growing we electrolyzer to the convert over to months. to the We next course have be and of to delivered orders, XX pipeline a of

end the market. in are shared production. XXXX, At million continuing of the that demand quarter This a to in tripled $XXX at to this of had adding XXXX, of for momentum the we the milestone demonstrating the reached we million capacity we end rise, backlog. electrolyzer $XXX first strong on With focused electrolyzer of

During XXXX the to capacity America gigawatts timeframe China. and we more capacity expansion to several investments and Europe, in announced than XXXX across have North scalable of two XXXX expect

battery, electric in powertrain adoption will cell with deliver continues we technologies to Additionally, along continue fuel and electric as the systems markets. transportation

results our Meritor guidance are for XXXX. mentioned, overall included As in

drive expect in share to improvement continuing be XXXX. Meritor accretive our margins and post-acquisition in per to are earnings We to

business the continue segment. on focused will within be our will the on progress value the of updates which Components We initiatives, to of capture provide portion our

$XX that in to XXXX XX.X% regions XXXX billion especially in for X.X%. our of comparable of to overall year. within of EBITDA EBITDA EBITDA Meritor of the Within Components, will add In projected of most margin XX%, revenue with electric the integrated been losses strong expect has remain XXXX that Power segment. margins in million with improvement we Meritor the anticipate we of powertrain portion XXXX the markets, to the range New in and in included business portfolio $X.X an billion from key in the half demand the first $X.X The guidance

customer recent While indicators have seen macroeconomic change we significant in weakened in a not orders have months, this at time. some

In year to XX% summary, growth full sales. we EBITDA XX.X% XX.X% to of XX% of to sales be and expect

and core EBITDA actions generate of a New business. and business very Meritor We while improve the within number have expect strong taken the business in of Power in improve to our to to our margins margins invest incremental our continuing XXXX

while of in to shareholders. the cash years effectively expect couple growth through continuing are to return the and to positioned well XXXX invest future performance past Having in managed we challenges improved

let will turn Now, to more in it discuss me who results our Mark, financial detail. over

Mark Smith

and everyone. Jen, you, morning, Thank good

four takeaways comments from today. key are There my

of strong results quarter delivered margins and XXXX, in from stronger EBITDA delivered Systems compared ago, year three Engines, we for Distribution we exceeding and fourth First, Components, own a ago. projections Power our the to and months revenue

$X.X returned continue $XXX by in on-track We remain pretax the repurchases. to we the good and billion Meritor and of of XXXX shareholders deliver dividends we of the to synergies to form integration in of make year Second, share end progress on million three.

for Finally, in demand New increased EBITDA our business share earnings and products and XXXX. our supporting core strong, per in growth revenues remains in Power and

go let or were $X.X the quarter of Now, XX.X%. into reported EBITDA and revenues me details more Fourth fourth on $X.X quarter. billion billion

$XX.X EBITDA million the billion Also and were of in costs. fourth $XX of For million quarter, billion integration EBITDA, XX.X% Meritor of sales. and $X.X $XX year, $X.X revenue, the incurring full of billion acquisition related revenues or of after generated

quarter $XX separation results costs filtration planned of related to also fourth business. Our the of million included the

of Full of billion $X.X of $XXX acquisition, revenue, included reflecting EBITDA, purchase performance million operational yielding integration of months year Meritor, and million XXXX related five $XX results costs. accounting for

in to a XXXX. forward cleaner set look all numbers of will We

Our XXXX suspension the filtration in related to results Russia. million business of separation full of planned the $XXX our costs related of included to indefinite million and of operations year also $XX the costs

year results and business To in magnitude about following operational are comments. the the indefinite performance provide guidance. our you But the those of to those am and on of XXXX the of prior hopefully, allow our Russia filtration fourth my of the suspension Meritor I of clear separation after full quarter clarity -- items. remarks excluding comparison earlier and my and each

demand in mining and, markets, stronger an demand power course, year of dollar. X% in the driven truck stronger operations in most $X.X ago. for negatively revenues and America increase a markets. Currency generation from our due in XX%, equipment offset by movements impact were International continued U.S. were XX% X% impacted with in of a sales declines up to strong our China decreased Sales of by billion, Russia. North revenues suspension quarter by of Fourth

higher or material lower performance was gross XX.X% XX.X% EBITDA EBITDA billion offset to margin than or million mainly $X.X million increased $XXX $XXX stronger ago. due to costs. all and more compared to product pricing, expenses, of improved year higher a coverage contributed which by volumes,

from due and Now, support research and billion profitable year increased margin the line XX.X% by of new expenses a Engines and $XXX and X% basis points let’s by ago. we little or go New into or our or income in $X.X in increased invest XXX more admin as by million Gross compensation sales statement, detail higher $XX to to of future Selling, million research capabilities continue item. growth, products costs to Power segments. particularly a

income associated venture financing to lower primarily pension expense increased million costs largely demand a income trucks million, million, construction Joint Interest the an in the year Meritor. $XX million and decreased by for of increase of income. $XX acquisition $XX Other due China. higher ago, from was equipment due to with $XX driven

or from and, the of per the in earnings million the the ago. -- Operating higher an $X.XX diluted a rate effective tax $X.XX higher or quarter all-in XX.X%, diluted earnings. or $XXX was primarily share, items. in up All-in million Meritor quarter net million, fourth fourth per $XX year, year including including inflow driven was $X.XX $XXX by flow quarter cash discrete than favorable for was share $XX quarter million $XXX The million last

‘XX, impacted or billion a movements up For revenues in X% full down from up negatively Currency $XX.X the the sales record and full for with a revenues year revenues X%. X%. year year XX% were North by international ago, America

by or Components, some in were $X.X mark-to-market XX.X% increased our $XXX losses XX.X% sales Systems compared billion offset on New of more billion of Engine a $X Power investment XXXX plans. underpin was EBITDA Power than margins for ago. nonqualified to Improvements benefit investments partially and and that year in million Distribution, of of

All of that run through EBITDA. our operating

due of XXXX as was $X.X year to operating the $XX.XX of year. invest share flow $X.X new We $XXX share $X.X were million, inventory billion $XX.XX share operations Full billion down from in compared future increase last from to or earnings expenditures billion, for $X cash products levels. shareholders a cash $XXX diluted from year ago. growth. expansion billion, higher to in repurchases or to cash of or an primarily per of net per All-in and and were Capital billion capacity XXXX form dividends million we XX% $X.X continue in critical diluted returned

we’ll XXXX. as thankfully, I appreciate to reduces on to the explain Meritor, guidance includes quarter, in for that moving number Now, of our exclusions through each XXXX, work which and and patience we have your

full excluding any timing filtration, are with now, the separation that for the are costs yet filtration and separation for in We assuming our associated of as not XXXX, we’re the operating results determined. that is of year guidance

to up in XXXX. company billion expect a XXXX compared XX% the XXXX. including expected modest currently XX.X%. XXXX EBITDA is XX% to will be of $X.X business and revenue to market EBITDA company-wide In to margins of to to North for in in to to of in truck be be Meritor revenues, $X.X continued in range the project flat add We recovery and the XX.X% be we XX.X% We range ‘XX, Meritor, Engine in to X%, projected revenues up XX.X% strength XX.X% expect driven American by to China. billion

in to We we this X% components increase in revenues XX.X% to to in XX.X% compared and XX.X% Meritor, EBITDA XX% expect expect of revenues XX.X% margins XXXX. year to in up distribution the XX.X% margins the of compared EBITDA X% Including to XXXX. range XXXX to to and to be XX% be to XX% range

due for And and ‘XX, there engines globally. X% sales increase generation expect Power Systems be last and year. XX.X%, be oil we to New year, to this also projected EBITDA to we up the demand to equipment also revenues expect and up between $XXX to power XX.X% million to to higher of is Power from XX% range $XXX In of revenues gas XX% million.

in make expect capacity, be targeted range We to $XXX the losses net investments we support million customer New $XXX in continue to growing as to demand. Power technology to of million

remains in achieve EBITDA breakeven XXXX. Our to goal

range Our to deliver in expected investments XX% to cash to our of this and products cycles billion we to as billion in cash $X.X we required new markets. Capital and and be goal profitable existing XXXX, operating flow year. XX% have We above investments of any the sheet to to our long-term important is will generated XX%, shareholders accelerated Meritor to over an more have invest cash recent than asset in cash time that our In to will shareholders the this is remain following Having excluding committed strategy. new continuing items. be prioritize navigate of returning goal effective returns and rate acquisition strong a through support dividends we years economic tax sustain approximately for $X.X year when reduction growth. discrete of debt future towards while balance

we year while delivered through managing full supply chain and a China. earnings summarize, To environment demand challenges record in weak sales, very strong in XXXX,

core we driving products penetrate As in position on our margins demand remains through most strong focus visibility in in investing new and improvements new and to generating of of half XXXX, markets and to continue our good first technologies We’ll cash for in year. our in the the raising markets Power business, into core of with through products our business. the the flow performance adoption technologies strong lead New that of us Meritor, the move

today. interest your for you Thank

Chris. Now turn let it me to over

Chris Clulow

and that others you Mark. of ask limit related call, you, question to to yourself consideration a follow-up. one on the Thank Out I would

for an first have If the question. additional Operator, ready we’re our queue. you question, please rejoin

Operator

today of Please coming question go ahead. Jerry Sachs. Goldman first Revich The Instructions] from [Operator is

Jerry Revich

Meritor, the just of and the the pipeline wondering what’s systems the out what developments the acquisition acceptance folks but the from in it’s could know acquiring look the ownership, had is Post-Cummins products on working what like? the expected you How propulsion been marketplace? Thanks. that cross-selling comment I you versus early assets? post has of Siemens if before

Jennifer Rumsey

we question. and Power our on now needs. we powertrains Yes. and the right components the and investments together were on for deliver to number bring Meritor Thanks, within are conversations those already business, we that to Vehicle integrating how customers their having meet Yes, New Jerry, the business really the of with Siemens that focused Commercial making a electric

at it have going customer so about So, days a level well strategic to early continue as opportunities grow businesses together. as more business some customers and products, those really It’s employees our we’re this bring talk as we relationships senior seeing forward. brings at growing strong relationships, with these to we’ll we that as point,

Jerry Revich

Sounds good, of embedded Jennifer, within ‘XX costs could I just if in as guide expecting well. the thanks. in And ask the And pricing on terms you’re Mark, the outlook? the can in logistics that you touch

You hit deliveries running have tailwind ‘XX. wondering I’m extent hot what pretty a the does to folks in within guidance? been that to

Mark Smith

X% price margin embedded about of cost biggest benefit the driver That’s got Yes, guidance, the we’ve single of improvement. in Jerry.

Operator

is next of The question Suisse. Cook Please coming go Credit from Jamie ahead.

Jamie Cook

guess, two questions. I

then, I the you demand would where And can see line macro improving. the out price given visibility of weakening? I guide concern guidance. speak do maybe or guess, the by most I the margins on guys been thought little away, trends would there, in to going better Just business margin China you where have cost a see given implied engine you guess, sort on have just

what’s bridge So, engine XXXX if Thank XXXX me implied? to help just you. you margins can

Jennifer Rumsey

Great. Thanks, Jamie.

of market. Let me macroeconomic course, are attention to we, paying of And we’re these what in some the speak seeing trends. first to

in equipment. certainly to out of freight for the because rates, some a market last to undersupplying there remain gives demand. year. you to strong, it’s and been two And spot which see just the market starting to for point, continue been healthy not half, North a that the going is backlogs first truck years, cycle typical the important been market They’ve note, it’s half first just through through us using still the confidence take us strong the as that has we’ve we decrease activity while been If America the

trucks reflected demand seeing efficiency continues, benefits and to provide fleet. these We’re the new very in that high which aftermarket

North strong So, we America continue expect market. truck to

In strong our generation, oil have a markets. in in but across the we healthy around and Systems the again, and flat, Power of business, growth remain gas to products many power of forecasting business. demand Mining, backlog we’re growth

that slow around really in about The confident we throughout pretty project uncertainty is as said feeling XXXX. some as we’re China. So, comments, my well. do biggest recovery And I

that certainly, there, We that any With and platform. waves products, of the is there. economic December, new lockdowns economy. VI the couple operational the launched may government stimulus will there in grow years happens market. lift that to had disruption, they stringent in of transmission the natural which NS position the last but automated manual with in our launched We’ve monitoring think feel the we really We’ve what COVID still we’re less result expect gas Cummins into enable positioned well there. We’ve we our got the a in strengthening

the So, on China we’re exactly as strengthen just continues about Mark like. question. shape margin really the what will talk and I’ll uncertainty positioned well of to let look that

Mark Smith

Yes.

we’re business, I We’ve main is won meet of got several on is building haven’t the of external platforms. mention, couple emissions margins recovery ahead lot China. the of that that updating that strong think us didn’t future the a fairly you in sustained thing and our we then we’ve over a of piece got years to got Jamie, investments And next business other because regulations. very we’ve Engine the

obvious So, if be outside, the that’s do them otherwise, that the be only expect well other markets not to business element from Engine strong. through we’ll may that’s the but running to continue

Operator

is next go Volkmann from Please of ahead. question The coming Jefferies. Stephen

Stephen Volkmann

following question, Engine on, the margin on Mark. just Maybe

incremental margins some be volume? what still Given years, just increased if of it about the or spending, cetera, et over we have can than better you should few around that, described next flattish sort R&D, think we

Mark Smith

better can it be definitely than I that. think

some inefficiencies there Steve. here and We’re still battling

to expecting still aftermarket growth time. We’re over have

JV, on locked China, but have to can higher. we the got what more know they which still comments business be not biggest through earnings the got into the the Getting no, market So And in no, seen I market, a around a margins. We’ve margins, think few we to underlying truck world’s Components is go there. business. I’ve lowest we’re I come clear in Engine trying the think gain decade. I these content was we factors. more just share

So, that move sit change yet enthusiastic, the thing materially that be could more our Jen, be one People could agree but if We I could guidance have clearly, say what here don’t would and activity I hasn’t the most right would it China, now. visibility. are today with picked up.

So, that would be one important factor.

Stephen Volkmann

And bigger, about then, XXXX maybe you start my But to need We’re understood. to outsource implications whether biggest hear this but the is for line have and have days technically hurdle there? has or to as associated to people prebuys get Great, some starting through. follow-on that you, start early themselves on do a it, plays like and how to thinking to going just guys very broader emissions with of that which maybe you some maybe that sight picture emission we ever of question. be costs do big to massive and we what sort may do the feel think people or of you some XXXX trouble it kind there have your getting regulations, it

Jennifer Rumsey

Yes.

EPA to feel lineup part X.XXX with provide customers and a to full to our finalize at on NOx XXXX late in with do is meet as now standard that a reduce needs. gram our strategy, that with focused of customer products offer happened NOx. continuing stringent right environment finalizing year, regulations with to that regulation, product the regulatory customers -- and will and to we invest on We market-leading a the that COX our fuel-agnostic that products to our well those. products our impact are offer and engine to so really regulation. our But new and on platforms exceed product Zero really we’re NOx environment the plans Destination intention and more positioned And our they We last requirements now have benefits clarity meet

Operator

coming The ahead. next Evercore of ISI. question Please is Raso from David go

David Raso

includes I Hi. how the consolidated Thank guide, speak of you. The of it. to up you revenue, JV X%, sort China kind that usually assume and

Mark Smith

Yes.

David Raso

be of so P&L than markets? the of Even -- up that the the us on maybe you must this your pretty end small shows seen. I’m because more surprised the on-highway. JV feels that mix you JV, the and have the exposure like the consolidated declines can business update construction in off-highway, with more is we’ve construction mix after at stage the It

So, to for double up and suggest light, have if X%, be the digit the up you’d lot, China, up though heavy even is a and truck truck double would than more down is only mix at excavator now for other Is relatively why X% X%? to down. with there at trying keeping China up small comment market construction Just business only businesses it understand is Are share that there a there? end digit guide?

Mark Smith

unconsolidated, our you markets. there, obviously, all [XX%] whether mean, in when add trucks it’s of probably significant anything or plus David. consolidated there’s think don’t I I up

does won’t. more we’ll So, up the than it be doesn’t, better, we truck If X%.

I that the really on-highway. think there’s been has I strong seen big exception in revenue. almost of Power That’s yes, China. other year It’s think off-highway last that’s any been And business any of probably change dynamics. for has components, has the business entirely market. pretty consolidated to Systems But then, all engine what size. in no we’ve the in It every

Jennifer Rumsey

share grow market to our we NS the launch China Just in on to of your continue product. the the share, VI expect with

our So, that’s assumed in guidance.

David Raso

even think some well. as transmissions of the with I’d

in should thought. Photon dynamic to of now row. China quarters Photon? barely the still we in be sensitive would on is than have more money Is more I in understand So, the making like to about a I’m recovery just struggling two for that It’s margin JV trying because there something

Mark Smith

entitled tech were part No. helped fees but there’s other of and the those don’t things We we no, -- wrong product which launches, the significant sizable word, last from think year, to did on kind of I based get some early anything there.

David Raso

And I’ll of hop modeling one off, question. kind just

take you it, annualize the quarter fourth it’s $XXX the interest in If expense million. and

for assuming reduction, is debt guide but rates but I we mean, expense, targeting interest there’s reduction? million. are have fourth you’re quarter interest mentioned to on debt $XXX You your from the up what

Mark Smith

Right.

to think is, down. the to answer So, I need we’ll that that keep working

debt floating we’ve come let some probably, think the year, exposure. and second I to all that, will you half fixed, me reduction back got It’s but come rate on David. of not in the the

Operator

Rob question Research. Wertheimer next is ahead. of coming The Please from Melius go

Rob Wertheimer

to it’s ramp structure clean margin know but early I ultimate energy a to as generally. be, And days, going some to electrolyzers. you’re what there’s lot guess starting still see of or I obviously is uncertainty Hi. New in the Power

you thoughts thoughts if the up gross thoughts clean you’re still your investing, on Maybe on tech. margins on of have improving, clarity, but where any wonder in the heavily profitability shaping margins are any is I gross trend. just when how see or So might you curve

Jennifer Rumsey

Yes, Power to electrolyzer drive ‘XX progress we is breakeven really for our the New shared for of that the XXXX. in growth and towards majority business going the aspirations

so, supply that of and we backlog into see the chain frame orders expect conversion continue and And revenue. and during product, scale to growing up the time manufacturing to

positive we suppliers time business you’ll time margin exact be through period. the that market, lot unclear. structure still is demand quite There’s strong in and period, a that expect see margins through and the improving, so of going to And of not that

we’ll breakeven margin optimistic share I’m look what for positive. that we as and margin get will the So, obviously, But, go like. business structure towards on more point

Mark Smith

year, on margin which we’re at the Yes. is a gross thing basis, last margin project good positive a add indicator. I’ll early Rob, is, one gross for

with in, we offsets good other costs that for obviously expansion that, and but path are a for volume. move capacity indicator things too, it’s the forward other going right have that as more profitability on we’re We that

Rob Wertheimer

build-out and you. supply of in manufacturing Okay. And still just lot That’s there’s a helpful. Thank chain. obviously,

do competitively have you either guess you build So, have a as off cost, in on lot and design how you the advantages I sense or stack to you up manufacturing a there. of out top as

Jennifer Rumsey

that existing I of we to and have mean advantages leverage comment. a capability we’re broader the here one have able the of we is part footprint as our

plan saw Fridley production you for So, to facility use us we electrolyzer North in recently, America. our announce manufacturing

well as has profitable help chain. think we out into that tapping are here. supply have that’s Cummins product and capability as we an to our supply So, footprint I that strength chain advantage build And in both

Operator

go DeBlase Nicole The next from ahead. coming question Bank. of Deutsche is Please

Nicole DeBlase

Maybe are reason for margin margins. expansion to X% is there, guess X%. looks just the you like on expecting that? though sales what even It aren’t up distribution the guys I

Mark Smith

of think It’s record a but range. there’s a no we’ve a There’s pretty margins track impediments to got bit improvement time. into guidance, over strong growing little the baked I improving. of structural

So, variation, scenarios, to we up. going time, the under margins keep But over the the expect different Nicole. revenue some

Nicole DeBlase

Okay, And understood. Systems guess Power out to I stood Thanks. then me.

year-on-year price/cost big Is it’s other in of just the is or guys driver biggest are you any XXXX. margins margin of On other there the impressive look really expansion drivers that, expecting? side, the the that

Mark Smith

and that’s demand in pretty we’ve certainly, a healthy think, got big factor, locked been I now.

with particularly been We’ve on business. year, there’s we’ve that been very, a focus continuing half in of got So, a to pleased very second the just drive… focus -- solid lot this results, of and the on we strong

Jennifer Rumsey

very very a see long in to time important keep you lead on that For mind, we a it’s have long orders. -- business,

So, is it improvement that that, to to increases of took strong while offset the part for as the to in on costs and pass ‘XX. some price margin ‘XX what us a from accelerated, drove

Operator

Please of is from Elkott go next Matt ahead. The Cowen. coming question

Matthew Elkott

a If the Meritor sounds expect because half? more be of you’ll you will how directionally a case also, the the you guys can us can half. assuming sense that on moderation growth And like are much cautious the give of it second have in comps. we second I’m

we are moderation growth a of much how So, expecting?

Mark Smith

our to split half versus XX% roughly revenues XX% second can You the the Matt. first half, in

Matthew Elkott

And then, front. the agnostic engine. fuel it. That’s one helpful. the you New since been Power about guys follow-up a on It’s just announced year very Got

also, receptiveness update customers in announced the PACCAR on your and August from think back in that I conversations? natural And any your gas that using engine. So, they’re new

So, as well? is new front there on anything that

Jennifer Rumsey

Yes.

clarify, a agnostic of Engine a fuel the as part product as a just developed mentioned So, launch part platform, business. as America the that’s EPA And XX North I lineup we’ll in of our being regulation. earlier, to that of full

PACCAR have natural and in are natural including interested around and and announced to that. customers partnerships As that very plans product, is we you’ve introduce version, seen, with gas we integrating gas, that the renewable

version year the of platform. We with also on Tata of last late announced hydrogen that a understanding memorandum

to way that’s really improve we as fuels really, And lot to diesel integration to as and platforms. up as platform they platforms, natural the a both flexibility other engines hydrogen gas of efficiency such interest in see move a so with those pair create then or customers of the and minimizing between for required move those

the the begin years accelerate ‘XX, gas here, version launch introduction that. So, after to we’ll early in late then and ‘XX with coming America in natural those in North

Operator

ahead. is Please Noah Oppenheimer. go question from Kaye next The coming of

Noah Kaye

how Maybe give Can give kind the of then, for guidelines net New you’re Power? you higher characterize for is, you us this of mix to a New ready some would investment I of the to call key can on spending? the in us where buckets spending the much are year CapEx investment think of XXXX current sense of segment? Just And attributed of kind here you peak question Power? the be spending the even

Jennifer Rumsey

high big of there’s electrolyzers, investment capacity in New and investments growth a and making about At we investments of level, we’re the happening the Power, in there. that different categories talked course,

include The in fuel batteries, other cells. electric electrified investments in other then and powertrain components in buckets the

model with position investing both key well of as powertrains components the well Engine ourselves to as we’re mover components and powertrain end as the to business electrified of to some today as So, be have similar to start current prime provider to markets our we key provide Components. move the as the

You allocation talk of investment? about want to

Mark Smith

Yes.

in range. probably to the So $XXX million CapEx, million $XXX

have capabilities would of part of And albeit to plan going in I’d total portfolio? appropriate. the that’s where, production, They’re EBITDA weighted company ramping only our the at for not our more some be significant most to of of we’re then, caveat That’s in aiming losses. course, Cummins change, today, Power -- part aren’t in XX% is, sites, there’s up we invest peak electrolyzers level. under The if the towards a should the the soon peak of segment, yes, where that XXXX only call to using current new love we’re that towards because in breakeven just possible New New variation. the So Power and Noah, existing but and

Noah Kaye

earnings That’s modestly cadence obviously, deterioration just in the around But you’re of EPS. give then getting improving, from but year, some this about And capture JV synergies, year, not on expectations guiding to to us maybe the then helpful. China throughout end Meritor better EBITDA, some thinking potential markets. some offset

guideposts even So, versus you or us EBITDA first on would just the second any EPS? half half, give

Mark Smith

a in by revenue. the we and with QX XXXX. along No. it will had Unfortunately, go mean, large, tough I

So through us comp, and probably just going quarter, stronger. year much the that the gives easiest then of kind by started we

will -- I We’ve look in So QX ex-JV, I think year. maybe disappointing. of The here think second. P&L, the at When biggest in good year, the in half JV the single of the be well you swing half first factor. QX. we’ll would a that the margins have rebounded first in were gross helps our

the expect modestly unless half all first we’ve direction yes, be stronger in, So second from guided. what to change revenues in significantly half

Operator

go is question next Please coming ahead. The from Zakaria of JPMorgan. Tami

Tami Zakaria

from you expecting believe question is, this any Meritor in year? year I synergy million you savings by are the first my total expecting So three. $XXX were acquisition

So, year? anything this

Mark Smith

on members team. along Meritor, hard mean working personally, the we’re many Absolutely. very of with I that. Cummins Yes,

yes, those but million. yes, we’ll towards along, as confident progress that So talk $XXX that we’re we go feeling and about about

Tami Zakaria

guidance some or embedded and And that of is -- would that assuming in be incremental?

Mark Smith

that the get -- both cost structure. long-term as can We’ll and try we of business improve helps the as much and interest

clearly segment. So Components yes, especially results improve, the expect the to we in

year now. making to happy assuming but just good we’ll clear. for We we number, get won’t If three more, all than progress. We’re report. more be to then a be get $XXX That’s in we’re that’s million,

Tami Zakaria

Got it.

expansion on And XX%, be color sorry back? the but the if it so, guided cadence some for the ramp year? in to it, it you I’m the or I give does missed XX% Should towards margin can embedded Meritor

Jennifer Rumsey

Yes.

So, let within guidance me had that the the we Components just business. reiterate

We for in and to XX.X% that the Meritor compared have $X.X $X.X business, in revenue to X.X%. to was XXXX, billion billion EBITDA margins XX%

progress as cost operating that business, some that on And is efficiency savings. in synergy of as price/cost well

Tami Zakaria

Got you. it. Thank

Mark Smith

should from the you think improvement QX sequential the half through of year just first expect I the levels.

Operator

is question from next of Jaroslawicz go coming ahead. [ph] The UBS. Avi Please

Unidentified Analyst

Steve Fisher. our on taking for for Thanks questions guys. Hey,

generation the But, market. driving to this that that Just market, in power be year. talk about have market just in weakening of expecting like data terms centers you a this that could little drivers to robust you might little you’re We a up if the It still more of bit. year? about can so expected what’s sounds be talk bit some again

Jennifer Rumsey

our and continue drive well -- centers centers, generation customers construction data they have Yes. data as levels, demand show data The as to of regarding that in power demand despite and some in that the you’ve market interest power announcements our from backup products center market. seen in nonresidential really on and staffing investing

bullish about opportunities there XXXX. So, for we are still quite the

Mark Smith

segment, is across it’s significant think I to generation segments. for individual underlying the demand fair robust broad-based markets, attention. economy. power of a Yes, gets we’re lot multiple say, but pretty center seeing It parts it’s across broad a of multiple data the

Unidentified Analyst

in interest acceleration of that could view recent on the when the be in in the just appreciate terms customer of that. months And then in I have possible terms your there? the following business? market And in that breakeven Okay. New acceleration does seen Power you business, IRA we change

Jennifer Rumsey

is, we investments The describe that rate it the acceleration that hydrogen reduction are going around that I anticipate going being be to are details clarified the around act now. to is investment. would drive adoption right enable key to Yes. How in and investment really inflation the an

going the hydrogen actual in in come between these translate which market the production some well the both XXXX to business. as to hydrogen as put as of in in as that today, drive now cost frankly, adoption Definitely, U.S. and it’s So, -- years take incentives you several drive technologies, before of really into place place more. those just projects growth to see and it’s going that

incentives start customer to those make them costs and in down viable to the adoption need you the in drive order So, market. bring more and

capacity as I mean, in we’re run, others building are because investing in short more we’re the the industry. up

this we kind move, get the So, margins the once in expect we good of gross faster cash. run consume obviously, go to phase. But investment short to more could market deliver we the we and want

take in versus our a more year the sometimes and on the quite technology, adoption order. go so are even It’s very then to an equipment into we’re well not period, typically, long XX than development last strong in But business on-highway So, than a say, a incubation shipping actually we few months while is a our for more business side. doing sometimes encouraged, year. faster. business, headline between place announcements yes, it from, and putting that engine could we different It’s typical been weeks. And

Operator

We’re showing time of of Feniger ahead. for from today. America. one question coming The Please final Bank Michael go is question final

Michael Feniger

years. look consolidated XXXX, been plus JV the three, four it’s we basically the in lowest it’s revenue, at over When China

you those I years, below post some think profitable were maybe three curious, restructuring in past? you in just how XXXX. I’m recover, those China If each are the in units maybe more slightly than optimization? in profitability looks of units

Mark Smith

more adopting for over what’s business is the So, Well, our time standards. happening a that’s one is thing up, that emission is right? positive been content China big going consistently advanced

a selling year. that billions of time. revenue extra dollars of it’s amount we’re up over of And cycle, quite the So is vehicle going revenue over significantly cycle certainly, per growth

a at in the market lowest just decade. We’re

rate for that volumes that but don’t growth at we of profits yet operations. by are We customers, when any adoption. the improve, profitability obviously, looking data you’re signs a and feedback modest. looking our on We’ll up. rapid our board agree same be We have we sure, will So, don’t go but is in taken from profitable disclose region, the our at, China

Michael Feniger

And quite months and we dates driving OEM more suppliers dynamics powertrain? profitability. traditional a the of with space looking you key to those in some ahead trying suppliers deliveries this you the e-mobility to really or some as we’ve start of Thank to adopt and altered in these you. of emerging struggled seen few conversations back Do last see EV, XX

Jennifer Rumsey

ago. a year about Yes. this Day We our talked in Analyst about

going well we’ve adopting, our time customers long and our got incumbents a the in Regardless you take to solution this invest term. expect We transition like of portfolio. long Cummins the our what are is industry, to that for positions because for that need

as long us you sure, a their that it’s new an has advantage of like portfolio term going a of these for and invest company of and be compared in so meet and the goes to product be to to support some advantage, of to able on it’s needs, more And playing be entrants. time do some an to as for see the around to options technologies, continuing the new the that out benefit of

continue they attention enter those We the though pay entrants new to and market. to and to technology work how the advance

this long investment So, but period we and to wouldn’t stay certainly, it be successful. discount them them, makes challenging in more for

Mark Smith

by for our our to also segments dependability, think wherever reputation our footprint, be customers global approached new in is industrial I And large operate, leading players. us

today, it’s market So, that the in we’ve expand applications. different just exciting. we in not That’s particularly been operate to approached into market

Operator

comments. to back Mr. At turn floor the to I’d closing like for this over Clulow time,

Chris Clulow

the And for today. Thank I Take you participation all teleconference. interest. available after will really care. appreciate the always, concludes afternoon. the this call our as questions Investor That be for team Relations your

Operator

Ladies and thank interest your participation in today’s you for gentlemen, conference. and

disconnect time, your enjoy may this lines or rest the and of webcast log day. the You your off at

Cummins (CMI) 6 Feb 232022 Q4 Earnings call transcript