Cummins Inc. (CMI) has signed a memorandum of understanding (MoU) with Russian truck manufacturer KAMAZ under which the former will provide its advanced Euro VI emissions technology to ZAO Cummins KAMA. The move will help produce environment friendly engines for the Russian market.
 
ZAO Cummins KAMA is a 50:50 joint venture formed by Cummins and KAMAZ in 2006. It is located at Naberezhnye Chelny, Tatarstan, Russian, the headquarters of KAMAZ. The joint venture currently produces about 1,000 diesel engines per month, which are sold to KAMAZ and other original equipment manufacturers in Russia.
 
Euro VI emissions standards will be implemented in Europe by 2014 and in Russia by 2018. Therefore, the MoU will help the joint venture to improve its competitive position by becoming a supplier of Euro VI emissions technology enabled engines in the Russian and European markets.
 
Cummins posted a profit of $149 million or 75 cents per share in the first quarter of 2010 from $51 million or 26 cents per share (excluding restructuring charges) in the same quarter a year ago. With this, the company has exceeded the Zacks Consensus Estimate of 35 cents per share.
 
Operating income improved substantially to $246 million from $29 million in the year-ago quarter. Earnings before interest and taxes (EBIT) increased to $266 million or 10.7% of sales from $94 million or 4% of sales in the year-ago quarter, excluding restructuring charges.
 
Sales in the quarter increased marginally by 2% to $2.48 billion as growth in the company’s Components and Distribution segments just about offset declines in the Engine and Power Generation segments.
 
The first quarter results were driven favorably by continued strength in China, India and Brazil, partially offset by a weak demand in North America with medium-duty truck, bus, and heavy-duty engine shipments decreasing 80% on a year-over-year basis.
 
Cummins has projected sales of $12 billion for 2010, up from the previous guidance of $11 billion. The company now anticipates an EBIT margin of 10% of sales, up from the prior outlook of 7%.
 
The company continues to expect capital spending of $400 million for 2010, an increase of nearly 30% from 2009, to fund projects critical to the company’s long-term growth.
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