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Transcript of Cummins_mats_V3
Sustainable Performance in Global On-Highway Markets
Mid America Truck ShowMarch 22, 2007
2
Disclosure Regarding Forward-Looking Statements & non-GAAP Financial Measures
This presentation contains certain forward-looking information. Any forward-looking statement involves risk and uncertainty. The Company’s future results may be affected by changes in general economic conditions and by the actions of customers and competitors. Actual outcomes may differ materially from what is expressed in any forward-looking statement. A more complete disclosure about forward-looking statements begins on page 61 of our 2006 Form 10-K, and it applies to this presentation.
This presentation contains certain non-GAAP financial measures such as earnings before interest and taxes (EBIT). Please refer to our website (www.cummins.com) for the reconciliation of EBIT to GAAP financial measures.
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Welcome and Introductions
David Geraghty – Commercial Vehicle Engine BusinessDan Davis – Emission Solutions – Global OEM BusinessRich Eikill – Consumer Business, Power GenerationShawn Wasson – Auxiliary Power Unit Business, Power Generation
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Diversified Global Power Leader
Four Complementary Businesses
Engines PowerGeneration
Components Distribution
5
Creating Greater Shareholder Value
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6S
tock
Pri
ce I
ndex
46% Average Annual
Total Shareholder Return
Over last 4 years
CMI S&P 500 Peer Avg.
6
Cummins is a Long-Term Player in Global On-Highway Markets
We have fundamentally changed our business model
Customers recognize Cummins for our technology leadership and dependability
We are investing in the next generation of profitable growth opportunities in global automotive markets
7
Aggressively Pursuing Cost Leadership
Six Sigma
Technical productivity
Global sourcing
Lean manufacturing$3,435 $3,582
$5,424
$6,657
$7,511
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2002 2003 2004 2005 2006
Segm
ent N
et S
ales
($M
)
$0
$100
$200
$300
$400
$500
$600
$700
$800
Segm
ent E
BIT
($M
)
Segment Net Sales Segment EBIT
Engine Segment
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Growing Share with OEM Partners
10
Delivering Great End-Customer Value
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Vehicle, engine and aftertreatment . . . a single system designed to optimize performance, reliability, cost and emissions
System Integration is Critical
Controls Integration
12
Investing in Global Light Duty Diesel
6000 – 8500 lb GVW >8500 lb GVW
Light Truck (includes PU trucks, SUVs and Vans)
<6000 lb GVW
6.6 M 0.85 M2.9 M
0% Diesel 67% Diesel
North America
0.85 M11.7 M
10% Diesel 67% Diesel
Worldwide
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Company-owned
Joint Venture
Independent
Investing in Our Distribution Channel
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Cummins Emission Solutions
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Components Segment
Strategic advantage in emissions complianceSignificant future growth in revenue and earningsMultiple new product introductionsWinning non-CMI business
SpecialtyFiltration
6%Air IntakeSystems
11% Turbocharger27%
FuelSystems
17%Engine
Filtration21%
AcousticExhaust
12%
CatalyticExhaust
6%
2006 Segment DataSales: $2.3 billionEBIT: $107 millionEBIT Margin: 4.7% (Target: 7-9%)
2006 Revenue by Product
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Fuel Systems
Electronic Controls
Air Handling Systems
Filtration and Aftertreatment
Combustion Technologies
Unique Technology Integration
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Why Cummins Emission Solutions exists
0 1 2 3 4 50.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.10
NOx [g/bhp-hr]
Par
ticu
late
s [g
/bh
p-h
r]
0.11
Limits of In-Cylinder PM
US98US02 Tier III
Limits ofIn-Cylinder
NOx
US07/US10/Tier 4
EURO-IVEURO-V
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NOx Adsorber Catalyst
Periodic Fuel InjectionNOx AdsorberActive Particulate Filter
NOx Control Using Urea SCRUrea (NH3)
Soot
Ash
Soot
Ash
The Right Technology Matters
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Three Product Segments in Aftertreatment Market
Packaging (canning)Components (e.g. dosing systems, controls)System Integration– Single point of contact for an OEM– Responsible for the entire aftertreatment
system (catalyst, dosing units, controls, packaging)
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Cummins Emission Solutions Technology Creates On-Highway MD/HD Truck Market Leadership Position
EPA 2007 Market Share
CES35%
C27%
B22%
A12%
D5%
Euro 4 Market Share
CES27%
A19%
B15%
C10%
D10%
3 Others19%
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Evolving global emission standards creates growth opportunities
Global Market Size for On-highway Commercial Vehicle Diesel Catalytic
Exhaust ($B)$0 $1 $2 $3 $4 $5 $6
2006
2010
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Cummins Power Generation Auxiliary Power Units
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Power Generation Segment
Commercial56%
Alternators19%
Rental2%
Consumer13%
PowerElectronics
6%Energy
Solutions4%
2006 Revenue by ProductTurnaround completeStrengthening marketsExpanding market shareConsumer growth opportunitiesGrowing project business capability
2006 Segment DataSales: $2.4 billionEBIT: $220 millionEBIT Margin: 9.1% (Target: 7-9%)
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Commercial Mobile
Consumer Products Adjacencies
TruckOEMs
RVOEMs
Consumers ProfessionalsHome
Standby
Recreational Vehicles
Aux. Power Unit
Portables
Trailers
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ComfortGuard APU System
Integrated system which eliminates the need to idle the main vehicle engineReduces fuel consumption up to 80%Payback period of 1-2 years for HD TrucksUtilize 5.5 kw Diesel platform used in all Consumer markets– Proven Design– Minimal Investment– Fast to Market
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Positioned for Growth in APU Market
0
10
20
30
40
50
60
2003 2005 2007E
Uni
ts (T
hous
ands
)
Strong and respected brandIndustry leading support networkRespected relationships with Owner Operators, large fleets, and OEMsLeveraging Cummins Power Generation experience in mobile power applications
APU Market Size
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Cummins is a Long-Term Player in Global On-Highway Markets
We have fundamentally changed our business model
Customers recognize Cummins for our technology leadership and dependability
We are investing in the next generation of profitable growth opportunities in global automotive markets
29
Appendix
31
Cummins Inc.
2006 – Outstanding YearRecord revenue and EBIT for the company and each operating segmentRecord net incomeRecord cash flow from operations for the year
ComponentsSegment 17%
EngineSegment 55%
Power GenSegment 18%
DistributionSegment 10%
2006 DataSales: $11.4 billionEBIT: $1,179 millionEBIT Margin: 10.4% (Target: 7-10%)
2006 Revenue by Segment
32
Cummins Inc.
Mexico/Latin America
8%
Africa/Middle East5%Canada
7%
United States50%
Asia/Australia16%
Europe/CIS14%
2006 Revenue by Marketing TerritoryInternational revenue is 50% of consolidated revenuePre-emission demand has accelerated US growth rateMost international areas growing at double digit rate
33
Cummins – Historical Performance
$139$181
$543
$907
$1,179
0
200
400
600
800
1000
1200
1400
2002 2003 2004 2005 2006
$ M
illon
s
$5,853$6,296
$8,438
$9,918
$11,362
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 2006
$ M
illon
s
Sales EBIT
34
Engine Segment
Emission regulations create opportunitiesAftermarket revenue creates stable earningsEmerging marketsStrategic OEM partnerships
HighHorsepower
(19-91L) 14%
Midrange(3-9L) 37%
Heavy-Duty(10-15L) 29%
Parts andService 20%
2006 Segment DataSales: $7.5 billionEBIT: $733 millionEBIT Margin: 9.8% (Target: 7-10%)
2006 Revenue by Product
35
Engine Segment
Heavy-duty Truck demand remains strongShare gains in Medium-duty Truck & BusOff-highway markets supported by non-residential construction and commodity markets
Light-duty Automotive & RV 17%
Heavy-dutytruck 33%
Medium-dutyTruck & bus 13%
StationaryPower 10%
Construction& Ag 15%
Mining/RailGovt/O&G
Marine 12%
2006 Revenue by Market Application
2006 Segment DataSales: $7.5 billionEBIT: $733 millionEBIT Margin: 9.8% (Target: 7-10%)
36
Engines – Historical Performance
$37$62
$328
$582
$733
0
100
200
300
400
500
600
700
800
2002 2003 2004 2005 2006
$ M
$3,435 $3,582
$5,424
$6,657
$7,511
0
1000
2000
3000
4000
5000
6000
7000
8000
2002 2003 2004 2005 2006
$ M
Sales Segment EBIT
37
Power Generation Segment
Commercial56%
Alternators19%
Rental2%
Consumer13%
PowerElectronics
6%Energy
Solutions4%
2006 Revenue by ProductTurnaround completeStrengthening marketsExpanding market shareConsumer growth opportunitiesGrowing project business capability
2006 Segment DataSales: $2.4 billionEBIT: $220 millionEBIT Margin: 9.1% (Target: 7-9%)
38
Power Generation – Historical Performance
($25) ($19)
$60
$145
$220
-50
0
50
100
150
200
250
2002 2003 2004 2005 2006
$ M
$1,226$1,329
$1,842$1,999
$2,416
0
500
1000
1500
2000
2500
3000
2002 2003 2004 2005 2006
$ M
Sales Segment EBIT
39
Components Segment
Strategic advantage in emissions complianceSignificant future growth in revenue and earningsMultiple new product introductionsWinning non-CMI business
SpecialtyFiltration
6%Air IntakeSystems
11% Turbocharger27%
FuelSystems
17%Engine
Filtration21%
AcousticExhaust
12%
CatalyticExhaust
6%
2006 Segment DataSales: $2.3 billionEBIT: $107 millionEBIT Margin: 4.7% (Target: 7-9%)
2006 Revenue by Product
40
Components – Historical Performance
$94$86 $84
$89
$107
0
20
40
60
80
100
120
2002 2003 2004 2005 2006
$ M
$951
$1,292
$1,783
$2,000
$2,281
0
500
1000
1500
2000
2500
2002 2003 2004 2005 2006
$ M
Sales Segment EBIT
41
Distribution Segment
Broadening product offeringExpanding global coverageIncreasing equity ownershipExcelling in customer support Parts,
Filters, &Consumables
38%
Service18%
Engines20%
PowerGeneration
24%
2006 Revenue by Product
2006 Segment DataSales: $1.4 billionEBIT: $144 millionEBIT Margin: 10.4% (Target: 8-10%)
42
Distribution – Historical Performance
$33
$51
$79
$107
$144
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006
$ M
$574$669
$973
$1,191
$1,385
0
200
400
600
800
1000
1200
1400
1600
2002 2003 2004 2005 2006
$ M
Sales Segment EBIT