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Cummins (CMI)

Participants
Jennifer Rumsey President and Chief Executive Officer
Jack Kienzler Investor Relations
Tom Linebarger Chairman and Chief Executive Officer
Mark Smith CFO
Stephen Volkmann Jefferies
Jamie Cook Credit Suisse
Ann Duignan JP Morgan
Tim Tse Citigroup
Jerry Revich Goldman Sachs
Noah Kaye Oppenheimer
Matt Elkott Cowen
Rob Wertheimer Melius Research
Call transcript
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Operator

Greetings, ladies and gentlemen, and welcome to the Cummins Inc.

Third Quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. pleasure Investor your Relations. my Executive Jack now of Director is to host, introduce Kienzler, It Thank sir. you, Please go ahead.

Jack Kienzler

the XXXX. Thank you our to for today to Chairman our Quarter and good Officer, morning, discuss everyone. and Chief Cummins Tom today with me Participating Welcome Executive teleconference Third are of Linebarger. results

Chief Executive and and President Jen Rumsey, Chief Financial Our Officer, Officer, Mark Smith.

available for end conference. the your of at be questions all will We the

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

such certain uncertainties. because risks we available recently filings Our our in our of this reports number quarterly financial for XX-K Form any and Securities Due of Report measures slide. be on of those and information to GAAP forward-looking the More in a statement this actual filed and filed section and Risk the results Form projected will Deck statements discussing we the to the measures course subsequently XX-Q. call, differ future refer during of measures. of you on Annual reconciliation non-GAAP uncertainties and could Factors website such most materially regarding and particularly financial our risks from disclosure Exchange is Commission, the forward-looking in with those

Media. out way, the begin heading our webcast CEO, press www. under website are Investors Chairman our financial will and and available at Linebarger. Our statements a copy copy a presentation we But of of today's release Tom with with the that of cummins.com, and the with of on

Tom Linebarger

a good the trucks markets, improve, growth you third forecast then Quarter results financial strong with of details you, to China. regions morning. for industry-wide We point end-user this through the remains summary as slowed with China, region of sharply, of remain construction our both the sales and our rest Mark start our and of expectations. everybody. quarter will by our strong take our in Third which in is across demand in XXXX. year. In equipment outside a of line quarter our Demand economic and economy for strong the XXXX. and driving and of market continued most financial finish extending by sales discussion third but global businesses outlook Welcome trends Jack into I'll trends with and our encouraged Thank more performance to

to continue constraints also Unfortunately, We see products, OEM up products our strong ability orders to in field. much our performance significantly customers chain These a in sales limiting the short and costs the outpaced our growth same and of their chain run. as way. continue driving impact the our impacting to supply produce for are competition ship result supply in constraints

engine future. including hydrogen offering existing in of by exciting utilizes renewable product available today gases Equally is to pollutants our reliability an zero October, designed and and couple of we that I gases in Before want engine of that's infrastructure. this is heavy-duty the been our take In and products the getting has bring moment a next-generation evolution China strategic accept announced a in will into in is greenhouse the to This and strategy, a important both and a The to our highlight to launched milestones engine results, further range market, North path emission a part XX-liter we technologies. this well-received was criteria of natural significant the market. in in and reduction performance this that excellent a for demonstrating far. engine XX-liter gas year earlier gas natural trucks American to fuels,

and In At the flexibility. are platforms the is to with customers of same and time, other ensure renewable engine Chevron the energy designed fact, we industry fuel place working to are being same the in of natural gas others infrastructure fuels needs. all with meet availability in increase renewable our Cummins' to

options We also in signed fuel systems their along vehicle the stringent These Enterprises operation important technology's which natural sustainability meet while achieving a emission delivery America, and engineering support to with expanding of goals. gas momentum and Rush and the both of objectives, of natural steps the North fuel are also and to produce delivery Solutions infrastructure Cummins and venture joint expertise letter standards between a business Cummins, our systems companies. customers of goals powertrain help for increasingly intent portfolio Power will fuel branded customers Cummins strengths combining commercial establish in compressed gas our market meeting

XXXX year other the quarter with Company of Now, or the I last cover $XXX third and supply chain Revenues quarter ongoing were in ago. expenses, of inefficiencies and an rising challenges in manufacturing benefits of year. billion, global the the XXXX third $XXX our volume of some logistics XX.X% increases than markets. Higher compared to XX% material industry. will the associated XX.X% a freight third comment to offset quarter our EBITDA for of compared for the million on overall to or performance $X third of compared More costs and was XXXX. the increase key million quarter of

million. helped temporary cost EBITDA a which quarter last our reductions, was by lowered the $XX in salary approximately As reminder, third by year of

of demand markets. trucks XX,XXX levels. Our grew heavy from on in $X.X to and quarter, up engines XXXX medium-duty the from third same increase use XX,XXX Industry increase an XXXX. XX% in of in XXXX engine quarter quarter of trucks sales by by RAM year, XXXX highway across decrease power, shipped to third but XX,XXX of driven medium-duty X% XX,XXX decrease the heavy-duty due XX,XXX, datacenter Cummins of the heavy-duty the XX% a this the third X% our period, in grew still pickups in power a for America while standby levels, quarter. of were We a North levels, XX% X% from shipments higher of in production and Revenues Stellantis XX% strong higher units units, third recreational markets. to quarter XXXX revenues billion, Industry very sold unit in and the vehicle, was generation Cummins production in component from for levels. engines was

the Our of by international a in compared XXXX quarter revenues XX% ago. year increased to third

China, in demand the as ventures, on markets. in inventory for including works to $X.X billion, Industry demand standard a X through higher-cost units, and of a heavy-duty truck China national XX% XX% X national Third heavy-duty in and demand were standard quarter the truck was industry revenues XXX,XXX medium medium of hand and lower due lower newer decrease decrease unit. joint the trucks for

Our unit quarter including third the last ventures, units, sales were in a joint year. versus XX% XX,XXX, of decrease

driven in units, were decrease of XX% the and XXXX supply were market XX% in third XX,XXX, sales quarter demand engine constraints light-duty a levels. a decrease weaker of XX,XXX Our Industry from by demand. excavators chain China for

a Our the other units strong increased centers a units, in XX% on in generation in compared Cummins sold and quarter Power were in XX%. demand data applications. ago, to based year sales decrease backup power third XX,XXX China of

center in product in the We driven position end-user data and our strong by a China, relationships market-leading continue segment offerings. to hold compelling

production in from engine third ventures quarter $XXX strongly our continued equipment compared third generation oil base In driven our construction increased the same Demand XXX%, In to the rebounded while by truck increased increased increased to Brazil, market, in quarter joint across also partner a shipments a including million, driven XXX% as industrial for low venture India, year revenues by ago. XX% XX% in the third increase very period revenue XXXX. last of year Systems revenues and joint gain demand and were share. markets. Power an all Industry quarter of compared a increased XX% our quarter end mining to power in gas. our by the Third

XX% of quickly EBITDA let at on Now expected outlook XXXX. lower below current me approximately the expect be now remainder of sales. guidance XX.X% are our to our up approximately forecast, our our we versus for to our of revenue XXXX. XX% is of end XX%, previous be guidance the cover to Based

of than decreasing up our of to units. market, our XX% demand. prior forecast is again XXX,XXX our constraints medium-duty lack of supply a year-over-year, We've below to chain guidance and rather material in by a which for customers end-user of are persistence In constraints chain guidance North units. freight industry trucks disruptions, XXX,XXX are are exacerbated XXXX, America margins EBITDA because to lowered escalating our supply but heavy-duty the XX% prices. up trucks for production forecast to expected This production Our units, below of and the we XXX,XXX now due of the impacting units, but our the lower XXX,XXX industry compared prior

in X.X% from demand decline compared shipments up In North of trucks to domestic America our three from expect months to to engine our year ago. we expect continue levels expectations on-highway record We for be ago. to increase a XXXX, China, pickup an XX%

XXXX X truck market unchanged X.XX and guidance. is light-duty outlook heavy-duty for for from market medium is previous and units, XXXX demand outlook Our million our our both million trucks units;

from record excavators to levels to XXXX. of we experienced unchanged anticipate our businesses in unchanged with In be engines, guidance. continued X from the XXXX guidance. growth demand XX%,compared due expectation now continued previous other mining promising for flat from XX% be our sales up for previous industry of increase expect trucks this to achieved expect to industry ago in continue prices. We also our We India, is levels in in and And based to on strength infrastructure showing are commodity XX% demand XXXX. Up to investment, months

as generation expect data-center many continue growth vehicle the those customers, XX%, in demand, as the markets. continued sales strong revenue the increase our growth. continue recreational supply constraints Despite drove logistics We our quarter. markets quarter, impact across driven the third operations up material and and to demand capping of primarily higher strong both Summing to chain well to revenue in of power and costs, by global our significantly resulting

our performance suppliers Company the of our faster with strong resulting and position industry our these than recognizing collaboratively the performance in Customers XXXX. number in demand sales important better to and in navigate customers products, markets. are challenges growing of working are a We for

XX% now The new markets, time you Thank to cash to of cash turn dividends over end to customers, providing your invest returns expects and shareholders our continue of outgrowing our to to flow it our in form bringing and technology in Mark. and operating for me share shareholders. the today in We let return to our Company XXXX repurchases. strong over

Mark Smith

are you, sales Global of expectations. customer our China, across growth chains impacting Thank key resulting where most with quarter, good to from labor, customer morning supply third quarter driving truck costs. and in demand outside businesses in meet the has everyone. demand -- weakened markets in results. end ability demand, remains takeaways and rising strong End third four strong strong material expenses There growth industry's Tom our remain sales and construction logistics and freight, constrained, line our and higher and

the outlook even As our of costs, a we are though continued very underlying challenges full-year profitability result strong. and lowering and remains supply sales associated demand

we'll first year X months shareholders share dividends, $XXX total this cash cash plan shareholders and of XX% quarter, through billion our to Finally, a year. million of in flow and the with return the of to $X.XX consistent to repurchases return operating the for

rose $XXX into billion, in of of to of revenues a were details Revenues $X for million North from quarter, more third XX.X% on America $XXX sales Now go Sales year and compared was let or XX% quarter. XX%. XX.X% the a or the sales grew ago. dollars ago. increase international million XX% year EBITDA an me

elevated expenses. basis supply and as our continues the ability constraints XX.X% gross higher We in in billion resulted last $XX demand and feature chain lose EBITDA third of the performance points. cost in of $X.X to freight, a costs. million or quarter. have our margin reminder, by the elevated and logistics percent that meet would by be Along $XX and impact QX to but VAT year of labor additional sales sales gross strong addition continue approximately reductions, million million $XX of by Global a and supply in industry's the QX to or salary with margin the offset costs million the rising incurred key costs. $XX to $XX in or increased million challenged by costs, expenses chain As the expenses million XXX recovery material was compensation ago, by temporary research pricing in $XX demand, to a year and primarily from partially by XX% increased declined Brazil. SG&A aftermarket. of increased in increased of the due higher X%, by constraints

rate Company salary and through a was operating resulted salary we -tax in third a the the per of tax XXXX, per share earnings $XX a rate of $X.XX $X.XX significant million diluted million uncertainty both primarily year year. results count. trucks a effective weaker $XX These in primarily last savings ago comparisons in $XX share China. the As tax venture reminder, of due or due September million income lower to share $XXX reductions temporary gross for quarter the a impacted of the and million year last from year end equipment was down the our reduced Other from quarter were impacted ago, $XX and of to April $XXX of or for the million pandemic, XX.X%. slightly and the for due of compared onset implemented to all approximately to million construction Joint increased income COVID-XX demand quarter, pre year-over-year. our margin the Net the in in The and operating expenses $XX segments. million by reductions

tax cash million year dollars to share. working cash Operating Our flow flow items in led discrete to $X.X operating increase inflow a this included per $XXX or million quarter. expense lower was for in quarter compared $X.XX of an billion favorable of capital diluted the $XX the dollars ago. An income

for Now, our latest me segment let full-year on performance and XXXX. comment guidance the

in below expense. chain by joint the stronger at reduced down segment, the by for year, XX% and Europe. higher and increased the of supply the guidance the EBITDA expense, But for and XX% dollars supply primarily challenges increased XX.X% XX.X% now to We from compensation guidance to ongoing year little chain we've driven XX% on full be primarily in In sales U.S. chain engine some between primarily EBITDA XX% equipment XX.X% weaker percent in ago. year a costs, compensation income, but the XX.X%, the lower offset higher be warranty full the year to ago, to as midpoint, a revenues XX.X% segment, revenue distribution our a and to third by and of expect venture demand challenges. again XX.X% but benefits X% construction higher For the costs. increased due of year. margins due the from partially lower volumes from X.X% revenues U.S. from driven a decreased to of prior our sales increased decreased trucks quarter EBITDA the supply to

the very and higher EBITDA primarily expenses in be America. primarily by stronger demand quality costs our to quarter, have to to EBITDA maintained XXXX increased up the and margins Component year-ago increased We of quarter. segment outlook XX% guidance. X.X% the for of decreased driven from North to revenues our X% segment, due distribution to trucks XX.X% in XX.X% third midpoint supply at chain for higher in warranty revenues cost very, of sales compared low

our by and we components guidance increase for primarily truck. outlook in expect XX%, outlook a slightly revenue year, than of full driven XX%, the North up lower lower prior to America For weaker now China

$XX North challenges We has margins segment our harder and have the -- the XX%, to sales more coverage midpoint, the EBITDA and of by in from for lowered is expense. our quarter, XX.X% demand by expanded by Partially benefits Power in supply primarily by EBITDA due slowdown equipment. prior chain the segment higher XX.X the of America be also volumes production of power costs. increased In and elevated to China. been for and increased offset supply XX.X% this hardly at guidance XX% stronger revenues lower down sales, to at truck chain the as being in segment, Systems hit of forecast the and generation third product million, by mining driven

XX% outlook segment. at by our the also in XX.X% EBITDA our sales For a prior to margin revenue up increasing year XX% our primarily the our of growth We're midpoint stronger we increased of power forecast $XX to invest system. continue power new of developing. mining of guidance new from the products in up increasing we're for new million, guide revenue from driven sales we're that XX% battery losses the be In segment, quarter widespread to ahead scale to be prior the the XX.XX. and stronger full electric $XX of were guidance EBITDA of technologies as up due systems adoption million

losses For midpoint, $XXX the range in of and be new EBITDA the to the we now revenues of full million. at power $XXX year, project million

slower XX% for our We're to down We drivers prior EBITDA of chain lower XX%. guidance truck of XX% lowering the guidance our be our to challenges continued of A expect low-end of now with costs were supply guidance. production North American full from the pace revenues total margin the prior approximately XX.X% year, grow associated global and the to improvement elevated in also primary Company at the approximately outlook.

which $XXX-$XXX continue joint full-year million. expect our We're to markets expect demand year of were when tax items. year. prior to core to $XXX incredibly cost of of than we [Indiscernible]. supply expenditures base, we'd half a and million discrete in full-year expected forecasting with continue to second the so the To up up in excluding our rate year but venture many from have global faced face million we $XXX strong more impacted summarize, XX% We chain spend challenges in our our capital a between the XX.X%, a this line in for be earnings ago, Capital effective quarter, be

economy global customers that tireless work deliver while want employees demand important results. setting meet thank the strong. this continuing outpacing for remains to our year us remains to of ensure we've our of for solid financial up needs in the and assuming markets strong all However, many customer end to XXXX, their supply this a strong, I

returning We for capital Thank me performance interest continue will in you power to profitable over turn improving to prioritize technologies to investing now and your And Jack. that growth shareholders. let our cycle-over-cycle, it excess back today.

Jack Kienzler

that limit question. follow-up. additional Operator, Thank the the of to ready yourself and Mark. I first now for any queue. ask others you consideration if please questions, are rejoin one have Out our would related on you, you And call, we to question a

Operator

Thank you.

As you if have do question, a a and reminder, ladies [Operator Instructions]. gentlemen,

your star you're may sure yourself make participants the handset using up one pressing as Again, For question equipment, pick limiting stated, to just And [Operator follow-up. be please previously and before it speaker necessary to Instructions]. one keys.

our Our sorry, next Stephen come Please go is ahead. from question -- of is first Volkmann question coming Jefferies.

Stephen Volkmann

Hi, some I'm to productivity good costs have about supply us there's a guessing just can these Mark. morning. thinking I'm I guys if for think just dive understand bucket exactly possible about the thinking better relative on just headwinds. logistics price Thanks questions. that number to seen? we I'll chain it interruptions. costs being probably headwind, supplier gave of you're what impact these you a in I'm trying see for issues. that Is I'm taking some you Maybe to the seeing

Mark Smith

morning, Happy that and Steve. to do good

added points in we are more see -- in a X% reduction that from little third operations. worse principally has cost our quarter, ago. almost -- we've when we've that's started the this the we've X.X freight And premium second recovered. than the side. price We that's X anticipated material in well, premium to year, yes, did results. we see which increases in on our to bit So than the about a lost obviously inefficiencies and costs, increase material between rising XX price quarter aftermarket higher between more And freight, yeah, but basis the The to recovered points the not made months

Stephen Volkmann

be go know, with I'm for it into commentary is we mean, 'XX? a I Mark, better. right you will goal any as too assuming don't XXXX Or And can that. to year even little bit maybe get early? I make out

Mark Smith

say of customers and also and to operation a and increases. focus on both I with our will suppliers side continues implementing area just be working high this through price this

Tom Linebarger

issues issue in the haven't have, is still but supply that Steve, lot improvement. etc. are like industry freight side improved is a yet supply is chain, some still at look freight, semiconductors. when our also shortages, they quite they're look not worried Hey It's not and about the that like. a it's and there's because I'd it's Tom, have a they of you It's -- of look longer-term things capacity this tight one across everybody really thing containers the chain, where better But seems labor getting what say marginal things so semiconductors ports like just

we hoping the negotiating and as side said, we as that the negotiate too. That into working of to things to to all. much come So it them somewhat our looks have those. He on rest. There'll as be price address are some are like cost mean element look but we'll goes question cost be and It's likely can next going internally, improve know to side, year they like inefficiencies. there's that, doesn't talked increases, just you be no persistent. about to about for Mark some want out as not these those automatically, realistic we're material just I that

Stephen Volkmann

for how Thanks. freight Thank long-term I out. and guess guys, have probably good you, costs that you wait to Understood. plays we'll see but are high

Operator

Yeah.

Mark Smith

you. Thank

Operator

Thank you.

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

Jamie Cook

over I thinking China how more we terms as from the important a that's color morning. how head there. there, goals XXXX, Tom, you're and I what, impacting business positive you. I to in power over so like good Hi, perspective I outages that's -- guess I'll a and get time. your start you potentially wanted from shortages into for market just an guess perspective And about of on negative

Tom Linebarger

Yeah.

talk about China see and sort seeing back and us jump about I things. can is now how little longer-term and a how market it, talk we're bit Let of me let Jen the in

Jamie Cook

Okay.

Jennifer Rumsey

Jamie. Hi,

NS particular, a the on-highway from Mark, with As seen VI V and between standards. heard been China we've year we've in changeover market you at of the forecasting, in the emission market NS and the drop-off -- middle

that the NS down building of inventory still the product now V year first coming are in sold half regions in seeing saw we're allowing getting we and that and up So sales.

the combined China higher back come though, And new some a so so product expectation with is XXXX going to record which drop in a in come we on-highway of driven to emissions back that with we to more cost we saw was degree. line as our on-highway. 'XX has, for demand, market's what that expect to in for expected, year a be

in We are content components requirements of in emissions the additional business with from new benefiting endurance the transmission China and China. also the launch in now

So overall we to our has performed and market the the that we market construction market we some strength think down and see in is upside some benefit market give as NS-VI us down. continuing products the and there. come are also The going potential. well gen But to see in are power well some

it us We power to of something point, disruption it's watching suppliers, this for shortage impact we closely. not watch China but are a those continue the created issues very with our major to in is closely

Tom Linebarger

just up power from would I as shortages the off, she where said. Yeah. pick Jen left

impact. content markets. Some market. across our the China our now -- There's mentioned production, positioned got transmissions across power-gen said, Jen consolidation I is truck a look my we've in as in see helps all market. impacts But and growing. off, is in positioned And are engines Jamie, as do we us and side, at our the cost our suggested, in but more taking us as of think China The business I I automatic on it you the now remarks, huge well not

we've fuel-cell doing come as a Add partner to So ever it, start I China. things think We've electrolyzers launches with we're in been. we're China. better to back, now got positioned in that

while slower just be side, in moving off. than and strongly China markets ago, those power several more people new position in they that's are years the to anticipated to ourselves as take maybe us on So things allowed

So where our stronger. I'd never position again, China -- I say in today looking been today, has really am

we're back as more market think our year? it strengthen So, down, yeah. I I Do Sure. stronger position. wish turns consolidate was able But to the and this

Jennifer Rumsey

now, China for as And the think China and product sizable I fairly better positions in new gas well. natural we NXX gas have launched in natural a well what's as us market that

Jamie Cook

then double Thank it, today your can degree ordering far to about And Okay. book order at extent and all? you. and unfavorable pricing risks book to a what just has Thanks. are order you just how you in there's that as the talk concerned follow-up,

Jennifer Rumsey

this seeing mean, I growing at been orders there couple out We're customers in and out talking is both and the some And businesses. is strong. in there demand months point, Yeah. with recent very demand strong back OEMS our I've of of are even into for point, is this all that real limitations. year there do that this sure get there's that out think and would at they next like customers believe going to to not getting trucks the they year, not looking some be

on direct light right first-fit continuing to see to customers, on environment negotiate metals been our and go taking the as that year. that in and think cost got some market we we into PowerGen, as OEM we'll now. to and We've Tom we're where we actions work on go pricing pricing get, orders strong aftermarket contractual we've just are that with I pricing of said, next

Jamie Cook

Thank you very much.

Tom Linebarger

Jamie. Thanks

Operator

you. Thank

ahead. Duignan is coming Morgan. Our from next question Ann Please of JP go

Ann Duignan

to morning. you, steel follow a eliminating Thank on we're Hi. Just chain, supply aluminum Good on please. the have expect, steel and XXXX? tariffs that to up impact the announcement European in quick any prices the on Would follow-up, you U.S.

Tom Linebarger

mean, import you hear know as I on know, Hi are, Ann too. Tom, again, I'm good export, sorry, it's don't because caps that there really I you. to

high much to now. impact is how really unclear going prices So pretty me. that's course, to is And metals demand, for of

pretty are well-supported. the So markets

metal mining, our primarily you driven our that's mining by up and fact, saw In are numbers prices.

to given not probably that feels moderate So a relief, just it's in impact. may medium like or Short-term, long-term big said me but import would the little I caps, it have it long provide have a the bit move of to it's going term. U.S.,

Ann Duignan

we as you. to to being Thank though like I XX-liter re-engineering Okay. burning hydrogen hydrogen, combustion my in an their talking system at major all? some so in we you're fuel-cells on question particular cells minor If all? I more hydrogen about to that are path fundamental. of with a the internal it appreciate investing investments If why engine just and easy is of internal use XX-liter the a able or the the new at engine why fuel do convert it's or down fuel fuel. color go engine, injection mean, real can fuels combustion

Tom Linebarger

you actually we we be hydrogen as fuel. just impact the investments the It's course, generate really, the a as efficient COX And of Still reduce need same. to know, need is answer. cell. as of Well, combustion hydrogen hydrogen not green order and, good a fuel to in would would the hydrogen

running cost that you're efficiency to cell or where is is increase from if trucks long-haul then So your fuel be power worth fuel going one you. energy to it is, heavy-duty our a number

range is the a that if our view cell truck, relatively If have you especially short too maybe engine a vocational you units. not conversion or you, for you're having hydrogen fuel and many expensive might have work a is to

going XX fuel an with efficiency for you system, view to a there's is years place going both, want to transportation provide. going is XX to but the from now, to that a drive really years cell, if the especially you're our what's electric need -- So think economy

across fuel can of the as are engines are feeling for trucking majority markets. that portfolio available real our -- addition hydrogen our be but still industry, So the the products -- sales we a to win, of

Jennifer Rumsey

And time can as there's too, a you imagine. factor

total down, on like having and period fuel maybe cell ownership. and time will where customers hydrogen and cells Tom over an costs that we for toward there time economic are benefit of by driven strictly come down, are shift think as advanced a Haul. that said but May advantage, costs -- efficiency come drive fuel really Line costs engines are As applications

Ann Duignan

Okay, I'll offline more take relented mine questions engineering and then

Jennifer Rumsey

a going have You to of be them. lot be Jamie I'm to

Tom Linebarger

Ann [Indiscernible]

Jennifer Rumsey

to to Ann, conversation longer going be happy have I'm a --

Ann Duignan

system simple I'm fuel over-simplifying just re-engineering. injection

Jennifer Rumsey

XX for you the then and hardware and tuning. Exactly, this Second flexibility I is system on we're think some the platform differences it, taken components as other this said, physical that exactly designing fuel

leverage to based but platform. and manufacturing investment Of the fuel, of engine the on the and some that course, different engineering calibration common a of able in control we're is

Ann Duignan

get Thank in that. back queue. I'll the Appreciate Okay. you.

Tom Linebarger

Ann. you, Thank

Operator

you. Thank

of next is ahead. Our from go Please coming question Tse Tim Citigroup.

Tim Tse

segment question you Cummins into and trucks. medium-duty in of about some 'XX. we should as could industry between your we sales the both relationship? the think near again, how impact fourth Obviously, as quarter the you. truck the out think versus and terms in hoping just The heavy-duty term. we morning. production, the Industry these engine Good relationship give Thank that, really in I'm for thinking how deal get just maybe is heavy How help then OEM about a with or thinking customers just all should here global red-tag pacing about you about

Jennifer Rumsey

Yes, of there's dynamics. couple a

customers. additional some So we've added of OEM course,

So through engine. you saw some of of market when -- around our And about total the medium-duty heard heavy-duty. with sales think the Cummins you numbers you and OEMS we're and much seeing how

The we most able able in market. good pull the have trucks. constraints So OEM supply really to products not well-positioned, in through position and they've are been in the have the to customers cases, we've of continue cases, not, most a end-user we performing and our to quarter, there's is feel seen our in been build happening the dynamic fourth that supply and well, work to lot been reason

stabilize they So build as production some trucks build some take down these components. of short of they that and their rate, their complete

building to supply inventory are in with rates really what some the and seen engine have on make We as out. sure build and that to itself efficient level to they working reduction more stabilize and have they they're demand get

impacting adjusted our quarter that we revenue in that in fourth guidance. part why the and So is

Mark Smith

well. on add Tim very our we the for enthusiasm quarter-to-quarter, is putting always financials in about our cost it positive market. Invariably, of with and strong the performing the products overall see but would do, we really that in some volatility we feel you're to products good what We we're position going products I get incredibly of the sense results is quality are in see our What of as market.

I at course, message to you we when the and more optimistic when picking time. the and business think up that's with step done this with, year look want leave we're and, you you about we're over and message back of

Tim Tse

is to I the lot things is which think too you impact and a metals the or about impact get that Mark and Got Obviously, and what more a timing know just platinum maybe short-term that gap to a a hard And year components. -- on reversed the presuming used next part? year always margin etc. is in it think the is there, a margin it. there palladium of of piece impact Is that's stabilize, and way a presume assumption, lag. there that but then this a there's wrong way gets effectively time about to

Mark Smith

up If down X back different actions of of we're that noise production somewhat noise come the in on Number issues a in wrestling one, results the for because counting lot because step in I'll not of months year, were that Really, guidance. year-over-year drifted in to it's half numbers. of anticipated a X has from boosted year, little anything, to back us step business three that the we we'd in just North that I for we there's the a back took are or the some picked than with America our if moment. bit. last ago. And the second the

business expect We've margins the of OEMS picked up, the is up components. naughty bigger transition new supports operations, pretty launch of happened NS-X anticipated is variable a will And we which rise chain we'd so environment our and seen light year supply NS-X. the This year, principally, demand in engine the is to we the for the that's are to as electrical think business start components product out doing the and we spread expected. we've challenge, costs, optimal ramp half chain has is the still in whilst the of recover. availability care when So first more underlying and we've China with challenges saw for The should Number supply that largely drop NS-X demand And that for year in impacting in scale, or major efficiency. what's products, when as more sharp more, playing itself. below next to business. we we of a half more and robust in really seen take second cost X, what

So that one's not you were working

Mark Smith

got normal a adjustments message. we that one start last I ask try clear the compared higher costs, that of the metal simplify we just in segments. other thing explanations, the the on it's through other talked just Whilst we to wanted it's contractual we're around call in to segment, at didn't and me, focus you. There's product all other extraordinarily noise out in the just that. -- some that. Thank There's say mentioned supply on we But here. that warranty Yes, I'll charge focused lot number coverage the costs for up to the no big about actions this up the product hear. listeners. an of clear got -- low you just that But noise chain just there. year. I wanted the coverage I for or and

Tim Tse

time, the for Mark. Thanks right. All it. Got

Mark Smith

Cheers, Tim. Yeah.

Operator

Thank you.

Revich of Our Goldman next Sachs. is coming go question from Please ahead. Jerry

Jerry Revich

morning, Good Yes. everyone. Hi.

Tom Linebarger

Hi, Jerry.

Jennifer Rumsey

Hi, Jerry.

Jerry Revich

supply inventories folks you the an out here, you about environment entire I'm wondering at folks positioning of improvements debt by and facing way some Tom, thinking how are where is, meaningfully about way look the changes the chain industry structural this or the in complex wondering here. you we're comments target inventories that you're given you thinking cycle volatility coming reduce as supply going face the every pretty in manage of to opportunity the chain the how challenges forward? you cost etc.? manage increasing potential of Is business there

Tom Linebarger

did mind Jerry, did my terrific for can some question, we it's structural -- on early the do you it's a in and been as reform. pandemic We imagine, a while.

talked calls to also with trying of supply the some about on challenges, make sure on previous did that some weren't I new chain we seeing capacity work But let's bunch I we seen that good hey, that. rightsize market's on our a well, we and problems get say, down, we think the we've before. think early

of Do enough Are in have places? insourced? trade cross-border be in much challenges them. we course on the And inventory outsourced You then highlighted with some are trade. of we too between places we relying we countries, should right

things how all forward our So want supply reposition our now strategy chain. those about to we are in looking

challenges -- trying doing taken on try rough, trying going that our demand, are So to and our the been keep today production we that really chain we've our our make customers. we're quarters. supply question would be supply about the we people work. what to need the need issues to just reposition here, in say supplier I a is is the working get that of And can trying analysis we've industry chain the position. there's and need up doing some team, us outsourced do speaking, operations we basically will for costs those say we down, reliable sure foremost, no at last we work to and they're for consolidate XX/X. likely it's get lot to of this, really, to to first we're when customer a It's and elements, what for we because in-source is future, But thinking we partly what to want about to leadership further. what seen while just to couple I to so thinking of we're broadly because but also and the of strategic how the that backseat meet them, be And keep

from helpful looking us, be you've will key supply there will that point some a through to hit we both to point-of-view reliability a cost optimization and right on where and at will in think the but thinking So different be position is, chains overtime. that that way be ourselves I

Jerry Revich

folks supplier systems engine a fragmented the if talk about a I'm the Terrific. off-highway markets, now. in obviously terms for note, there significant see for How base milestones to should the and separate comments wondering outlook that electrification could product On that pretty offerings? off-highway you other set in market are look of as opportunities do major your electrify opportunity you in new forward an you as we

Tom Linebarger

power electric in is battery conversations phase more trains, they behind and highway a on but are you As highway are common. generally off fragmented speaking, said,

view major sustainability highway figure to and trying you'd view. is their long-term point point what strategy of producers As carbon every from guess, of off out

is with level a having at all conversations the think strategically high them. battery it cases, conversation, the are of as electric many I thing. We In same

All need them of a solution.

-- when them for cost and generally a of doesn't the application. it publicly in of work figure end-users costs total want is financed the to out out unless you're All ownership today

ferry, okay. a you're If bus a or a in train or

changing know commercially it yet, are doesn't viable a in as you but work numbers work you're but quite If still the quickly, doesn't out. thing, out it

are out, the not trying how for And with, how. and within when get and figure a partnership way work to because to a does out nor themselves partner there to to most of conversations now. to make out viable today, they there's viable those are are pushed they position costs they a as who technologies it So offering today, offering is

to we'll today. products in volume now that So because sort battery volume represent their have to making like. that the special And so a challenge Not that we right them everyone's the have view will with and they're be the give to as that then understanding them good looking very Off-highway, Cummins is out on-highway does be strategically, well-positioned forward we how we'd you it will look effectively same electric a of our trying an us will will for to guessed, most needs application them, are figure and pitch and of believe, we the and as to application. in which I'm be and one, what off-highway will partner justify to scale specific I in enough their adapt technologies that partner engines. to but

Jerry Revich

Thanks. discussion. I appreciate the

Tom Linebarger

Thank you.

Operator

you. Thank

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

Noah Kaye

kind you taking for Thanks could us naturaliser morning. if questions. pipeline how Good the the I update wonder of developing. is on Hi. Tom,

really it's production nitrogen just the of incentives start the some in but since a provision. some think there pretty be reconciliational growth demand you of robust the I healthy companies also set And the to we've can for if seen obviously not the year. stone, comment, appear in in industry

potential just the you'd if outgrow So on comment business? impact wondering that of

Tom Linebarger

the and your in appreciate to I no backlog. see projects -- have thinks big and bigger those a business, question in the much wanted strategic to conversations He better continued going was we growth and backlog the to have electrolyzer make the some Yeah. backlog I'd add to answer been say move is, we

we course into backlog, market's of time going. there. last more with We larger newer And or delays good in I and that and in need is get of where the in something a to megawatts think to it projects, some were checked likely larger XX funding, I problem projects take with together, which was exciting quite the to have add quite they those see backlog. some that's so interest would strong. come but electrolyzers say to the still big good those ones, longer just

way likely incentives, especially be some phase that's you how where those fertilizer We see do an in there some to -- those good which do -- We going to green carbon through the it so calculations, see demand making Better pretty if some move calculations a are Plan in can pretty carbon-free to early once into in electrolyzers there's hydrogen, of there's We fertilizer-related markets take Build for especially can As the that and green in hydrogen Back ammonia. think Europe lot the projects ammonia it's I already. a business of in I Equivalency law. you in has bill take the in used see you you -- get carbon a see get cost. expect hydrogen it area about the U.S. of incentives make electrolyzers. guess a the mentioned, promote that and funding producing some you the to incentives nitrogen, straightforward. use hydrogen there, easy, it already how quickly where price They're But will is through and green gray there's low the it why bill. of I green more the do think they quickly, not that's one be they -- is

Noah Kaye

light earlier level operational or just any that planning. a of could some changes the about Where terms of realignment exploring get you business? for in the you're if at filtration then particularly the in Thanks. And on made a on different we alternatives high that update comments business, from the wonder topic, of

Mark Smith

Mark. pursuing this in continue is the make alternatives to progress Noah, that business. for Hi Yes, we

are I for months. an do Will in that within but business unchanged unchecked. But you that. year continues that been this new any Our remaining year And new don't and components significant and -- the say update continue year direction the the plans an It's anticipate in update strong remains that just the embedded the the well. be the should to change expect will performance in business, very the and as very we of also no work. business three enthusiasm has I process

Noah Kaye

very much, Mark. Thanks Yes.

Mark Smith

Thanks.

Operator

Thank you.

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

Matt Elkott

you. morning. Thank Good

So as U.S., looking we're well significant guys, the in construction mining upcycles production equipment. at as in and truck

percentage fully gaining to it I As these engines take integrated? who your new on-highway longer a upcycles both be begin bit currently of opportunities your customers to unfold, term, are potentially may there for for opportunities customers, you if off-highway? guys with are increase and the And there

Jennifer Rumsey

question. great Yeah,

have working capacity and to are through pull OEM that most grows we cycles. the also that s' in We conversations. we market make sure And in and that end-user have the constantly needs position our drives have to competitive we continue market to meet strong the engine ensuring

with not announcements the engines conversations We're customers offer today those that in Dymo. seen Isuzu, Hino, introduce with future. partnerships with with You've have around may Cummins to to the those continuing

expect opportunities time. will we continue that So over those

Matt Elkott

go up-cycle, cyclical for OEMS? the the an up production generally, OEM or down So vertical does during integration usually

Tom Linebarger

is given may this may pretty high but own they because out was they both, of variation depends, a of their as our it they good run goes they saying up demand generally have bit quarter-to-quarter engine. a speaking, top the Matt, have little at a if for not indicator more But have Mark with both because generally if use earlier, ours. capacity the case, trucks market, again, they and very of quarter their is In and backlogs. penetration unfinished

What's supply is the by capped now, of chain more suppliers. because see. to hard it's quarter-to-quarter, challenges, OEM truck just is production right So

not. production in but more they could maximum anywhere today. not we're demand, if the they the hope based get where engine near we're to mean, So of an I can area users industry produce more we parts. be what We're on

we're you're asking think of production. really not industry that terms I the about So near in spot

Matt Elkott

Got it.

Next very [Indiscernible] In engine. gas on question small. Tom and then U.S. follow-up one the just the it's natural

-- XX,XXX market. the I guys produce think about it's and you you dominate engines

or about engine, I can you the meaningful a With opportunity to this could the it you talk is XX-liter growth next opportunity is and when year see more mean, it longer-term? be unfold? going

Jennifer Rumsey

Yes.

So the engine market gas we've have we're announced the natural now in bringing that we 'XX. U.S. into this by China -- NXX that production in plan

we're So out offering from years of couple product. that

natural using see talked gas end gas. as great excited a this to to in product way the customers, pursue own they particular, reduction. renewable their I've very they carbon years, are meet those, including As In about for goals and coming as natural they

upside market. opportunities natural the bring into that some we So new gas expect market we and also interest in yo as platform some the growing

Mark Smith

Which gas, given natural share again our should position in boost our yeah.

Matt Elkott

Thank you very much.

Tom Linebarger

you. Thank

Operator

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

Rob Wertheimer

you. Thank

I freight freight on? understand platforms. portion overview then just like mix could quick have price material one earlier, you pricing pricing if us not that includes after what to constraints on of then, And touched on a what the right. guys You have the escalators, of costs, where maybe you give do that on go recap you things maybe remind how engine but works only Is

Tom Linebarger

long-term phase the Rob, on. you'll over those part, the those, of course, rest, material negotiate costs. customers negotiate, most of a but the some your different, a And on engines. have with and one's escalator OEM orders pricing with have Doesn't speaking, the on if and continued benefit The for where need major means customer you on sectors is we you that it aftermarket only of and arrangements partner. on what's those general we what Broadly we want a book That's can again, sets production way basic There's to pass-through, an can -- of can't large see customers, the that -- components. the long-term can't just is each a what's time over it we then period sort in directly of works negotiate you go to they're to change. And retail agreements. of or is price engines make count of mean trucks agreements and the as you have the little to deal order then you you on generator where for

this that negotiations recover to about with freight, away. year, and of we then in So what if as -- and our products we is that sets the just fact year, as the shipments in the aftermarket other middle back then special semiconductors, costs, delays we've we're all these and we Mark of are a now. the freight, now again. Early want escalators, right in with year, not to And talking in we're also move the them the we from And result looking Jen In said, gen pricing priced OEM priced always see should way, by aftermarket. of and more. we at do we in that them, had the logistics, doing material we customers

Rob Wertheimer

helpful. your chips, think supplier, there, touched And industry and I'll on be Cummins stop gets before what semiconductors. in That's Do on overview does sense love industry Tom, specifically better -- qualifying redesigning when earlier the you new Okay. you the thanks. you about re-qualifying thinking have a I'd on it on suppliers, shape etc, doing better? then, an

Jennifer Rumsey

will I that on one. comment Yeah,

And been some on the That to constrained year other and future. see quarter-over-quarter really X to parallel we've also growing disruption working today also dual-sourcing have think our Not strategies seen that started second in to in tier So as we half us improvement in sure in closely we'll got for it's we've and supply microprocessors level flexibility middle inventory all able a a way of issue of the become year. and the electrical since very are some bigger components sourcing been the make inventory. I current And we've of back throughout for the the to components. strategy most working revisit something and more we've the the environment. we're of doing has we at, year build looking

Tom Linebarger

I of a ideal Company's that's set we sky pie I about be thing but Taiwan, semiconductor all and of not of -- a a nightmare output. coming we one are course, that U.S that to for as That's really That's that industry. Rob, part we production only pretty in it, supply at factories mean, strategically, -- have we And mean wafers the situation the in the very it's needed chain. that's don't kind automotive one -- domestic need, in of those much need semiconductor we're or the small targeted the factory from

the can some more So at ever hey, so -- the new that of is most look plan? shore are time has or have significant of semiconductor and said, sensors you more moving. now semiconductor or what's manufacturers capacity The to ramps the the something, right that add come defined closer most each total because Each chips or buses out, product automotive strategic and a semiconductors to to to demand, way that's and their plan portion adding revolution if strategic not industry be trucks we XX% they their and electronics. critical ideally who onshore -- the is the industry the success think automotive capacity

So and those to need target -- we to add more it capacity it at customers. need we add

Rob Wertheimer

you. Thank

Jack Kienzler

our everybody. Thank concludes you, teleconference Tom. today. believe that And I thank you,

your you As joining available today. the Thank for be questions will always, interest again. for call. Cummins after thank in and I you everybody continued for to

Operator

your for concludes you thank event. This gentlemen, and Ladies participation. today's

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