Analysis of Reportable Segments
Cummins Inc. operates in 5 segments: Components; Engine; Distribution; Power Systems; and Accelera.
Segment Profit Margin
Cummins Inc., profit margin by reportable segment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 13.72% | 13.82% | 15.39% | 15.95% | 15.87% |
| Engine | 13.95% | 14.08% | 14.18% | 15.40% | 14.46% |
| Distribution | 11.80% | 9.95% | 9.41% | 9.32% | 8.13% |
| Power Systems | 14.74% | 11.84% | 11.23% | 9.45% | 11.48% |
| Accelera | -125.14% | -171.72% | -192.24% | -238.89% | -392.11% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The segment profit margins across the reporting period demonstrate a clear divergence between established core operations and strategic growth initiatives. While traditional segments such as Components and Engine show a trend of gradual margin erosion, Distribution and Power Systems have exhibited consistent expansion. Concurrently, the Accelera segment, though remaining deeply negative, shows a significant and steady reduction in operational losses.
- Components and Engine Segments
- A trend of margin compression is evident in the core industrial segments. The Components segment peaked at 15.95% in 2020 before declining steadily to 13.72% by 2023. The Engine segment followed a similar pattern, reaching a high of 15.40% in 2020 and subsequently receding to 13.95% in 2023. Both segments indicate a downward trajectory in profitability over the latter half of the analyzed period.
- Distribution and Power Systems Segments
- Positive momentum is observed in the Distribution and Power Systems segments. Distribution margins expanded consistently every year, rising from 8.13% in 2019 to 11.80% in 2023. Power Systems experienced an initial dip to 9.45% in 2020 but recovered strongly, achieving a period-high margin of 14.74% in 2023, reflecting improved operational efficiency or pricing power.
- Accelera Segment
- The Accelera segment is characterized by extreme negative margins that have improved substantially over time. The profit margin increased from -392.11% in 2019 to -125.14% in 2023. While the segment remains loss-making, the consistent reduction in the deficit suggests a transition toward operational stabilization.
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Segment Profit Margin: Components
Cummins Inc.; Components; segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,840) | 1,346) | 1,180) | 961) | 1,097) |
| Sales | 13,409) | 9,736) | 7,665) | 6,024) | 6,914) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 13.72% | 13.82% | 15.39% | 15.95% | 15.87% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment profit margin = 100 × Segment EBITDA ÷ Sales
= 100 × 1,840 ÷ 13,409 = 13.72%
An analysis of the financial performance from 2019 to 2023 reveals a period of significant expansion in scale accompanied by a gradual compression in operational efficiency. While both revenue and absolute earnings grew substantially after a brief contraction in 2020, the rate of expense growth outpaced the rate of revenue growth, leading to a decline in relative profitability.
- Revenue and EBITDA Trajectory
- Sales experienced a strong upward trend, rising from 6,914 million USD in 2019 to 13,409 million USD in 2023, representing an overall increase of approximately 93.8%. Segment EBITDA followed a similar recovery and growth path, increasing from 1,097 million USD in 2019 to 1,840 million USD in 2023. The most aggressive growth for both metrics occurred between 2022 and 2023, with sales increasing by approximately 37.7% and EBITDA increasing by 36.5% in a single year.
- Profit Margin Compression
- Despite the increase in absolute dollar amounts, the segment profit margin exhibited a steady downward trend after 2020. The margin peaked at 15.95% in 2020 before declining to 13.72% by the end of 2023. This contraction indicates that the incremental costs associated with the rapid expansion in sales have exerted pressure on the segment's profitability.
- Comparative Analysis of Growth Rates
- The divergence between sales growth and margin performance suggests that the company achieved higher market penetration or volume growth at the expense of margin stability. Because the growth in sales (93.8%) significantly exceeded the growth in Segment EBITDA (67.7%) over the five-year period, the resulting margin eroded by approximately 215 basis points from its 2020 peak.
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Segment Profit Margin: Engine
Cummins Inc.; Engine; segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,630) | 1,541) | 1,411) | 1,235) | 1,454) |
| Sales | 11,684) | 10,945) | 9,954) | 8,022) | 10,056) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 13.95% | 14.08% | 14.18% | 15.40% | 14.46% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment profit margin = 100 × Segment EBITDA ÷ Sales
= 100 × 1,630 ÷ 11,684 = 13.95%
The Engine segment demonstrates a recovery and expansion phase in total sales and EBITDA since 2020, although this growth has been accompanied by a consistent, marginal decline in profit margins.
- Revenue Performance
- Sales experienced a significant contraction in 2020, falling to 8,022 million from 10,056 million in 2019. Following this dip, a steady growth trend is observed, with revenue increasing to 9,954 million in 2021, 10,945 million in 2022, and peaking at 11,684 million by the end of 2023.
- EBITDA Trends
- Segment EBITDA mirrored the revenue trend, decreasing to 1,235 million in 2020 before entering a period of sustained growth. Absolute EBITDA increased annually from 2021 through 2023, reaching 1,630 million, which represents an increase of approximately 12% over 2019 levels.
- Segment Profit Margin Analysis
- A divergent trend is observed in the profit margin relative to sales growth. The margin peaked at 15.40% in 2020, the same year sales were at their lowest, suggesting effective cost management or a shift in product mix during the downturn. However, from 2021 onward, the margin has declined progressively, moving from 14.18% to 13.95% by 2023.
Overall, the data indicates that while the segment has successfully expanded its scale and absolute earnings capacity, there is an observable trend of margin compression. The increase in sales and EBITDA has not been sufficient to maintain the percentage profitability levels seen during the 2020 period.
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Segment Profit Margin: Distribution
Cummins Inc.; Distribution; segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,209) | 888) | 731) | 665) | 656) |
| Sales | 10,249) | 8,929) | 7,772) | 7,136) | 8,071) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 11.80% | 9.95% | 9.41% | 9.32% | 8.13% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment profit margin = 100 × Segment EBITDA ÷ Sales
= 100 × 1,209 ÷ 10,249 = 11.80%
The Distribution segment exhibits a consistent upward trajectory in both profitability and operational efficiency over the five-year period from 2019 to 2023. While sales experienced a temporary contraction in 2020, the segment has since maintained a strong growth trend, culminating in record highs for both revenue and margins by the end of 2023.
- Revenue Trends
- Sales declined by approximately 11.6% between 2019 and 2020, dropping from 8,071 million to 7,136 million. However, a sustained recovery followed, with sales increasing annually through 2023 to reach 10,249 million. This represents a cumulative increase of 27% relative to 2019 levels.
- EBITDA Performance
- Segment EBITDA demonstrated uninterrupted growth throughout the period. Notably, EBITDA increased from 656 million in 2019 to 665 million in 2020, despite the concurrent decline in sales. Growth accelerated in the subsequent years, with a significant surge in 2023, where EBITDA reached 1,209 million, an 84% increase over the 2019 baseline.
- Profit Margin Expansion
- The segment profit margin shows a steady expansion from 8.13% in 2019 to 11.80% in 2023. The most pronounced improvement occurred between 2019 and 2020, where the margin rose to 9.32% despite lower revenues, suggesting effective cost containment or a favorable shift in product mix. The margin continued to scale, surpassing the 11% threshold in 2023, indicating enhanced operating leverage as sales volume increased.
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Segment Profit Margin: Power Systems
Cummins Inc.; Power Systems; segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 836) | 596) | 496) | 343) | 512) |
| Sales | 5,673) | 5,033) | 4,415) | 3,631) | 4,460) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 14.74% | 11.84% | 11.23% | 9.45% | 11.48% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment profit margin = 100 × Segment EBITDA ÷ Sales
= 100 × 836 ÷ 5,673 = 14.74%
The Power Systems segment demonstrated a V-shaped recovery and subsequent expansion pattern between 2019 and 2023. Following a contraction in 2020, the segment achieved consistent growth in both top-line revenue and bottom-line profitability, culminating in peak performance levels by the end of 2023.
- Revenue Trajectory
- Sales experienced a notable decline in 2020, falling to 3,631 million US dollars from 4,460 million US dollars in 2019. A sustained recovery followed, with annual increases leading to a five-year high of 5,673 million US dollars by December 31, 2023. This represents a significant expansion of the revenue base compared to the 2019 baseline.
- EBITDA Performance
- Segment EBITDA mirrored the revenue trend, decreasing to 343 million US dollars in 2020. Earnings recovered to 496 million US dollars in 2021 and grew steadily thereafter. A sharp acceleration is observed between 2022 and 2023, where EBITDA rose from 596 million US dollars to 836 million US dollars, suggesting strong operational scaling.
- Profit Margin Analysis
- The segment profit margin compressed to 9.45% in 2020, the lowest point in the analyzed period. Margin recovery was evident in 2021 at 11.23%, followed by a marginal increase to 11.84% in 2022. A significant expansion occurred in 2023, with the margin reaching 14.74%. The fact that the margin increase in 2023 outpaced the growth in sales indicates improved operational efficiency and enhanced pricing power or cost management during the final year.
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Segment Profit Margin: Accelera
Cummins Inc.; Accelera; segment profit margin calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | (443) | (340) | (223) | (172) | (149) |
| Sales | 354) | 198) | 116) | 72) | 38) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | -125.14% | -171.72% | -192.24% | -238.89% | -392.11% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment profit margin = 100 × Segment EBITDA ÷ Sales
= 100 × -443 ÷ 354 = -125.14%
The Accelera segment exhibits a financial trajectory characterized by rapid revenue expansion and widening absolute operating losses, though the relative profit margin shows a consistent improvement over the analyzed five-year period.
- Revenue Expansion
- Sales grew significantly from US$ 38 million in 2019 to US$ 354 million in 2023. This represents a substantial increase in scale, with the most accelerated growth occurring between 2022 and 2023, where sales increased by approximately 78% in a single year.
- Operating Loss Trends
- Segment EBITDA remained negative throughout the entire period, with losses deepening in absolute terms from US$ 149 million in 2019 to US$ 443 million in 2023. The widening of these losses suggests a period of heavy capital investment and operational expenditure associated with the segment's growth.
- Profit Margin Analysis
- The segment profit margin demonstrated a steady upward trend, moving from -392.11% in 2019 to -125.14% in 2023. This improvement indicates that while absolute losses are increasing, revenue is growing at a faster rate than expenses, effectively reducing the loss per dollar of sales as the segment scales.
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Segment Return on Assets (Segment ROA)
Cummins Inc., ROA by reportable segment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 26.42% | 18.42% | 40.16% | 33.39% | 37.68% |
| Engine | 175.27% | 106.20% | 90.80% | 94.56% | 132.91% |
| Distribution | 51.49% | 32.91% | 31.87% | 27.21% | 25.87% |
| Power Systems | 43.14% | 25.02% | 22.03% | 16.07% | 22.81% |
| Accelera | -38.22% | -29.36% | -37.04% | -34.13% | -31.57% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The analysis of segment return on assets reveals divergent performance paths across the various business units from 2019 to 2023. While established segments generally demonstrated recovery or growth by the end of the period, one segment remained consistently negative, indicating a significant variance in asset productivity across the organization.
- Engine Segment
- This segment maintains the highest asset productivity of all analyzed units. Despite a contraction from 132.91% in 2019 to a low of 90.80% in 2021, a sharp upward trajectory followed, resulting in a peak ROA of 175.27% by December 31, 2023.
- Distribution and Power Systems
- A consistent positive trend is observed in both units. Distribution ROA grew steadily from 25.87% in 2019 to 51.49% in 2023. Power Systems experienced a dip to 16.07% in 2020 but subsequently recovered, nearly doubling its efficiency to reach 43.14% by the end of 2023.
- Components Segment
- Asset returns in this segment exhibited significant volatility. After reaching a peak of 40.16% in 2021, the ROA declined sharply to 18.42% in 2022. While a partial recovery to 26.42% was recorded in 2023, the segment finished the period below its 2019 starting point of 37.68%.
- Accelera Segment
- A persistent negative return on assets is evident for Accelera throughout the entire five-year duration. The ROA fluctuated within a negative range, starting at -31.57% in 2019 and ending at -38.22% in 2023, reflecting a continuous lack of positive return relative to its asset base.
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Segment ROA: Components
Cummins Inc.; Components; segment ROA calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,840) | 1,346) | 1,180) | 961) | 1,097) |
| Net assets | 6,965) | 7,306) | 2,938) | 2,878) | 2,911) |
| Segment Profitability Ratio | |||||
| Segment ROA1 | 26.42% | 18.42% | 40.16% | 33.39% | 37.68% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment ROA = 100 × Segment EBITDA ÷ Net assets
= 100 × 1,840 ÷ 6,965 = 26.42%
The segment's financial performance between 2019 and 2023 is characterized by a consistent growth in earnings capacity contrasted with a substantial expansion of the asset base, which has resulted in a significant compression of return efficiency.
- Segment EBITDA Performance
- Operational earnings exhibited a general upward trajectory following a temporary decline in 2020. After reaching a low of 961 million USD in 2020, EBITDA grew steadily, culminating in a peak of 1,840 million USD by the end of 2023. This represents a substantial increase in absolute profitability over the five-year period.
- Net Asset Evolution
- The asset base remained relatively stable from 2019 through 2021, maintaining a range between 2,878 million USD and 2,938 million USD. A dramatic shift occurred in 2022, where net assets increased to 7,306 million USD, before slightly declining to 6,965 million USD in 2023. This suggests a major capital deployment or acquisition that fundamentally altered the segment's balance sheet structure.
- Segment ROA Interpretation
- The Segment Return on Assets (ROA) reflects the inverse relationship between the surging asset base and earnings growth. High efficiency was observed between 2019 and 2021, peaking at 40.16%. However, the massive increase in net assets in 2022 led to a sharp decline in ROA to 18.42%. A partial recovery to 26.42% in 2023 indicates that while the segment is successfully scaling its earnings to match the new asset level, the return efficiency has not yet returned to historical norms.
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Segment ROA: Engine
Cummins Inc.; Engine; segment ROA calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,630) | 1,541) | 1,411) | 1,235) | 1,454) |
| Net assets | 930) | 1,451) | 1,554) | 1,306) | 1,094) |
| Segment Profitability Ratio | |||||
| Segment ROA1 | 175.27% | 106.20% | 90.80% | 94.56% | 132.91% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment ROA = 100 × Segment EBITDA ÷ Net assets
= 100 × 1,630 ÷ 930 = 175.27%
The Engine segment exhibited significant volatility in its return on assets over the five-year period from 2019 to 2023, characterized by an initial decline followed by a substantial recovery and peak in the final year.
- Segment EBITDA Trends
- Earnings before interest, taxes, depreciation, and amortization showed a V-shaped recovery early in the period. After a decline from 1,454 million USD in 2019 to 1,235 million USD in 2020, the segment entered a period of consistent growth, reaching a peak of 1,630 million USD by December 31, 2023.
- Net Asset Evolution
- The asset base expanded steadily between 2019 and 2021, rising from 1,094 million USD to a peak of 1,554 million USD. However, this trend reversed sharply thereafter, with net assets declining to 930 million USD by 2023, representing the lowest asset level recorded during the analyzed period.
- Segment ROA Analysis
- The Segment ROA experienced a notable contraction between 2019 and 2021, falling from 132.91% to 90.80%. This decline was driven by the simultaneous occurrence of lower EBITDA in 2020 and a growing asset base. A reversal occurred in 2022, with the ratio climbing to 106.20%. The most significant expansion occurred in 2023, where the ROA surged to 175.27%. This peak was the result of a dual effect: the achievement of the highest EBITDA in the period coupled with a significant reduction in net assets, indicating a substantial increase in asset efficiency.
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Segment ROA: Distribution
Cummins Inc.; Distribution; segment ROA calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 1,209) | 888) | 731) | 665) | 656) |
| Net assets | 2,348) | 2,698) | 2,294) | 2,444) | 2,536) |
| Segment Profitability Ratio | |||||
| Segment ROA1 | 51.49% | 32.91% | 31.87% | 27.21% | 25.87% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment ROA = 100 × Segment EBITDA ÷ Net assets
= 100 × 1,209 ÷ 2,348 = 51.49%
The Distribution segment has demonstrated a strong and accelerating trend in profitability and asset efficiency from 2019 through 2023. The period is characterized by a significant expansion in earnings alongside a relatively stable and eventually declining asset base, leading to a substantial increase in the return on assets.
- Segment EBITDA Growth
- A consistent upward trend in Segment EBITDA is observed, rising from US$ 656 million in 2019 to US$ 1,209 million in 2023. While growth was steady between 2019 and 2022, a sharp acceleration occurred in 2023, where EBITDA increased by approximately 36% over the prior year.
- Net Asset Utilization
- Net assets exhibited fluctuations over the five-year period, starting at US$ 2,536 million in 2019 and ending at US$ 2,348 million in 2023. Despite a peak of US$ 2,698 million in 2022, the overall trend indicates that the segment managed to scale its earnings without requiring a proportional increase in its asset base.
- Segment ROA Expansion
- The Segment ROA increased progressively from 25.87% in 2019 to 51.49% in 2023. This nearly twofold increase in ROA is the result of the combined effect of surging EBITDA and a reduction in net assets in the final year, signaling a significant improvement in operational leverage and capital efficiency within the distribution network.
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Segment ROA: Power Systems
Cummins Inc.; Power Systems; segment ROA calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | 836) | 596) | 496) | 343) | 512) |
| Net assets | 1,938) | 2,382) | 2,251) | 2,134) | 2,245) |
| Segment Profitability Ratio | |||||
| Segment ROA1 | 43.14% | 25.02% | 22.03% | 16.07% | 22.81% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment ROA = 100 × Segment EBITDA ÷ Net assets
= 100 × 836 ÷ 1,938 = 43.14%
The Power Systems segment demonstrated a volatile but ultimately strong growth trajectory in profitability and asset efficiency between 2019 and 2023. Following a downturn in 2020, the segment experienced a consistent recovery in earnings, culminating in a significant peak in return on assets in the final year of the period.
- Segment EBITDA Trends
- Earnings experienced a sharp decline in 2020, falling from 512 million to 343 million. A sustained recovery phase followed, with values climbing to 496 million in 2021 and 596 million in 2022. This growth accelerated substantially in 2023, reaching 836 million, which represents a 63% increase compared to 2019 levels.
- Net Asset Management
- The asset base remained relatively stable from 2019 through 2022, fluctuating within a range of 2,134 million to 2,382 million. However, a notable contraction occurred in 2023, where net assets decreased to 1,938 million, the lowest level recorded during the five-year period.
- Segment Return on Assets (ROA) Analysis
- The ROA mirrored the earnings trend initially, dropping to 16.07% in 2020 before rebounding to 22.03% in 2021. A steady increase was observed in 2022 at 25.02%, followed by a dramatic surge to 43.14% in 2023. This peak in ROA is attributable to the simultaneous expansion of EBITDA and a strategic reduction in the net asset base, indicating a significant improvement in capital productivity and operational efficiency.
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Segment ROA: Accelera
Cummins Inc.; Accelera; segment ROA calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Segment EBITDA | (443) | (340) | (223) | (172) | (149) |
| Net assets | 1,159) | 1,158) | 602) | 504) | 472) |
| Segment Profitability Ratio | |||||
| Segment ROA1 | -38.22% | -29.36% | -37.04% | -34.13% | -31.57% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment ROA = 100 × Segment EBITDA ÷ Net assets
= 100 × -443 ÷ 1,159 = -38.22%
The Accelera segment demonstrates a consistent trend of widening operational losses and significant capital expansion, resulting in a persistently negative Return on Assets (ROA) over the five-year period from 2019 to 2023.
- Operational Profitability Trends
- Segment EBITDA has exhibited a continuous downward trajectory, moving from a loss of 149 million in 2019 to a loss of 443 million in 2023. This represents a substantial increase in operational deficits, indicating that expenses have grown at a rate significantly outpacing any revenue generation within the segment.
- Net Asset Accumulation
- The asset base grew steadily from 2019 through 2021, followed by a sharp increase in 2022, where net assets rose from 602 million to 1,158 million. The asset value remained stable in 2023 at 1,159 million, suggesting a period of aggressive investment or capital deployment that culminated in 2022.
- Segment Return on Assets (ROA) Analysis
- The Segment ROA remained negative throughout the analyzed timeframe, reflecting an inability to generate positive returns relative to the invested capital. A temporary moderate improvement to -29.36% was recorded in 2022, which is attributable to the massive increase in the asset base offsetting the rise in losses. However, by 2023, the ROA declined to its lowest level of -38.22%, as the growth in EBITDA losses outpaced the stability of the asset base.
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Segment Asset Turnover
Cummins Inc., asset turnover by reportable segment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 1.93 | 1.33 | 2.61 | 2.09 | 2.38 |
| Engine | 12.56 | 7.54 | 6.41 | 6.14 | 9.19 |
| Distribution | 4.36 | 3.31 | 3.39 | 2.92 | 3.18 |
| Power Systems | 2.93 | 2.11 | 1.96 | 1.70 | 1.99 |
| Accelera | 0.31 | 0.17 | 0.19 | 0.14 | 0.08 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
An analysis of segment asset turnover from 2019 to 2023 reveals a general recovery trend across most business units following a period of volatility and contraction between 2020 and 2022.
- Engine Segment
- This segment demonstrates the highest asset efficiency across all reportable units. Following a decline from 9.19 in 2019 to 6.14 in 2020, the ratio recovered steadily, reaching a peak of 12.56 in 2023. This indicates a significant acceleration in revenue generation relative to the asset base.
- Components Segment
- Asset turnover within this segment has experienced considerable fluctuation. After maintaining ratios between 2.09 and 2.61 from 2020 to 2021, a sharp contraction occurred in 2022, with the ratio falling to 1.33. A moderate recovery to 1.93 was observed in 2023, though it remains below 2019 levels.
- Distribution and Power Systems Segments
- Both units exhibit a consistent upward trajectory in asset utilization since 2020. Distribution turnover increased from 2.92 in 2020 to 4.36 in 2023. Similarly, Power Systems improved from a low of 1.70 in 2020 to 2.93 in 2023, reflecting enhanced operational efficiency.
- Accelera Segment
- The Accelera segment maintains the lowest turnover ratios, which is characteristic of an early-stage or capital-intensive investment phase. However, a positive growth pattern is observable, with the ratio increasing from 0.08 in 2019 to 0.31 in 2023.
The overall trend indicates a systemic improvement in asset productivity, with the Engine segment acting as the primary driver of efficiency and the Accelera segment showing gradual scaling.
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Segment Asset Turnover: Components
Cummins Inc.; Components; segment asset turnover calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Sales | 13,409) | 9,736) | 7,665) | 6,024) | 6,914) |
| Net assets | 6,965) | 7,306) | 2,938) | 2,878) | 2,911) |
| Segment Activity Ratio | |||||
| Segment asset turnover1 | 1.93 | 1.33 | 2.61 | 2.09 | 2.38 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment asset turnover = Sales ÷ Net assets
= 13,409 ÷ 6,965 = 1.93
The analysis of the reportable segment reveals a period of significant revenue expansion and a substantial increase in the asset base, resulting in notable volatility in asset utilization efficiency between 2019 and 2023.
- Sales Revenue Trends
- Sales exhibited a recovery and subsequent growth trajectory. Following a contraction in 2020 to US$ 6,024 million, revenues increased consistently each year, peaking at US$ 13,409 million by December 31, 2023. This trajectory represents a substantial overall increase of approximately 93.7% compared to the 2019 baseline.
- Net Asset Evolution
- Net assets remained relatively stagnant from 2019 through 2021, maintaining a range between US$ 2,878 million and US$ 2,938 million. A significant structural change occurred in 2022, with net assets surging to US$ 7,306 million, an increase of approximately 148% over the prior year. A slight reduction was observed in 2023, with the balance adjusting to US$ 6,965 million.
- Segment Asset Turnover Performance
- The asset turnover ratio reflects the fluctuating relationship between revenue generation and the asset base. Efficiency peaked in 2021 at a ratio of 2.61, as sales growth occurred without a corresponding increase in assets. A sharp decline to 1.33 was recorded in 2022, as the rapid expansion of the net asset base outpaced the growth in sales. By 2023, the ratio recovered to 1.93, indicating improved asset productivity driven by continued strong sales growth and a modest reduction in net assets.
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Segment Asset Turnover: Engine
Cummins Inc.; Engine; segment asset turnover calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Sales | 11,684) | 10,945) | 9,954) | 8,022) | 10,056) |
| Net assets | 930) | 1,451) | 1,554) | 1,306) | 1,094) |
| Segment Activity Ratio | |||||
| Segment asset turnover1 | 12.56 | 7.54 | 6.41 | 6.14 | 9.19 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment asset turnover = Sales ÷ Net assets
= 11,684 ÷ 930 = 12.56
The Engine segment demonstrated a significant recovery in operational efficiency between 2019 and 2023, characterized by a V-shaped trajectory in sales and a substantial reduction in net assets during the final reporting period.
- Sales Performance
- Annual sales experienced a notable contraction in 2020, falling to 8,022 million US dollars from 10,056 million US dollars in 2019. Following this decline, a consistent upward trend was established, with sales increasing to 9,954 million US dollars in 2021, 10,945 million US dollars in 2022, and reaching a period peak of 11,684 million US dollars by the end of 2023.
- Net Asset Trends
- Net assets showed an initial growth phase, rising from 1,094 million US dollars in 2019 to a peak of 1,554 million US dollars in 2021. This trend reversed in 2022 and accelerated sharply in 2023, where net assets decreased to 930 million US dollars, the lowest level recorded during the five-year period.
- Segment Asset Turnover Analysis
- The asset turnover ratio reflects the combined impact of fluctuating sales and asset levels. The ratio declined from 9.19 in 2019 to 6.14 in 2020, coinciding with the decrease in sales and an increase in the asset base. A steady recovery followed, with the ratio climbing to 7.54 in 2022. In 2023, the ratio surged to 12.56, driven by the simultaneous achievement of record sales and a substantial reduction in net assets, indicating a marked increase in the efficiency of asset utilization to generate revenue.
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Segment Asset Turnover: Distribution
Cummins Inc.; Distribution; segment asset turnover calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Sales | 10,249) | 8,929) | 7,772) | 7,136) | 8,071) |
| Net assets | 2,348) | 2,698) | 2,294) | 2,444) | 2,536) |
| Segment Activity Ratio | |||||
| Segment asset turnover1 | 4.36 | 3.31 | 3.39 | 2.92 | 3.18 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment asset turnover = Sales ÷ Net assets
= 10,249 ÷ 2,348 = 4.36
The Distribution segment demonstrates a strong recovery and subsequent growth in operational efficiency between 2019 and 2023. After a temporary contraction in 2020, the segment achieved significant expansion in sales while maintaining a relatively stable asset base, resulting in a marked increase in asset utilization.
- Sales Performance
- Revenue exhibited a recovery trend, declining from US$ 8,071 million in 2019 to US$ 7,136 million in 2020, before ascending consistently to reach US$ 10,249 million by the end of 2023. This progression indicates a robust growth trajectory following the 2020 downturn.
- Net Asset Management
- Net assets remained relatively stable over the five-year period, fluctuating within a range of US$ 2,294 million to US$ 2,698 million. A notable peak in assets occurred in 2022, followed by a reduction to US$ 2,348 million in 2023, suggesting a strategic optimization of the asset base during a period of increasing sales.
- Segment Asset Turnover Efficiency
- The asset turnover ratio shows a general upward trajectory, recovering from a low of 2.92 in 2020 to a peak of 4.36 in 2023. The significant increase observed in the final year reflects a substantial improvement in the segment's ability to generate revenue from its net assets, indicating heightened operational productivity and capital efficiency.
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Segment Asset Turnover: Power Systems
Cummins Inc.; Power Systems; segment asset turnover calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Sales | 5,673) | 5,033) | 4,415) | 3,631) | 4,460) |
| Net assets | 1,938) | 2,382) | 2,251) | 2,134) | 2,245) |
| Segment Activity Ratio | |||||
| Segment asset turnover1 | 2.93 | 2.11 | 1.96 | 1.70 | 1.99 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment asset turnover = Sales ÷ Net assets
= 5,673 ÷ 1,938 = 2.93
The Power Systems segment demonstrated a significant improvement in asset utilization efficiency between 2019 and 2023. After a period of volatility and a temporary decline in performance during 2020, the segment achieved a substantial increase in its ability to generate revenue relative to its asset base, culminating in a peak turnover ratio in 2023.
- Revenue Trajectory
- Sales experienced a notable contraction in 2020, falling to 3,631 million US dollars from 4,460 million US dollars in 2019. However, a consistent recovery followed, with sales increasing annually to reach 5,673 million US dollars by December 31, 2023. This represents a strong growth trend in top-line performance over the final three years of the period.
- Net Asset Dynamics
- Net assets remained relatively stable from 2019 through 2022, fluctuating between 2,134 million and 2,382 million US dollars. A significant shift occurred in 2023, where net assets decreased to 1,938 million US dollars, the lowest level recorded in the five-year period.
- Asset Turnover Efficiency
- The segment asset turnover ratio reflects the combined impact of rising sales and a reduced asset base. The ratio dipped to 1.70 in 2020 but recovered to 1.96 in 2021 and 2.11 in 2022. In 2023, the ratio rose sharply to 2.93, indicating a marked increase in operational efficiency and a higher volume of sales generated per dollar of net assets employed.
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Segment Asset Turnover: Accelera
Cummins Inc.; Accelera; segment asset turnover calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Sales | 354) | 198) | 116) | 72) | 38) |
| Net assets | 1,159) | 1,158) | 602) | 504) | 472) |
| Segment Activity Ratio | |||||
| Segment asset turnover1 | 0.31 | 0.17 | 0.19 | 0.14 | 0.08 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment asset turnover = Sales ÷ Net assets
= 354 ÷ 1,159 = 0.31
The Accelera segment demonstrates a trajectory of rapid expansion and increasing operational efficiency between 2019 and 2023. Revenue growth has significantly outpaced the growth of the asset base over the long term, resulting in a marked improvement in the segment's ability to generate sales from its invested capital.
- Revenue Growth Trends
- Sales exhibited consistent and accelerating growth, rising from 38 million USD in 2019 to 354 million USD by the end of 2023. This represents a substantial increase in scale, with the most significant nominal gains occurring in the 2022 and 2023 fiscal years.
- Capital Investment and Asset Base
- Net assets increased from 472 million USD in 2019 to 1,159 million USD in 2023. A notable surge in capital allocation occurred in 2022, where assets nearly doubled from 602 million USD to 1,158 million USD, indicating a period of heavy investment to expand capacity or infrastructure.
- Segment Asset Turnover Performance
- The asset turnover ratio improved from 0.08 in 2019 to 0.31 in 2023. A marginal decline was observed in 2022, where the ratio dropped from 0.19 to 0.17, coinciding with the sharp increase in net assets. However, the subsequent rise to 0.31 in 2023 suggests that the capital investments made in the prior year were rapidly internalized to drive higher sales volume, leading to enhanced asset productivity.
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Segment Capital Expenditures to Depreciation
Cummins Inc., capital expenditures to depreciation by reportable segment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 0.76 | 0.87 | 1.01 | 0.73 | 0.86 |
| Engine | 2.39 | 1.80 | 1.66 | 0.97 | 1.19 |
| Distribution | 0.90 | 1.00 | 0.79 | 0.73 | 1.18 |
| Power Systems | 0.94 | 0.80 | 0.61 | 0.61 | 0.91 |
| Accelera | 1.33 | 1.95 | 1.54 | 1.00 | 2.17 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
An analysis of segment capital expenditures relative to depreciation reveals divergent investment strategies across the business units from 2019 to 2023. While several segments maintained investment levels near or below their depreciation rates, the Engine and Accelera segments exhibited more aggressive capital allocation patterns.
- Engine Segment
- A significant and accelerating upward trend is observed in this segment. After a brief dip to 0.97 in 2020, the ratio rose consistently, reaching 2.39 by December 31, 2023. This trajectory indicates a substantial increase in capital investment far exceeding the depreciation of existing assets, suggesting an aggressive expansion of capacity or a comprehensive modernization of infrastructure.
- Accelera Segment
- This segment demonstrates high volatility but consistently high investment levels. The ratio peaked at 2.17 in 2019 and remained above 1.00 throughout the period, ending 2023 at 1.33. These figures suggest a continuous phase of growth and asset acquisition characteristic of a developing or high-innovation business unit.
- Power Systems Segment
- A recovery pattern is evident following a period of reduced investment. The ratio declined from 0.91 in 2019 to a low of 0.61 in 2020 and 2021, before steadily climbing back to 0.94 by 2023. This movement suggests a return to a maintenance-level investment strategy after a period of capital expenditure contraction.
- Distribution and Components Segments
- Both segments exhibit relatively stable, conservative investment profiles. The Distribution segment fluctuated between 0.73 and 1.18, ending 2023 at 0.90. Similarly, the Components segment trended between 0.73 and 1.01, finishing at 0.76. These ratios indicate that capital expenditures in these segments generally track closely with depreciation, focusing on asset replacement rather than significant expansion.
Across all reportable segments, a common contraction in the capital expenditure to depreciation ratio occurred in 2020, indicating a synchronized reduction in capital spending across the organization during that fiscal year. Post-2020, the reallocation of capital has been heavily weighted toward the Engine and Accelera segments.
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Segment Capital Expenditures to Depreciation: Components
Cummins Inc.; Components; segment capital expenditures to depreciation calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Capital expenditures | 373) | 264) | 184) | 140) | 191) |
| Depreciation and amortization | 491) | 304) | 183) | 192) | 222) |
| Segment Financial Ratio | |||||
| Segment capital expenditures to depreciation1 | 0.76 | 0.87 | 1.01 | 0.73 | 0.86 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 373 ÷ 491 = 0.76
The financial trajectory from 2019 to 2023 reveals a significant acceleration in both capital investment and depreciation expenses, although the relationship between these two metrics has remained inconsistent.
- Capital Expenditure Trends
- Investment in capital assets experienced an initial decline in 2020, dropping to 140 million US dollars. Subsequently, a sustained upward trend emerged, with expenditures increasing to 184 million US dollars in 2021, 264 million US dollars in 2022, and peaking at 373 million US dollars by the end of 2023. This represents a substantial increase in capital allocation toward the end of the observed period.
- Depreciation and Amortization Dynamics
- Depreciation and amortization expenses showed a gradual decrease between 2019 and 2021, reaching a low of 183 million US dollars. However, a sharp escalation occurred in the final two years, with expenses rising to 304 million US dollars in 2022 and reaching 491 million US dollars in 2023. The magnitude of the increase in depreciation has outpaced the growth in capital expenditures during this timeframe.
- Capital Expenditures to Depreciation Ratio
- The ratio of capital expenditures to depreciation fluctuated throughout the five-year period, indicating varying levels of asset replacement and expansion. The ratio reached its peak in 2021 at 1.01, signifying that capital investments slightly exceeded the consumption of existing assets. Following this peak, the ratio declined to 0.87 in 2022 and further to 0.76 in 2023. The prevailing trend since 2021 suggests that the rate of asset depreciation is currently exceeding the rate of new capital investment.
The overall analysis indicates that while absolute spending on capital assets has risen, the sharp increase in depreciation and amortization since 2021 has led to a downward trend in the reinvestment ratio, suggesting a period where asset aging is occurring faster than the acquisition of new capital assets.
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Segment Capital Expenditures to Depreciation: Engine
Cummins Inc.; Engine; segment capital expenditures to depreciation calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Capital expenditures | 538) | 368) | 341) | 202) | 240) |
| Depreciation and amortization | 225) | 205) | 205) | 208) | 202) |
| Segment Financial Ratio | |||||
| Segment capital expenditures to depreciation1 | 2.39 | 1.80 | 1.66 | 0.97 | 1.19 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 538 ÷ 225 = 2.39
The Engine segment demonstrates a significant acceleration in capital investment relative to asset depreciation over the five-year period ending December 31, 2023. While investment levels experienced a temporary decline in 2020, the subsequent years show a consistent and aggressive upward trajectory in capital spending, suggesting a strategic shift toward capacity expansion or technological modernization.
- Capital Expenditures
- Annual capital expenditures exhibited a volatile but overall growth trend. After decreasing from US$ 240 million in 2019 to US$ 202 million in 2020, spending increased substantially each year, reaching US$ 538 million by 2023. This represents a 166% increase in annual investment between 2020 and 2023.
- Depreciation and Amortization
- Depreciation and amortization remained remarkably stable throughout most of the period, fluctuating minimally between US$ 202 million and US$ 208 million from 2019 to 2022. A modest increase to US$ 225 million occurred in 2023, likely reflecting the gradual integration of newer assets into the depreciation schedule.
- Segment Capital Expenditures to Depreciation Ratio
- The ratio of capital expenditures to depreciation serves as an indicator of whether the segment is maintaining, contracting, or expanding its asset base. The ratio fell below 1.0 in 2020 (0.97), indicating that depreciation exceeded new investment. However, the ratio rose sharply thereafter, reaching 1.66 in 2021, 1.80 in 2022, and peaking at 2.39 in 2023. This trend confirms that the segment is investing in new assets at a rate significantly faster than the pace at which existing assets are wearing out.
The divergence between the stagnant depreciation costs and the rapidly climbing capital expenditures indicates a period of intensive growth. By 2023, the segment was allocating more than double the amount of its annual depreciation toward new capital projects, signaling a strong commitment to increasing the long-term productive capacity of the Engine business.
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Segment Capital Expenditures to Depreciation: Distribution
Cummins Inc.; Distribution; segment capital expenditures to depreciation calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Capital expenditures | 103) | 114) | 92) | 89) | 136) |
| Depreciation and amortization | 115) | 114) | 116) | 122) | 115) |
| Segment Financial Ratio | |||||
| Segment capital expenditures to depreciation1 | 0.90 | 1.00 | 0.79 | 0.73 | 1.18 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 103 ÷ 115 = 0.90
The financial trajectory of the Distribution segment between 2019 and 2023 is characterized by a period of initial expansion followed by a phase of capital discipline and subsequent stabilization.
- Capital Expenditure Trends
- Annual capital expenditures exhibited notable volatility over the analyzed period. Spending peaked at $136 million in 2019 before experiencing a sharp decline to $89 million in 2020. A gradual recovery occurred over the following two years, with expenditures rising to $114 million by 2022, followed by a slight moderation to $103 million in 2023.
- Depreciation and Amortization Stability
- Depreciation and amortization expenses remained remarkably consistent, fluctuating within a narrow range between $114 million and $122 million. This stability suggests a steady base of depreciable assets and a consistent rate of asset consumption across the five-year window.
- Capital Expenditures to Depreciation Ratio Analysis
- The ratio of capital expenditures to depreciation indicates a shift in investment strategy. In 2019, a ratio of 1.18 signaled an expansionary phase where investment exceeded the consumption of assets. This trend reversed in 2020 and 2021, with the ratio dropping to 0.73 and 0.79 respectively, indicating a period where capital spending did not fully replace depreciating assets. The ratio returned to a neutral replacement level of 1.00 in 2022, before settling at 0.90 in 2023, suggesting a slight lean toward capital conservation relative to asset wear.
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Segment Capital Expenditures to Depreciation: Power Systems
Cummins Inc.; Power Systems; segment capital expenditures to depreciation calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Capital expenditures | 115) | 96) | 80) | 79) | 107) |
| Depreciation and amortization | 122) | 120) | 131) | 130) | 118) |
| Segment Financial Ratio | |||||
| Segment capital expenditures to depreciation1 | 0.94 | 0.80 | 0.61 | 0.61 | 0.91 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 115 ÷ 122 = 0.94
The Power Systems segment exhibited a V-shaped trend in capital expenditures between 2019 and 2023. Following a reduction in investment from US$ 107 million in 2019 to a low of US$ 79 million in 2020, expenditures grew steadily over the subsequent three years, reaching a five-year peak of US$ 115 million by the end of 2023. During this same period, depreciation and amortization remained relatively stable, fluctuating between a low of US$ 118 million and a peak of US$ 131 million.
- Capital Expenditure to Depreciation Ratio Trends
- The ratio experienced a significant decline from 0.91 in 2019 to 0.61 in 2020 and remained stagnant at 0.61 through 2021. This indicates a period where capital investment substantially trailed the rate of asset depreciation. A recovery trend emerged in 2022, with the ratio increasing to 0.80, and further accelerating to 0.94 in 2023.
- Asset Replacement Analysis
- The ratio remained below 1.00 throughout the entire five-year period, signifying that depreciation and amortization consistently exceeded capital expenditures. This suggests that the segment did not fully replace its depreciating assets on a dollar-for-dollar basis. However, the trajectory from 2021 to 2023 demonstrates a shift toward asset replacement parity, as capital spending increased while depreciation costs stabilized near US$ 122 million.
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Segment Capital Expenditures to Depreciation: Accelera
Cummins Inc.; Accelera; segment capital expenditures to depreciation calculation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Capital expenditures | 84) | 74) | 37) | 18) | 26) |
| Depreciation and amortization | 63) | 38) | 24) | 18) | 12) |
| Segment Financial Ratio | |||||
| Segment capital expenditures to depreciation1 | 1.33 | 1.95 | 1.54 | 1.00 | 2.17 |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 2023 Calculation
Segment capital expenditures to depreciation = Capital expenditures ÷ Depreciation and amortization
= 84 ÷ 63 = 1.33
The Accelera segment has demonstrated a strong trajectory of asset expansion between 2019 and 2023. While capital expenditures experienced a brief decline in 2020, the subsequent years showed an aggressive increase in investment, with spending rising from 18 million US dollars in 2020 to 84 million US dollars in 2023. Concurrently, depreciation and amortization expenses grew steadily from 12 million US dollars to 63 million US dollars over the same period, reflecting a broadening base of depreciable assets.
- Capital Expenditure Trends
- A substantial upward trend in capital spending is evident, particularly from 2021 onward. The increase from 37 million US dollars in 2021 to 84 million US dollars in 2023 indicates a strategic acceleration in infrastructure or technology investments.
- Depreciation and Amortization Growth
- Depreciation and amortization costs have increased fivefold over the five-year period. This consistent rise suggests that previous capital investments are being integrated into the operational asset base, increasing the annual non-cash charges.
- Capital Expenditures to Depreciation Ratio Analysis
- The ratio remained consistently at or above 1.00 throughout the period, signifying that the segment is investing at a rate that meets or exceeds the consumption of its existing assets. The ratio peaked in 2019 at 2.17 and reached another high of 1.95 in 2022, highlighting phases of rapid growth. A moderation to 1.33 in 2023 suggests that while the segment continues to expand, the rate of new investment relative to asset depreciation has slowed compared to the previous year.
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Sales
Cummins Inc., sales by reportable segment
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 13,409) | 9,736) | 7,665) | 6,024) | 6,914) |
| Engine | 11,684) | 10,945) | 9,954) | 8,022) | 10,056) |
| Distribution | 10,249) | 8,929) | 7,772) | 7,136) | 8,071) |
| Power Systems | 5,673) | 5,033) | 4,415) | 3,631) | 4,460) |
| Accelera | 354) | 198) | 116) | 72) | 38) |
| Total segments | 41,369) | 34,841) | 29,922) | 24,885) | 29,539) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Total segment sales exhibited a V-shaped recovery between 2019 and 2021, followed by a period of accelerated growth through 2023. Following a contraction in 2020, where total sales decreased from 29,539 million to 24,885 million, revenue increased consistently to reach 41,369 million by the end of 2023.
- Components Segment Performance
- This segment demonstrated the most significant expansion among the established business lines. Sales grew from 6,914 million in 2019 to 13,409 million in 2023, representing an increase of approximately 94% over the five-year period. The growth became particularly pronounced after 2021, indicating a substantial acceleration in revenue generation.
- Engine Segment Dynamics
- The Engine segment remained a primary revenue driver, although its growth trajectory was more moderate compared to the Components segment. After a decline to 8,022 million in 2020, sales recovered to 11,684 million by 2023, maintaining a steady upward trend post-recovery.
- Distribution and Power Systems Trends
- Both the Distribution and Power Systems segments showed consistent recoveries and growth. Distribution sales rose from 8,071 million in 2019 to 10,249 million in 2023. Similarly, Power Systems grew from 4,460 million in 2019 to 5,673 million in 2023, reflecting a steady increase in operational scale across these sectors.
- Accelera Emerging Growth
- While Accelera represents the smallest portion of total sales in absolute terms, it exhibited the highest relative growth rate. Sales increased from 38 million in 2019 to 354 million in 2023, indicating a rapid scaling of this reportable segment over the observed period.
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Segment EBITDA
Cummins Inc., segment ebitda by reportable segment
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 1,840) | 1,346) | 1,180) | 961) | 1,097) |
| Engine | 1,630) | 1,541) | 1,411) | 1,235) | 1,454) |
| Distribution | 1,209) | 888) | 731) | 665) | 656) |
| Power Systems | 836) | 596) | 496) | 343) | 512) |
| Accelera | (443) | (340) | (223) | (172) | (149) |
| Total segments | 5,072) | 4,031) | 3,595) | 3,032) | 3,570) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Total segment EBITDA experienced a V-shaped recovery between 2019 and 2021, followed by a period of accelerated growth through 2023. After a decline from US$ 3,570 million in 2019 to US$ 3,032 million in 2020, the total surged to US$ 5,072 million by the end of 2023, representing a 42% increase over the five-year period.
- Core Profitable Segments
- The Components segment has emerged as the primary driver of growth, increasing from US$ 1,097 million in 2019 to US$ 1,840 million in 2023. By 2023, it surpassed the Engine segment as the largest contributor to EBITDA. The Engine segment showed steady recovery and growth, rising from a 2020 low of US$ 1,235 million to US$ 1,630 million in 2023.
- The Distribution segment demonstrated consistent year-over-year growth, nearly doubling its EBITDA from US$ 656 million in 2019 to US$ 1,209 million in 2023. Similarly, the Power Systems segment recovered from a significant dip in 2020 (US$ 343 million) to reach a five-year peak of US$ 836 million in 2023.
- Investment Segment Performance
- The Accelera segment reflects a continuous widening of operational losses. EBITDA for this segment declined from negative US$ 149 million in 2019 to negative US$ 443 million in 2023. This persistent downward trend indicates increasing expenditures or investment costs that offset the gains realized in other business units.
- Structural EBITDA Shift
- A shift in the composition of total EBITDA is evident. In 2019, the Engine segment was the dominant contributor; however, by 2023, the contribution became more diversified, with Components and Distribution contributing a larger proportion of the total. The growth in these profitable segments has more than compensated for the accelerating losses within the Accelera segment.
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Depreciation and amortization
Cummins Inc., depreciation and amortization by reportable segment
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 491) | 304) | 183) | 192) | 222) |
| Engine | 225) | 205) | 205) | 208) | 202) |
| Distribution | 115) | 114) | 116) | 122) | 115) |
| Power Systems | 122) | 120) | 131) | 130) | 118) |
| Accelera | 63) | 38) | 24) | 18) | 12) |
| Total segments | 1,016) | 781) | 659) | 670) | 669) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Total depreciation and amortization expenses across all reportable segments exhibited relative stability between 2019 and 2021, followed by a significant acceleration in growth during 2022 and 2023. Total expenditures rose from 669 million US dollars in 2019 to 1,016 million US dollars by the end of 2023, representing a total increase of approximately 51.8% over the five-year period.
- Components Segment
- The Components segment demonstrates the most volatile and impactful trend. After an initial decline from 222 million US dollars in 2019 to a low of 183 million US dollars in 2021, the segment experienced a sharp upward trajectory. Expenses surged to 304 million US dollars in 2022 and reached 491 million US dollars in 2023. This suggests a substantial increase in capital investment or the commissioning of new assets within this segment starting in 2022.
- Accelera Segment
- A consistent and rapid growth pattern is observed in the Accelera segment. Depreciation and amortization expenses increased every year, rising from 12 million US dollars in 2019 to 63 million US dollars in 2023. While the absolute values remain lower than other segments, the rate of growth indicates a scaling phase of asset acquisition and implementation.
- Engine Segment
- The Engine segment maintained a high level of stability throughout the period. Expenses remained largely flat, fluctuating minimally between 202 million US dollars in 2019 and 205 million US dollars in 2022, before seeing a modest increase to 225 million US dollars in 2023.
- Distribution and Power Systems Segments
- Both the Distribution and Power Systems segments exhibited stagnant trends. Distribution expenses remained virtually unchanged, ending 2023 at 115 million US dollars, identical to the 2019 figure. Power Systems showed minor fluctuations, peaking at 131 million US dollars in 2021 before stabilizing at 122 million US dollars by 2023.
The overall increase in total depreciation and amortization is primarily driven by the Components segment and the steady expansion of Accelera. The transition from 2021 to 2023 marks a shift from a period of expense maintenance to one of significant asset-based growth.
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Net assets
Cummins Inc., net assets by reportable segment
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 6,965) | 7,306) | 2,938) | 2,878) | 2,911) |
| Engine | 930) | 1,451) | 1,554) | 1,306) | 1,094) |
| Distribution | 2,348) | 2,698) | 2,294) | 2,444) | 2,536) |
| Power Systems | 1,938) | 2,382) | 2,251) | 2,134) | 2,245) |
| Accelera | 1,159) | 1,158) | 602) | 504) | 472) |
| Total segments | 13,340) | 14,995) | 9,639) | 9,266) | 9,258) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Total net assets across reportable segments exhibited a period of relative stability from 2019 through 2021, followed by a substantial increase in 2022 and a subsequent contraction in 2023. The overall asset base grew from US$ 9,258 million in 2019 to a peak of US$ 14,995 million in 2022, before settling at US$ 13,340 million by the end of 2023.
- Components Segment Analysis
- The Components segment represents the most significant driver of total asset fluctuations. After maintaining a steady baseline of approximately US$ 2,900 million between 2019 and 2021, net assets surged to US$ 7,306 million in 2022. A slight correction occurred in 2023, with assets decreasing to US$ 6,965 million, though the segment remains the largest contributor to the total asset base.
- Accelera Growth Trend
- Accelera demonstrated consistent upward momentum throughout the five-year period. Net assets grew steadily from US$ 472 million in 2019 to US$ 602 million in 2021, followed by a sharp increase to US$ 1,158 million in 2022. This growth trend reached a plateau in 2023, ending the year at US$ 1,159 million.
- Engine and Power Systems Trends
- The Engine segment showed an initial growth trend, peaking at US$ 1,554 million in 2021, before declining to US$ 930 million by 2023. Similarly, Power Systems remained relatively stable around US$ 2,200 million until a decrease to US$ 1,938 million in 2023. These downward movements in the final two years contributed to the overall reduction in total segment assets during the 2023 fiscal year.
- Distribution Segment Stability
- The Distribution segment exhibited moderate volatility compared to other segments. Assets fluctuated within a range of US$ 2,294 million to US$ 2,698 million over the analyzed period, concluding at US$ 2,348 million in 2023.
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Capital expenditures
Cummins Inc., capital expenditures by reportable segment
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Components | 373) | 264) | 184) | 140) | 191) |
| Engine | 538) | 368) | 341) | 202) | 240) |
| Distribution | 103) | 114) | 92) | 89) | 136) |
| Power Systems | 115) | 96) | 80) | 79) | 107) |
| Accelera | 84) | 74) | 37) | 18) | 26) |
| Total segments | 1,213) | 916) | 734) | 528) | 700) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
Total capital expenditures across all reportable segments exhibited a significant upward trajectory over the five-year period, increasing from US$ 700 million in 2019 to US$ 1,213 million in 2023. A temporary contraction was observed in 2020, with total spending falling to US$ 528 million, before entering a phase of aggressive expansion through 2023.
- High-Growth Investment Segments
- The Engine and Components segments have emerged as the primary drivers of capital allocation. The Engine segment, the largest single area of expenditure, grew from US$ 202 million in 2020 to US$ 538 million in 2023. Similarly, the Components segment saw expenditures rise from US$ 140 million in 2020 to US$ 373 million in 2023, indicating a strategic prioritization of these core operational areas.
- Strategic Expansion in Accelera
- The Accelera segment demonstrated the highest relative growth rate among all units. Capital spending increased from US$ 26 million in 2019 to US$ 84 million in 2023, reflecting a consistent year-over-year increase since 2020 and suggesting an intensified focus on this segment's development.
- Stable Expenditure Segments
- Capital spending in the Distribution and Power Systems segments remained relatively stagnant compared to the broader portfolio. Distribution expenditures fluctuated within a narrow range, ending 2023 at US$ 103 million, which is lower than the US$ 136 million recorded in 2019. Power Systems expenditures showed a modest recovery, rising from a low of US$ 79 million in 2020 to US$ 115 million by the end of 2023.
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