Cummins Inc. (CMI) has reported a 23.95 percent fall in profit for the quarter ended Oct. 02, 2016. The company has earned $289 million, or $1.72 a share in the quarter, compared with $380 million, or $2.14 a share for the same period last year.

Revenue during the quarter dropped 9.37 percent to $4,187 million from $4,620 million in the previous year period. Gross margin for the quarter contracted 38 basis points over the previous year period to 25.77 percent. Total expenses were 90.83 percent of quarterly revenues, up from 87.94 percent for the same period last year. That has resulted in a contraction of 289 basis points in operating margin to 9.17 percent.

Operating income for the quarter was $384 million, compared with $557 million in the previous year period.

"Due to the slow pace of growth in the global economy, we continue to face weak demand in a number of our most important markets,” said Cummins chairman and chief executive officer Tom Linebarger. "The restructuring actions that we initiated in the fourth quarter of 2015, combined with strong execution on material cost reduction initiatives, productivity gains and improvements in product quality are all helping to mitigate the impact of weaker revenues. We are on track to deliver our goal of 25% decremental EBIT margin for the full year 2016, as a result of strong operational performance in very challenging economic conditions. We have returned $1.3 billion to shareholders so far this year, through a combination of dividends and share repurchases, consistent with our plans to return 75 percent of operating cash flow to shareholders in 2016."

For the financial year 2016, Cummins Inc. projects revenue to decline by 9 percent.

The company has spent $590 million cash to meet investing activities during the nine month period as against cash outgo of $477 million in the last year period.

The company has spent $1,041 million cash to carry out financing activities during the nine month period as against cash outgo of $1,215 million in the last year period.

Cash and cash equivalents stood at $1,251 million as on Oct. 02, 2016, down 25.89 percent or $437 million from $1,688 million on Sep. 27, 2015.

Working capital drops significantly

Cummins Inc. has witnessed a decline in the working capital over the last year. It stood at $3,486 million as at Oct. 02, 2016, down 28.77 percent or $1,408 million from $4,894 million on Sep. 27, 2015. Current ratio was at 1.81 as on Oct. 02, 2016, down from 2.23 on Sep. 27, 2015.

Cash conversion cycle (CCC) has decreased to 55 days for the quarter from 95 days for the last year period. Days sales outstanding went up to 68 days for the quarter compared with 65 days for the same period last year.

Days inventory outstanding has decreased to 41 days for the quarter compared with 81 days for the previous year period. At the same time, days payable outstanding went up to 55 days for the quarter from 51 for the same period last year.