Global diesel engine maker Cummins (CMI) is looking to Africa, where there’s a whole continent in desperate need for power. And CMI is ready to provide it. Over the next five years, the company plans to invest $15 million per year in Africa, much of it to boost its sales network so it can reach its goal of $2 billion in sales there annually by 2020.
The big focus is on diesel generators big enough to power the continuing mining boom across Africa and to power growing economies such as Nigeria, where the energy supply deficit is rife.
Africa is shifting from pool-based electricity to off-grid solutions, and that’s where CMI is putting its bets. Already sales from Africa reach about $300 million a year with 1,100 employees and 25 facilities, coordinated from its African headquarters in Johannesburg, South Africa.
The driver is going to be sales targeting these big, energy-intensive industries, with exports coming out of Columbus, Ind., until the market is ready for its own localized production.
In the most recent earnings report in late April, Africa only accounted for just 1 percent of engine revenue and 3 percent of power generation revenue out of a total $8.9 billion for the quarter.
Cummins is expanding at home, adding 600 new white-collar jobs in its hometown.
The decision to invest and a new office building in downtown Columbus will mean a total of 3,000 jobs by 2013, enough to bring out the mayor and the governor to the announcement party. The state is suffering from unemployment below the national average but still high enough to be a concern for communities in the Rust Belt.
Analysts tracked by Thompson/First Call had a median price target on the stock of $135. It traded recently around $93.
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