Jennifer Rumsey
Chair and Chief Executive Officer at Cummins
Thank you, Chris. Good morning.
I'll start with a summary of our second quarter financial results. Then I will discuss our sales and end market trends by region. I will finish with a discussion of our outlook for 2023. Mark will then take you through more details of both our second quarter financial performance and our forecast for the year.
Before getting into the details on our performance, I want to take a moment to highlight a few major events from the second quarter that demonstrate the continued execution of our strategy. On April 3rd, United States President Joe Biden visited company facilities in Fridley, Minnesota to tour Accelera by Cummins' first U.S. manufacturing location for electrolyzers, a key technology to produce no-carbon hydrogen. Accelera is initially dedicating 89,000 square feet of the existing Cummins power generation facility in Fridley to electrolyzer production, with the opportunity to expand to meet the growing demand. Accelera also reached a further milestone of electrolyzer order backlog totaling over $500 million at the end of the quarter. The Fridley facility will help address that growing demand, along with other capacity being added globally.
Lastly, progress continues to be made on the separation of the filtration business. On May 26th, Atmus Filtration Technologies, Inc., began trading on the New York Stock Exchange, under the ticker symbol ATMU, in connection with its initial public offering. Upon the completion of the IPO, Cummins retained approximately 80.5% of Atmus' outstanding shares. The Atmus IPO generated $299 million of net proceeds, and Atmus added $650 million of debt. Cummins realizes the benefit of the IPO proceedings and the debt issuance, as Atmus will hold the debt at full separation.
Now I will comment on the overall Company performance for the second quarter of 2023, and cover some of our key markets, starting with North America, before moving on to our largest international markets. Demand for our products continued to be strong across many of our key markets and regions, resulting in record revenues in the second quarter of 2023. Revenues for the quarter were $8.6 billion, an increase of 31% compared to the second quarter of 2022, driven by the addition of Meritor, strong demand, and improved pricing. EBITDA was $1.3 billion, or 15.1%, compared to $1.1 billion, or 16% a year ago. Second quarter 2023 results include $23 million of costs related to the separation of the filtration business. This compares to second quarter 2022 results, which include $47 million in recovery of amounts reserved related to the indefinite suspension of operations in Russia, offset by $29 million of costs related to the separation of the filtration business.
Excluding those items, EBITDA percentage of 15.4% in the second quarter of 2023, represented a slight decline from the 15.7% we delivered in 2022, principally due to the addition of Meritor activity, which currently has a lower gross margin percentage than our other businesses, and increased SDMA and development expenses. EBITDA and gross margin dollars improved compared to the second quarter of 2022, as the benefits of higher volumes, pricing, and the acquisition of Meritor exceeded the supply chain cost increases. The strong EBITDA performance of the business in the first half drove an increase in selling and administrative expenses versus the prior year, as we recorded higher accruals related to our variable compensation plans during the quarter.
Research and development expenses also increased in the second quarter as we continue to invest in the products and technologies that will create advantages in the future, particularly in the engine, components, and Accelera segments. As we noted previously, Meritor results are included in our overall guidance for 2023. In the second quarter, Meritor operating performance and financial results showed improvement with sales of $1.2 billion and EBITDA of 12.2%. The improvement in the profitability from the first quarter EBITDA margin of 9.4% was driven by pricing to cover inflation, operational improvements, and cost reduction activities, which more than offset material cost increases that we expect to persist through the second half of the year.
Our second quarter revenues in North America grew 31% to $5.3 billion, driven by the addition of Meritor and strong demand in our core markets. Industry production of heavy-duty trucks in the second quarter was 77,000 units, up 11% from 2022 levels, while our heavy-duty unit sales were 29,000, also up 11% from 2022. Industry production of medium-duty trucks was 37,000 units in the second quarter of 2023, an increase of 11% from 2022 levels, while our unit sales were 34,000, up 27% from 2022. We shipped 38,000 engines to Stellantis for use in their Ram pickups in the second quarter of 2023, flat with the 2022 levels. Engine sales to construction customers in North America increased by 8%, driven primarily by positive net pricing. Revenues in North America power generation increased by 16% as industrial and data center demand improved and supply chain constraints eased modestly.
Our international revenues increased by 32% in the second quarter of 2023 compared to a year ago, with the addition of Meritor and a strong demand across most markets. Second quarter revenues in China, including joint ventures, were $1.7 billion, an increase of 37% as markets began to recover compared to a very weak second quarter of 2022, which was impaired by COVID shutdowns in Shanghai and other regions. Industry demand for medium and heavy-duty trucks in China was 279,000 units, an increase of 61% from last year. Our sales in units, including joint ventures, were 41,000, an increase of 63% due to increased penetration within our joint venture partners and new products launched to meet the NS6 standard. The light-duty market in China was up 21% from 2022 levels at 460,000 units, while our units sold, including joint ventures, were 28,000, an increase of 23%.
Industry demand for excavators in the second quarter was 51,000 units, a decrease of 23% from 2022 levels. The decrease in the market size is due to weaker activity and construction. Our units sold were 8,000 units, an increase of 5%, driven by improved share with new and expanded customer relationships for both domestic and export usage. Sales of power generation equipment in China decreased 8% in the second quarter, primarily driven by a decline in the data center market.
Second-quarter revenues in India, including joint ventures, were $724 million, an increase of 22% from the second quarter of a year ago. Industry truck production increased by 2%, while our shipments increased 1%. Power generation revenues increased by 75% in the second quarter, driven by strong economic activity and customer demand ahead of a July 1st emissions regulation change.
Now, let me provide our outlook for 2023, including some comments on individual regions and end markets. Based on our current forecast, we are maintaining full-year 2023 revenue guidance of up 15% to 20% versus last year. EBITDA is still expected to be in the range of 15% to 15.7%. We now expect stronger revenue and profitability in both our power systems and distribution segments than we did three months ago, offset by increased cost in the Accelera business. We are maintaining our forecast for heavy-duty trucks in North America to be 270,000 to 290,000 units in 2023. Supply chain constraints continue to limit our industry's collective ability to produce, and while end customer demand remains strong currently, our current guidance forecast lower industry truck production in the fourth quarter.
In the North America, medium-duty truck market, we are projecting the market size to be 135,000 to 150,000 units, up 5% to 15% from 2022. This is an increase from our previous guidance by 10,000 units. Similar to heavy-duty, supply chain constraints continue to limit our ability to produce and fully meet end customer demand. However, through the rebalancing across our global plants efforts to improve the supply base, we have been able to increase our production resulting in the improved outlook. The improvement in the medium-duty outlook was offset by decreases in our forecast for two other markets. North American construction is now expected to be down 10% to flat versus our previous guidance of flat to up 10%.
Secondly, Brazil truck is expected to be down 30% to 40%, a decline from our prior guidance of down 10% to 20%, as the market adjust to Euro 6 equivalent emission standards. Consistent with our prior guidance, our engine shipments for pickup trucks in North America are expected to be 140,000 to 150,000 in 2023, volume levels in line with 2022. In China, we project total revenue, including joint ventures to increase approximately 15% in 2023 driven by share growth, better volumes and content increases. We project a 15% to 25% improvement in the heavy and medium duty truck demand and a 10% to 20% improvement in the light duty truck demand coming off the low market levels in 2022, consistent with prior guide. Despite the slow pace of recovery in the China truck market, we are continuing to see strong performance for our products, including the 15-liter natural gas engine, which we launched in 2021. Due to the fuel cost differential, approximately 20% of the heavy duty market is expected to be natural gas powered by the end of 2023.
In the short time, since we launched our new natural gas product in China, our share has been ramping up with strong customer reception in heavy-duty market. And we look forward to launching the 15-liter natural gas engine at North America in 2024. We expect China construction volumes to be flat to down 10% in line with prior guidance consistent with the tepid economy and weaker overall activity. In India, we project total revenue, including joint ventures to be up approximately 6% in 2023, an improvement from our previous forecast of up 1% propelled by stronger power generation and on highway sales. We expect industry demand for trucks to be flat to up 5% for the year. We project our major global high horsepower markets to remain strong in 2023. Sales of mining engines are expected to be flat to up 10%, an improvement from our previous guidance of down 5% to up 5%.
Revenues in global power generation markets are now expected to increase 15% to 20%, up from our previous guidance of a 10% to 15% increase, driven by non residential construction and improvement in the data center markets. For Accelera, we expect full-year sales to be $350 million to $400 million, consistent with our previous guidance. As noted in my highlights, the electrolyzer market continues to gain momentum with our near-term focus on expanding capacity to meet the growing demand. As we scale up to serve the electrolyzer opportunity, continue to develop our products and support our customers in the field, costs are running higher than originally projected for the year. As a result, we have revised our EBITDA guidance for Accelera to an expected loss of $420 million to $440 million for 2023 versus our prior guidance of $370 million to $390 million.
Within components, Cummins expects revenues contributed by the Meritor business for 2023 to be $4.7 billion to $4.9 billion, and EBITDA is expected to be in the range of 10.3% to 11.0% of sales, consistent with prior guidance.
In summary, coming off a very strong first half where we produced record revenues and record EBITDA while delivering for our customers, we are maintaining our guidance of sales up 15% to 20% and EBITDA of 15.0% to 15.7%. Demand in most of our core markets is strong, while we continue to closely monitor global economic indicators. Should economic momentum slow, Cummins will remain in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to our shareholders.
Our guidance for the full-year implies weaker revenue in the second half of the year. While demand remained strong in several markets, a weaker outlook in China versus the first half, an expected decrease in the North America heavy-duty truck production in the fourth quarter and the previously mentioned North America construction and Brazil truck decrease are some of the factors driving the lower second half run rate. In view of the lowered forecasted revenues in the second half of the year, we expect to manage our operating expenses below the second quarter levels. During the quarter, we returned $223 million to shareholders in the form of dividends, consistent with our long-term plan to return approximately 50% of operating cash flow to our shareholders.
Shortly after quarter end, we announced a 7% increase in the quarterly dividend from $1.57 to $1.68 per share, the 14th consecutive year in which we have increased the dividend. The strong execution from the first quarter of 2023 continued into the second, resulting in record sales and strong profitability despite the ongoing challenges in our operating environment.
I want to thank our Cummins employees who continue to work tirelessly to meet customer needs and respond to the strong demand levels by ensuring quality products, strengthening our customer relationships and navigating continued supply chain constraints. Our results reflect our focus on delivering strong operational performance, investing in future growth, bringing sustainable solutions to decarbonize our industry and returning cash to our shareholders.
Now let me turn it over to Mark.
