Jennifer Rumsey
President And Chief Executive Officer at Cummins
Thank you, Chris, and good morning. I'll start with a summary of our third quarter financial results, then I will discuss our sales and end market trends by region and I'll finish with a discussion of our outlook for 2022. Mark will then take you through more details of both our third quarter financial performance and our forecast for the year. Before getting into the details of our performance, I want to take a moment to highlight a few major events from the third quarter. On August 3, Cummins completed the acquisition of Meritor, a leading global supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for the commercial vehicle and industrial markets.
The integration of Meritor's people, products and capabilities in axle and brake technology will position Cummins as a leading provider of integrated powertrain solutions across the internal combustion and electric power applications. We've been excited to welcome our new colleagues into our company. The company announced several collaborations that further enable our customers to achieve their decarbonization goals and advance our Destination Zero strategy. During the third quarter, Cummins announced collaborations with Werner Enterprises, Transport Enterprise Leasing and Versatile to deliver 15-liter hydrogen internal combustion engines when available.
The X15H hydrogen engine, part of Cummins' fuel-agnostic platform, will enable a more timely solution to reduce carbon emissions by providing customers with an option that has powertrain installation commonality and end-user familiarity. The New Power business continued to expand its green hydrogen presence globally as demand continues to rise in the key markets of North America, Europe and China. Cummins announced it will expand PEM electrolyzer manufacturing capacity at its Oevel, Belgium factory to one gigawatt. The company also announced it will begin producing electrolyzers in the United States, underscoring our continued dedication to advancing the nation's green hydrogen economy. Electrolyzer production will take place at our
Fridley, Minnesota facility, starting at 500 megawatts of manufacturing capacity annually and scalable to one gigawatt in the future. In addition, we continue to make progress in preparing for the separation of our Filtration business. The addition of Meritor and the planned separation of the Filtration business are positive moves for our future. However, there are upfront costs associated with both transactions, which you can see from our press release and earnings materials, heavily influenced our reported results this quarter. We expect that the most significant costs associated with both transactions are behind us, and we look forward to updating you on our progress in future quarters.
Now I will comment on the overall company performance for the third quarter of 2022 and cover some of our key markets, starting with North America before moving on to our largest international markets. Demand for our products remains strong across all of our key markets and regions with the notable exception of China, resulting in strong revenues in the third quarter. Third quarter revenues totaled $7.3 billion. Excluding the Meritor business, third quarter revenues were $6.6 billion, an increase of 11% from the same quarter in 2021. EBITDA in the third quarter was $884 million or 12.1% of sales. Excluding the Meritor business results and the $25 million related acquisition and integration costs, EBITDA was $907 million or 13.8% of sales compared to $862 million or 14.4% of sales a year ago.
Third quarter results include costs of $16 million or $0.09 per diluted share related to the planned separation of the Filtration business. Adjusting for these costs, EBITDA without Meritor and Filtration costs was $923 million or 14% of sales. My comments moving forward will exclude the results of Meritor, the costs associated with its acquisition and the costs associated with the expected separation of our Filtration business. Our EBITDA percentage declined in the third quarter for three main reasons: first, we saw a 32% drop in joint venture income from the third quarter of 2021, driven primarily by the slowdown in the China markets; second, we increased investments in research and development as we continue to invest in the products and technologies that will create competitive advantage in the future, particularly in the Engine and
New Power segments; and finally, we made an investment in our people through a onetime bonus in recognition of their intense work and commitment to meet customer demand and navigate supply chain and other challenges. This bonus did not apply to company officers. A motivated and highly effective workforce is critical to delivering our customers, executing on our strategy and to creating shareholder value, and this bonus will pay dividends over time in the retention and engagement of our people. We continue to make positive progress in improving gross margins of our business and offsetting the impact of elevated supply chain and other inflationary costs that we have experienced since the start of 2021.
Gross margin percentage improved in the third quarter compared to the third quarter of 2021 as the benefit of higher volumes and pricing exceeded the manufacturing, logistics and material cost increases and higher product coverage costs during the quarter. Our third quarter revenues in North America grew 19% to $4 billion, driven by improved pricing, higher volumes and higher aftermarket demand. Industry production of heavy-duty trucks in the third quarter was 64,000 units, up 23% from 2021 levels. While our heavy-duty unit sales were 25,000, up 15% from 2021. Industry production of medium-duty trucks was 29,000 units in the third quarter of 2022, an increase of 26% from 2021 levels, while our unit sales were up 27,000, up 20% from 2021. We shipped 41,000 engines to Stellantis for use in their Ram pickups in the third quarter of 2022, down 4% from 2021 levels.
Engine sales to construction customers in North America increased by 16% over 2021 due to strong capital spending by rental companies and pricing. Power Systems North America sales were up 30% compared to 2021, driven by higher volumes and strength in aftermarket. Power Systems North America industrial sales were up 122% compared to the third quarter of 2021, driven by strong oil and gas demand. North America power generation sales also increased by 10% from the third quarter of 2021. Our international revenues decreased by 1% in the third quarter of 2022 compared to a year ago. Third quarter revenues in China, including joint ventures, were $1.2 billion, a decrease of 18% due to lower sales in on-highway and construction markets.
Industry demand for medium- and heavy-duty trucks in China was 164,000 units, a decrease of 25% from 2021. Weaker new vehicle demand, contracted property investment and economic impacts from the shutdowns as the country continues to respond to the COVID-19 outbreaks have pushed the market to the lowest level in a decade instead of our projected recovery of the market in the second half of the year. Our sales and units, including joint ventures, were 30,000, a decrease of 27%. The light-duty market in China decreased 8% from 2021 levels to 387,000 units in the third quarter, while our units sold, including joint ventures, were 24,000, a decrease of 30%. Industry demand for excavators in the third quarter was 57,000 units, an increase of 3% from 2021 levels.
And our units sold were 7,800 units, a decrease of 8%. Sales of power generation equipment in China decreased 29% in the third quarter due to the economic impacts of the COVID-19 resurgence. Third quarter revenues in India, including joint ventures, were $614 million, an increase of 18% from the third quarter a year ago. Industry truck production increased by 37%, while our shipments increased 20%, lagging the industry production due to the lower growth in the heavy commercial vehicle segment. Demand for power generation increased in the third quarter as economic activity continued to improve, resulting in record revenue in the quarter for that market. Now let me provide our outlook for 2022, including some comments on individual regions and end markets.
To provide clarity in our projections, we will first provide guidance excluding the results of Meritor from the acquisition date through the end of 2022. We will then provide a view of the expected Meritor results for 2022. Based on our current forecast, we are maintaining full year 2022 revenue guidance of up 8% versus last year. This guidance reflects stronger performance in North America and a continued weak market outlook in China as well as the indefinite suspension of our operations in Russia. We are forecasting higher demand in global mining, oil and gas and power generation markets and expect aftermarket revenues to increase compared with 2021.
EBITDA is now expected to be approximately 15% of sales, excluding the Meritor results and costs associated with acquisition and integration, the cost of the indefinite suspension of our operations in Russia and the costs associated with preparing for the expected separation of our Filtration business. This is below our previous guidance of approximately 15.5% of sales as a result of the lower-than-expected market in China in the second half of 2022 and the onetime employee bonus investment made in the third quarter. This guidance reflects our expectations of increased profitability in the fourth quarter as we continue to drive the improvements we've seen throughout the year on pricing relative to inflationary costs and improve our operating efficiency.
Based on our current forecast, we expect production of heavy-duty trucks in North America to be at 260,000 units in 2022, a 15% increase year-over-year. The supply chain constraints in our industry is expected to continue to limit our collective ability to fully meet the sustained strong end customer demand. In North America, medium-duty truck market, we are continuing to project the market size to be 120,000 to 130,000 units, a 5% to 10% increase from 2021. We are projecting our engine shipments for pickup trucks in North America to be flat compared to 2021, consistent with prior guidance. In China, we now project total revenue, including joint ventures, to decrease 25% to 30% in 2022, an update to our previous guidance of down 20% to 25%.
We now project a 55% reduction in heavy- and medium-duty truck demand and a 15% to 20% reduction in demand in the light-duty truck market compared to a 50% decline and 15% reduction, respectively, in our previous guidance. Industry sales of excavators in China are expected to decline 30% from record levels in 2021, consistent with our prior guidance. Despite the difficult economic and market environment in China, we have continued to improve our presence in the region through the down cycle and are well positioned for continued outgrowth across our end markets in the region. As we look ahead, industry volume of NS VI product will continue to increase as the new regulations are implemented more broadly.
Our technological expertise and emissions experience positions us well to outgrow the market and support our partners through this transition, with our NS VI share continuing to run ahead of our NS V share. We also continue to ramp production and expand our presence in automated manual transmissions as our market share increases and the heavy-duty market is increasingly adopting this technology. In India, we project total revenue, including joint ventures, to increase 15% to 20% in 2022, an improvement from our previous guidance of up 15%. We expect industry demand for trucks to increase approximately 30% in 2022. Strong performance in power generation within India is also contributing to this improved outlook. Most major global high-horsepower markets are expected to remain strong through the end of 2022.
Sales of mining engines are now expected to be up 5% compared to the prior year, an improvement from our previous guidance of flat. Demand for new oil and gas engines is expected to increase by 120%, consistent with our prior guidance. Strong demand in the U.S. and other oil and gas markets amid energy insecurity has fueled this strong outlook. Revenues in global power generation markets are expected to increase 10%, driven by increases in nonresidential construction. This is an increase from our prior guidance of up 5%, driven by the increased production of supply chain constraints slightly eased and improved pricing. We are projecting aftermarket sales to increase 15% to 20% from 2021, consistent with our previous estimate.
This strong outlook is driven by parts demand within our North America on-highway business as well as global Power Systems markets. In New Power, we expect full year sales to be approximately $180 million, down from our previous guidance of $200 million due to customer scheduling and supply chain impacts. We have a growing pipeline of electrolyzers which we expect to convert to backlog and be delivered over the course of the next 12 to 18 months. And we are seeing increased momentum in North America following the passage of the Inflation Reduction Act. Additionally, we will continue to accelerate our collaboration with customers on both electrified power and fuel cell applications in 2022.
This was demonstrated in the third quarter as we successfully launched the Cummins HD120 fuel cell System in China by delivering 52 units to the Lin-gang government for a bus application. For Meritor, we are expecting full year revenue since the date of acquisition to be between $1.7 billion to $1.9 billion. EBITDA is expected to be approximately 4.5% of sales during the same period, including the impact of required purchase accounting and integration costs. This represents the financial impact of Meritor across our Components and New Power businesses. During the quarter, we returned $245 million to shareholders in the form of dividends and share repurchases, consistent with our plan to return approximately 50% of operating cash flow to shareholders for the year.
As I sum up the third quarter, I want to emphasize that we are making progress in our strategy to lead in decarbonizing our industry. Although profitability dropped from the second quarter levels, the fundamentals of our business have not changed. Our products are performing well, leading to record demand from customers and rising market share in some of our core markets. This is a direct result of the contribution from our outstanding workforce. I do want to acknowledge the clear improvement in the financial performance of Power Systems business this quarter, and I'm enthusiastic about the prospects for future earnings growth.
We do expect total company profitability to improve in the fourth quarter from third quarter levels, as implied in our guidance for the fourth quarter. We are committed to improving the underlying financial performance of our business and delivering strong incremental margins through the remainder of 2022 and beyond.
Now let me turn it over to Mark.
