30.07.2015

Tough quarter for JLG

JLG has reported a tough third quarter with lower revenues and profits, causing it to lower its full year expectations.

Nine month revenues were $2.63 billion, 2.5 percent up on the same period last year, with aerial lift sales falling three percent to $1.25 billion, while telehandler shipments increased six percent to $891.5 million and other revenues improved 12 percent to $487.1 million. Operating profits for the nine months were $350.5 million, six percent lower than last year.

Looking at the third quarter, overall sales fell over 10 percent to $932.6 million – three percent of which is due to currency fluctuations - made up of a three percent reduction in aerial lift sales to $542.7 million, a 32 percent drop in telehandler shipments to $221.4 million. Other revenues climbed 7.5 percent to $168.5 million. Operating profit in the quarter was $136.4 million a fall of more than 18 percent. This due to lower volumes along with costs associated with the delay in shipping new products. The backlog/order book at the end of June was $394.9 million 19 percent below that achieved last year.

Oshkosh chief executive Charles Szews said: “Our access equipment segment sales fell short of our expectations for the third quarter, normally our seasonally best quarter, due to heavy rains in May disrupting construction projects across the Southern U.S., cautious order patterns arising from uncertain rental market conditions, including the impact of lower oil and gas prices on rental demand for access equipment, and to a much lesser extent, delays with several new product launches. While these launch issues are largely behind us, they impacted our sales and manufacturing costs in the quarter”.

“We believe the fundamental drivers for access equipment demand remain solid. Specifically, we believe slowly rising residential and non-residential construction in the U.S. will continue to drive rental fleet demand for access equipment, and that rental company metrics will remain strong. However, we now believe that a shortened construction season in the U.S. due to severe weather over the last two quarters along with the impact of lower oil and gas prices on rental fleet utilisation are leading U.S. rental companies to reduce access equipment purchases compared to our earlier expectations for fiscal 2015. Further, we now expect an approximate 5 to 10 percent sales decline in our access equipment segment in fiscal 2016 as we do not expect improving construction demand to fully offset anticipated reduced replacement demand resulting from very low industry purchases during 2009 and 2010”.

Vertikal Comment

These weaker numbers are not a complete surprise, telehandler sales had been dragged forward into the first two quarters due to price changes and new engines coming on line. Aerial lift sales on the other hand have remained close to last year’s levels, with small declines partly due to euro sales converting into few dollars, as the Euro has weakened in the face of a strong dollar.

While rental companies are continuing to do well in North America, they are holding off a little on new machine purchases, as lead times shrink. If this almost self fulfilling prophesy results in lower pricing, then it could accelerate. However the average age of rental company fleets remains on the high side in comparison to long term trends, this will limit the length of time companies can hold off on fleet replacements.

Also the fact that we are still at a relatively early stage of the economic cycle this is the ideal time for rental companies to be upping their replacement spending, rather than cutting it. With new well funded rental start-ups beginning to appear, any fleet ageing among the major national rental companies will play into the hands of the new start ups.

We expect the market to continue to grow, after a quarter or two of catching its breath, there is still plenty of replacement and growth to go, before we get back to the highs of 2006 to 2008. And don’t forget that the powered access market is still far from mature, even in the USA – there is plenty of market penetration growth to go.