28.10.2015

Manitowoc Crane drops 20%

Manitowoc cranes has reported its third quarter results with revenues, order book and profits all dropping.

Year to date revenues were down almost 20 percent to $1.32 billion, while operating income plunged to almost a third, from $118.6 million to $40.2 million. The order book at the end of the period was $631 million, compared to $716 million this time last year.

In the third quarter revenues dropped 23 percent to $438.2 million, due to lower sales in Asia and the Middle East, couple with slower shipments of the new Variable Counterweight crawler cranes due to production issues. Profits plunged from $41.6 million to just $4.3 million. The company expects to end the year down around 20 percent.

At the same time as publishing the results the company announced the sudden departure of chief executive Glen Tellock. He has been replaced with non-executive director Ken Krueger. See Tellock quits Manitowoc
Mantitowoc as a whole reported year to date revenues of $2.5 billion, down 12 percent, while pre-tax profits were just a third of last year’s levels – dropping from $131 million to $44.2 million.

Speaking of the results Krueger said: “While our third-quarter results for Foodservice showed solid improvement, Cranes fell short of our expectations. Consistent with the worsening global demand environment impacting the industrial sector as a whole, our shortfall during the third quarter was largely the result of weakness in tower crane demand in Asia and the Middle East, coupled with broad-based softness in All Terrain cranes. In addition, we experienced significant delays in crawler crane shipments due to extended reliability testing and operational issues.”

“Given our results for the third quarter, we are taking significant actions in both segments to right-size the business that will result in approximately $30 million of restructuring charges in the fourth quarter. These actions are expected to generate savings of approximately $135 to $145 million over the next three years”.

“Continued global economic uncertainty, coupled with the devaluation of the Chinese yuan that negatively affected the rest of the Asian markets, weighed on end market demand in the third quarter. As we look to the remainder of 2015 and into 2016, we will focus on those aspects of the business we can control, which include executing on our operational efficiency initiatives and optimizing our cost structure, without sacrificing the innovation and quality for which Manitowoc is known.”

“This cycle has proven to be different from any other in recent memory, particularly with regard to customer order patterns. As a result, we are taking a number of aggressive actions in Cranes to offset this decline in demand, including right-sizing the business, plant rationalisations, headcount reductions, and other cost optimisation initiatives. These actions will likely result in an approximate $10 - $15 million restructuring charge in the fourth quarter, and savings of approximately $35 - $45 million over the next three years”.

Vertikal Comment

While this quarter’s results were expected to be poor, they were not expected to be quite so bad, it looks as though a weak sales in several markets have come together with currency exchange issues and probably more critical – delays and production issues with the new VPC crawler cranes. However while the market is slow the reaction from the board of directors looks a little knee jerk and severe for what is most likely to be a temporary slow-down at least from this distance.

It is hard to argue though against the need to rationalise the number of production facilities. The company’s more smaller facilities than its main rivals Liebherr, Terex and Tadano. And with the benefit of hindsight the decision to build a plant in Brazil looks flawed. However the company will need to be careful not to derail a business that product wise is in a better place than it has been for many years.