29.10.2015

Another tough quarter for JLG

JLG has published its full year results, with a major slowdown in revenues, orders and profits during the final quarter

Looking at the year as a whole the company ended the year down two percent at $3.4 billion, this was made up of $1.63 billion of aerial lift sales – down seven percent on last year, 1.3 billion of telehandler sales – 2.5 percent lower than a year ago, while other revenues – parts service etc.. increased seven percent to $647 million.Operating income fell just over 18 percent to $407 million.

Moving on to the fourth quarter revenues dropped 17.5 percent to $769.5 million, made up of $374.5 million of aerial lift sales- down around 17 percent on the same quarter last year, telehandlers more than 25 percent lower at $234.6 million and other revenues of 160.4 million – four percent down on last year. Order intake was also badly affected particularly in North America, falling 55 percent to $209.7 million, compared to last year’s $384.3 million. Around three percent of the revenue drop is due to currency exchange rates.

Operating income for the period declined 56 percent to $56.5 million- due to the lower sales, restructuring charges, a less attractive product mix and increased reserves against used equipment inventory.

JLG parent Oshkosh saw full year revenues fall almost 11 percent to $6.1 billion, with a pre-tax profit of $326.1 million over 24 percent lower than last year.

Oshkosh chief executive Charles Szews said: “Fourth quarter earnings were in line with our revised expectations. As we expected, our access equipment and concrete mixer businesses experienced soft demand in the fourth quarter, but construction activity in North America and Europe remains on the upswing which we believe will lead to stronger demand for these products in coming months”.

“Our Defence business is rebounding and experiencing increased interest in our expanding portfolio of tactical wheeled vehicles. Today, we announced our expectations for fiscal 2016 earnings per share of $3.00 to $3.40. This range is lower than the range implied by our comments during our third quarter earnings conference call, due largely to a more cautious outlook for our access equipment and concrete mixer businesses. We believe these markets will be soft during the first half of fiscal 2016 before improving as the 2016 construction season gets underway. We also believe our defence business will strengthen as fiscal 2016 unfolds due to urgent international requirements for M-ATVs and aftermarket support”.

“We expect to generate approximately $350 million of free cash flow in fiscal 2016 as we reduce access equipment inventory, while also investing in Defence working capital to fulfil international sales contracts. We expect to utilise about half of the free cash flow for share repurchases and dividends, including the increase to our quarterly dividend rate”.

Vertikal Comment

This is steeper slow down than we might have expected given the underlying economic situation and rental activity. However a number of factors have come together to slow down recent growth trends, including a number of large American rental companies holding back on capital expenditure for reasons not all of which are related to activity and ongoing prospects. It would be surprising if these continue for more than another quarter or two.
The net effect might lead to a more cautious approach by manufacturers to add capacity as the market moves forward again which could then lead to higher prices due to supply and demand pressures and longer lead times, precisely the opposite of what some rental companies might have hoped to achieve.

JLG is still very well placed to bounce back in 2016 and most likely be the first powered access manufacturer to exceed annual sales of $4 billion. So in summary a gloomy result but not a true indicator of ongoing prospects.