06.08.2008

Palfinger up 24%

Palfinger, the Austrian based loader crane, truck mounted aerial lift and tail lift manufacturer has announced its half year results to the end of June.

Revenues increased by 24.3 percent to €423.5 million which included €33 million from the inclusion of the MBB tail lift business which was acquired at the end of last year. The company’s core crane business contributed most of the gain with sales climbing by almost 17 percent to €291 million.

Sales at the Hydraulic systems and services division, which includes aerial lifts, tail lifts, and other material handling equipment jumped 44 percent on the back of the MBB acquisition.

In terms of profits, the crane business continues to drive the company, with operating income rising by 20.3 percent to €61.1 million, this in spite of a shift in the product mix towards smaller cranes which are usually less profitable.

The Hydraulic systems business saw operating income fall from a meager €900,000 last year to just €100,000 this year. This due to the higher level of low margin tail lift business added by MBB and relocation costs involved Palfinger’s rationalization plans for its tail lift business which will include the merging of its Palift range with the MBB business for continental Europe and its Ratcliff range in the UK. In the second half the Wumag acquisition will also come into play.

The company as a whole reported pre-tax profits of €59.5 million an increase of 12 percent on the same period in 2007.

Chief executive Herbert Ortner said: “Our business success achieved in an increasingly difficult environment during the first half year shows how strongly Palfinger is positioned in the market, which is an asset in particular in times like these. Our excellent regional and product-oriented position and our solid financial basis have enabled us to actively operate in the market and has made Palfinger a successful business partner in the long-term.”

Palfinger says that it saw a weakening market in Spain, Italy, the UK and the USA but these were more than offset by growth in Germany, France, Scandinavia, Eastern Europe, Russia and Asia.

Looking forward the company says that it expects an improvement in some of the slowing markets, while the positive markets look stable, although not growing as fast as they did in 2007. On the basis of this it expects growth to continue to run in double digits throughout the second half.

However with the lower margin tail-lift business now representing a larger portion of the groups business and that the Wumag business is expected to have an initial negative impact on margins, not to mention the weaker economic environment, Palfinger says it is anticipating a decline in its overall EBIT margin levels for the year.

Vertikal Comment

No matter how you look at it this is another good quarter from Palfinger as it continues to increase its crane sales while building up its other divisions. With its stronger positions now in both tail lifts and truck mounted work platforms you can be sure that it will work at productivity improvements in order to build its margins in these areas.

The effort may take a year or two, but if you look at what the company has achieved with its crane business over the past three or four years, it looks well placed to repeat the exercise for these other two businesses.

In spite of what is a very good result overall, the fact that Palfinger has warned of lower margins, at least in percentage terms, it is likely to see a negative impact in its share price in the coming weeks.

It is also likely to see some negative commentary from some of the analysts that run a mile at the sight of any declining number. My guess is that this will not be of too great a concern to Palfinger which has relatively low gearing, is confident of its long term strategy and has a solid shareholder base to offset the ‘in-and-out’ quick buck merchants.

If the share price does continue to fall, it will present a good opportunity for those who like to invest over the mid to long term.