29.10.2008

Manitowoc crane up 28%

Manitowoc has released its nine month and third quarter results for the period to the end of September. Headline numbers show a strong performance led by the crane business.

Crane revenues at the nine month stage are $2.94 billion, an increase of almost 28 percent on the same period in 2007, while operating income for the same period jumped by 34 percent to $441 million.

Growth in the third quarter was a little slower than the year to date, with revenues up 22 percent and operating income up 24 percent.

Crane backlog at the end of September is 26 percent higher than at the same period last year, although slightly down on what it was at the end of June, at $3.3 billion - (-5%). Some of this fall is due to the fact that the company has not yet opened up its 2010 order book, due to the uncertainty of pricing this far ahead in such a volatile raw material market.

The company says that demand for most of its cranes continues to be strong, although it has experienced a slowdown in tower crane sales as the credit situation begins to bite.

The Manitowoc group as a whole saw nine month revenues improve by over 24 percent for the combined food and crane business to $3.28 billion. Having sold the marine segment it has been treated as a discontinued operation in these numbers.

The company as a whole reported a nine month operating income of $440 million, interest costs were more than 20 percent lower than last year, but a $198 million loss on hedging the exchange rate for the Enodis acquisition, a requirement demanded by the funders, resulted in a fall in pre-tax profits from $306 million to $234 million, a fall of over 23 percent. As a result the group has eased its full year profit expectations.

Glen Tellock, president and chief executive of Manitowoc said:
"The turbulence in the global financial system is affecting our markets and customers. However, Manitowoc is a much better balanced company than it was just five years ago. We have a broader mix of products, a wider geographic scope, and much higher levels of efficiency.”

“In addition, the benefits achieved through the acquisition and integration of Potain and Grove into Manitowoc Crane Group should continue to enable us to remain one of the world's leading sources of lifting solutions. Highlights of the third quarter included strong performance by our Crane business which continued to benefit from long-term global infrastructure and energy development projects, despite ongoing softness in some residential and commercial construction markets, as well as challenges in customer and project financing”

"Demand for our high-capacity crawler and mobile telescopic cranes remains strong in markets where investment in large infrastructure and power generation projects continues. These markets include the Americas, the Middle East, India, and Asia. Demand has softened in China consistent with the anticipated 'post-Olympic' pause in construction projects.”

“However, the availability and cost of financing in Europe, Russia, and Africa began impacting the demand for tower cranes during the quarter. Accordingly, we have taken prudent measures to maximize the performance of the Crane segment during this period of economic turbulence. These measures include rebalancing the production schedules at our factories, eliminating temporary workers in certain European factories, internalizing a variety of previously outsourced manufacturing activities, instituting numerous SG&A cost reductions and deferrals, and accelerating the ramp-up of lean manufacturing initiatives,"

Vertikal Comment

This is without question another first class result from Manitowoc, the crane business not only turned a solid performance, but also looks well placed for the next year or so.

The company’s backlog has eased a little from the end of June, while some of this is due to a softening of the market for some crane types, including tower cranes, boom trucks and smaller mobiles, the company is also under pressure to reduce its backlog and thus delivery times for medium to large cranes.

In order to achieve this the company has added a significant amount of extra produciton space with extensions to existing plants, such as Shady Grove and Niella – Italy, not to mention its facility in Slovakia.

The company has also started adapting its production facilities where possible, switching from slower products to ones that remain in high demand, while also bringing outsourced work back in house in order to preserve skilled staff. Although it has had to make some layoffs already in order to match production to demand.

With its plans to continue to invest in new product development and in building its already strong brands, the company looks to be well placed to continue its strong growth, at least for the next 12 to 18 months.