29.04.2010

JLG boosts revenues

Second quarter revenues at JLG almost tripled to $990.1 million, thanks largely to its M-ATV sub contract work for its owner Oshkosh. Sales of its access and telehandler products also improved to $253 million, up 1.5 percent compared to the same period last year. Operating income for the quarter was $46.1 million, compared to a loss of $941.6 million last year.

For the six months to the end of March revenues were up almost 280 percent to $1.7 billion, while operating income was $59.6 million compared to a loss of $988.5 million in 2009.

Order intake continued to outstrip current production and has cleared out most of the company’s inventory and boosted the order book from $98.5 million to $191 million.

Focusing on the core business, most of the modest sales improvement can be traced to currency exchange gains, although the company says that it has seen strong demand in South America and the Pacific Rim, including Australia, although this was offset by continued weakness in North America, Europe, Africa and the Middle East.

Looking at the group as a whole, Oshkosh reported another record quarter with sales more than doubling to $5.3 billion, while pre –tax profits jumped from a loss last your of $1.2 billion to a profit of $726 million this year.

Chief executive Robert G. Bohn, said: "We delivered record results in the second quarter of fiscal 2010 as our defense segment performed exceptionally well driven by continued strong deliveries of M-ATVs for Afghanistan. During the quarter, we also received notice that our contract award to supply the U.S. Army with its requirements for the Family of Medium Tactical Vehicles was upheld. Despite delays caused by the protest of the award.”

"We continued to improve our balance sheet during the quarter by paying down $239 million of debt and extending out our debt maturities by completing the issuance of $500 million of senior notes that mature in 2017 and 2020. We used the net proceeds of $489.2 million from the senior notes to repay debt that was scheduled to mature in December 2013.”

"We expect fiscal 2010 to be a record year for Oshkosh in terms of sales and earnings, driven by strength in our defense segment while most of our non-defense businesses continue to face soft markets. We continue to invest in lean initiatives to mitigate the effects of the soft markets and streamline operations for fiscal 2011 when we believe these markets will be stronger.”

Vertikal Comment

JLG is clearly benefiting massively from its ownership by Oshkosh, while this will not last forever it is allowing the company to continue to bring back production employees that it had been forced to lay off. The preservation of these skills and capacity could prove to be highly beneficial as the market for its core products begins to pick up.

Looking at the sale of its own products, it did at least manage to post a small positive growth at a time when its main competitors are still seeing some minor shrinkage. Its order book, while still modest compared to the glory days of 2007-8, is still a significant improvement on previous quarters and, one hopes, a positive indicator.

If all works out well for JLG the military subcontract business will start to tail-off as the access market improves. In the meantime it must be feeling very thankful for the day Oshkosh came along. While for Oshkosh JLG’s capacity, ability to ramp up rapidly and provide sub assemblies at the price and quality it requires is a godsend.

Rarely do acquisitions like this turn out to be as positive for both sides as this appears to be. The challenge will of course be when and how it returns fully to its core business. In the meantime Robert Bohn and his directors could be forgiven for feeling just a little bit smug today.