27.07.2010

Margins improve at Manitowoc Crane

Manitowoc has reported first half results which show profitability improving, while revenues continue to decline.

Crane revenues for the first six months were $818.5 million, down 38 percent on the same period last year, while revenues for the second quarter were down 31 percent to $451.6 million.

Operating income for the six months was down 59 percent to $43.1 million but declined just 22 percent in the second quarter to $38.6 million.

The significant improvement over the first quarter was, says the company, due to higher volumes, product mix, and favorable receivable collection activity. This helped push operating margins up a point on 2009 to 8.6 percent. Margins in the first quarter were just 1.2 percent.

The crane order book at the end of June was $531 million – down 13.4 percent on the quarter due to higher shipments and the removal of a significant order due to financing challenges.

Chief executive Glen Tellock said: "The second-quarter Crane segment results illustrate the continuing challenges of the current economic environment in which we operate. However, our focus on operational improvements and execution drove a notable improvement in operating margins during the quarter, which helped offset the weakness in global demand.”

“Emerging markets such as Asia, Latin America, and the Middle East demonstrated positive signs of improvement, while demand in the developed economies of North America and Europe continues to be weak. While we have seen modest improvements in utilisation rates and significant reductions in dealer inventories in developed markets, rental rates continue to be soft. Nevertheless, we remain focused on executing on the opportunities we see in emerging markets that we anticipate will drive both near- and intermediate-term results for our Crane business."

Group results

The Manitowoc group as a whole, which includes the food service sector, saw revenues declined just over 22 percent to $1.6 billion, while in the second quarter they were down just over 17 percent.

The group made a pre-tax profit of $18.3 million in the second quarter compared to just $7 million last year, but lost $18.6 million in the six months, however this compares to a loss of $682.5 million in the first six months of 2009.

Manitowoc says that the first half results are in line with its expectations and is holding its full year guidance. It expects the second half to be better for the crane business than the first although still down on 2009.

It also expects the full year operating margins to be above the 3.5 percent that it experienced in 2003. The company also expects to have cut its net debt by $200 million by the end of the year.

Tellock said: "Despite the prolonged challenges presented by the state of the global economy, we maintained our focus on executing against our goals during the second quarter of 2010. As a result, we were able to deliver results consistent with our expectations."

"We remain guarded as we move into the second half of 2010. At the same time, we continue to drive the operational efficiencies, process improvements, and cost reduction initiatives we implemented last year, which should provide enhanced profitability as demand strengthens across our business."

"Balance sheet improvements continue to be a key area of focus for our management team, and prudently managing our cash flow remains a top priority. Achieving our near- and long-term debt reduction goals will continue to be a key component of our strategy."

Vertikal Comment

While the crane business is clearly still tough these numbers do throw up some encouraging signs with revenue declines slowing and margins likely to come in above those of 2003 in spite of a far tougher economic environment and downturn.

Manitowoc is likely to benefit more from the positive economic news in the developing world than its two main rivals, given its strong local position in both India and China as well as South America.

The company is continuing to develop new products while refining its current ones and pushing its strong brands and reducing manufacturing costs and general overheads. It should reap some benefits from this in 2011, with the full rewards not likely until after 2012.