29.09.2011

Snorkel up 25%

UK based aerial lift manufacturer Snorkel has reported first half revenues up 25 percent, while tripling the size of its order book and reducing its pre-tax loss.

Revenues for the half year were £24.6 million, just over 25 percent up on the same period last year and marginally up on the second half of last year. The pre-tax loss was reduced from 7.8 million last year to £7.3 million this year, cash however improved from 3.6 million at this point last year to £4.7 million.

In the same period the company’s order book has surged from £7.7 million at the end of last year to £20.9 million as of the end of June.

Snorkel says that the improvement in revenues and order book is due to its customers replacing ageing equipment, along with the strength and spread of its distributor network. The company says that with limited availability of new equipment, pricing has improved and margins are on the increase.

It adds that its ability to ramp up production has been limited by a combination of supply chain issues and its careful management of working capital and that suppliers are demanding shorter payment terms, putting increased pressure on working capital. As a result it says that it is controlling its growth rate to ensure that it has sufficient working capital to fund the growth which means that it will take longer to reach break-even.

Snorkel also says that it is making gains in China, particularly with its all-electric lifts for the local market and that its engineers have stepped up its new product development programme.

Chief executive Darren Kell said: "Global demand for aerial work platforms is returning, driven by major fleet operators replacing ageing equipment. However, this has created bottlenecks as the supply chain struggles to restore the capacity it lost during the protracted downturn. Our order book rose 170 percent over the first half of the year and has improved further since the half year end. We are working hard to resolve the supply chain issues so that we can bring orders through to sales at a faster rate and take the business back to profitability."

Vertikal Comment

Snorkel has had more than its fair share of negativity in the industry rumour mill of late, in fact it would have been perfectly justified to have added the line “rumours of our death have been greatly exaggerated”.

The company is facing the same challenges as are most other manufacturers, possibly exasperated by its large international manufacturing footprint for its size and the fact that unlike most others it does not have a major credit line/loan facility.

What many forget however is that it has a very wide network of loyal distributors and parnters, all of whom are still selling machines to smaller rental companies and end users. providing a solid base for the business. But given its relatively large organisation it does also need some of the higher volume rental company deals to produce a decent profit. With lead times of all its competitors extending there is no reason to think that it will not be able to win some of that business over the next 12 months, as long as it can ramp up to meet the demand of course.

While it is likely to be disappointed with the level of improvement in its bottom line, this almost certainly reflects the stop start production challenges of a tight supply chain and rising material costs running ahead of pricing improvements. The fact that it has stopped the erosion of its cash pile and seen it start to grow again is a positive sign of course.

The current climate is a challenging one, but the strong improvement in the company’s order book will of course help improve the second half and subject to a market collapse it ought to go into 2012 ready for a decent year.