05.02.2018

Tadano expects Q4 upturn

Tadano has published its third quarter results for the period to the end of December, with year to date sales down 6.3 percent on 2016/17. However, the company is confident that this will improve in the final quarter.

Year to date revenues are ¥119 billion ($1.09 billion) 6.3 percent down on the same period last year. Pre-tax profits were just over 24 percent lower at ¥10.7 billion ($97.6 million). The decline in revenues was entirely due to lower sales of mobile cranes, which declined 17.4 percent to ¥65.1 billion ($583 million). Sales of loader cranes improved 2.8 percent to ¥14.4 billion ($131.5 million), aerial work platform sales were 12.5 percent higher at ¥17.2 billion (156.7 million) while other revenues – such as spare parts, services and used equipment sales - improved 16.7 percent to ¥23.2 billion ($211.2 million).

Looking at the same results on a geographic basis, most of the decline came from further steep falls in Europe and Asia. The Japanese domestic market was 2.9 percent lower at ¥66.1 billion ($601.7 million) - 55 percent of total sales. European revenues declined almost 21 percent to ¥12.8 billion ($116.2 million), North America - Tadano’s largest export region - was just 2.5 percent lower at ¥19 billion ($173.3 million) but it expected to end the year above last year’s levels. Sales in South America and the Caribbean etc were 38.6 percent lower at 674 million ($61.4 million). Revenues from Asia, the company’s third largest region dropped 18 percent to ¥11.2 billion ($101.8 million). In the Middle East sales were just over one percent lower at ¥7.4 billion ($67.6 million), while sales to other regions - Australasia, Africa and CIS countries - totalled ¥4.8 billion ($3.6 million) up 6.6 percent on the same period last year.

The company is forecasting full year revenues of ¥175 billion ($1.6 billion), which means 2.6 percent lower than for the previous year. The forecast is based on mobile crane sales being seven percent lower, loader cranes relatively flat, aerial lifts slightly higher, while other revenues improving by almost 12 percent.

Geographically almost all of the fourth quarter pick-up is expected to come from North America where the company says that full year sales are expected to come in around ¥29.7 billion ($270.4 million), 17 percent up on the year. Given that many of the cranes to be sold will already be on the water, this is almost already booked. Europe is expected to end the year 19 percent lower at ¥16.8 billion ($153 million). Asia is expected to come in roughly the same as last year, the Middle East around five percent lower, while other regions are forecast to rise by 27 percent to ¥7.2 billion ($46.5 million). Japan will come in five percent lower on the year at ¥97 billion ($883 million).

The company has also released a warning that it might have under reported the number of cranes that it has delivered that do not meet the current EPA emission regulations. Under transition rules each company is allowed a certain percentage of its sales to be non-compliant. The company self-reported under the scheme and now says that it believes errors were made. It has called in an outside law firm to investigate. It has also stated that all current models do comply fully. There is chance that if true, the company will face penalties and fines.

Vertikal Comment

This is not an unexpected set of numbers from Tadano, which clearly expects the North American market to bounce back as it goes forward. The problem though might be margins on those sales, given the current weakness of the dollar. This combined with any penalties imposed for its emission errors could lead to a sharp fall in profits for the current year? Still it is best to get it all cleared up in preparation for a better year in 2018/19. The other big challenge it is coping with is the European operation, where it has made substantial changes as it restructures.

Early indications are that things are beginning to improve. The recent purchase of Waterland Trading could help, while it is beginning to make some progress in the French market. While 2018 is likely to remain as a transition year for its European operation it does look set to turn things around. The challenge in the USA is likely to be the exchange rate with the dollar.

Overall the company remains relatively well placed to gain market share and looks to be dealing with some of the long-term issues it had in some parts of the world. All in all, the next 12 months look fairly positive at this point.