08.02.2018

Record revenues – lower profits at Palfinger

Loader crane and platform manufacturer Palfinger has reported a mixed result for 2017, with record revenues but lower profits, as the company restructures parts of the business.

Full year revenues were eight percent higher at €1.47 billion, a new record, thanks mostly to the European market and sales of loader cranes. The company splits its results into two main sectors, Land - being loader cranes and aerial work platforms etc - and Sea - the various marine businesses which the company has acquired in recent years.

Land revenues were almost seven percent higher at €1.23 billion, or almost 84 percent of the total - down from 85 percent. Operating profits increased by more than 14 percent to €147.5 million. The strong results are thanks to the European business, particularly in Germany and Southern Europe, but also include the acquisition of Palfinger Danmark, while performance was also satisfactory in Asia and CIS countries.

The Sea division saw revenues improve 18 percent to €203 million - mostly due to the full year addition of the Harding group - compared to a six month contribution last year, but at the same time its losses more than quadrupled to a negative €14.8 million. Group pre-tax profits for the year fell five percent to €88.5 million, due to restructuring and other costs.

In the fourth quarter group sales were up 4.5 percent to €380 million while pre-tax profits were halved to €8.9 million. The Land division saw revenues climb 10 percent to €321.4 million while operating profits increased 20 percent to €47.5 million. Net debt was marginally higher at €513.3 million.

The company said: “The economic recovery in Europe was still felt in the region in 2017. Particularly in construction and infrastructure, Palfinger benefited from replacement investments, which had been suspended in recent years. Performance was particularly noteworthy in the core markets and in Southern Europe, where the markets had recently been weak, and, in terms of products, once again in the crane business.”

“The restructuring in North America brought material success. In addition to making adaptations to its internal organisation, Palfinger sold its service body business in the first quarter of 2017. The revision of the existing product portfolio is progressing, one major newly developed product was about to be launched on the market at year end. Provided that the demand for loader cranes continues to be satisfactory, profitability in North America is expected to grow in 2018. The restructuring measures are expected to be completed in the first half of 2018. In South America, we continued to operate in a highly difficult market environment, but it seems that the downturn has bottomed out.”

“In Asia, particularly in China, the partnership with Sany is the foundation for the sound development of business. The Sany Palfinger joint venture recorded significant increases in revenue during the reporting period. In Russia/CIS, the economic environment remained a challenging one, and local value creation continued to prove highly advantageous, facilitating additional growth.”

“Core customers in most of the product groups in the Sea segment depend on the oil price. Therefore, the low oil price dampened investment propensity considerably. Following a highly volatile first half of 2017, signs of stabilisation at a low level became evident in the second half of the year.”

“As the order backlog at the end of 2017 was very high we are optimistic regarding business performance in 2018. Due to short term internal and external delivery problems, a significant order volume could not be completed by the end of 2017 and had to be postponed until 2018. Capacity utilisation of the production plants is expected to remain at a high level. The global approach to value creation structures will be conducive to balancing capacity utilisation peaks.”

Vertikal Comment

Palfinger appears to be struggling a little, due mostly to its attempts to diversify, both geographically with its ventures in Russia and China, and market wise with its heavy investment in various marine businesses. Thankfully its core European crane and access business goes from strength to strength. While it still has work to do in the USA.

Whether the company can sort out the disparate marine operations remains to be seen. The company has the advantage that it is closely held with the Palfinger family firmly in control, so it can focus on the longer term. Otherwise it would be coming under pressure from institutional shareholder to focus on the core business and possibly dump the more challenging marine operations as the offshore market picks up with the oil price and stronger economy.

2018 will be telling and it looks as though the Land operation is likely to perform even better than it did in 2017. All of the indicators are positive so expect another record year in 2018 - both in terms of revenues and profits.