20.05.2019

Solid year for Tadano

Tadano has released its full year results showing a strong second half. Total revenues for the year improved 8.5 percent to ¥188 billion ($1.71 billion) thanks to a strong pick up in overseas sales. While margins slipped a little, and costs increased limiting growth in operating profits, pre-tax profit improved 10.5 percent to ¥16.2 billion ($147.2 million), thanks to a ¥614 million ($5.6 million) exceptional gain this year compared to a ¥231 million ($2.1 million) loss last year.

Mobile cranes – Rough Terrains, All Terrains and Crawlers make up 83 percent of the ¥156.5 billion ($1.42 billion) of total new equipment sales, and an even higher percent of export sales. So focusing on this year’s mobile crane revenues – sales in Japan increased 10.7 percent to ¥42.2 billion ($383.4 million), while export sales improved almost 24 percent to ¥75.3 billion ($684.1 million).

European sales increased 13.5 percent to ¥19.1 billion ($173.5 million) the highest level since 2016, although market share slipped a percent to 10 percent, while North American sales were 37.3 percent higher at ¥40.4 billion ($367 million) a new record – thanks to a strong improvement in the overall market and a two percent market share gain from 24 to 26 percent.

Sales in Asia increased 13.9 percent to ¥13.77 billion ($124.5 million) thanks to a strong pick up in the overall market offset by a three percent drop in Tadano’s market share to 14 percent. In South America mobile crane sales were 42 percent higher at ¥1.44 billion ($13 million) thanks to a higher share – 11 percent – of a declining market, while in the Middle East Tadano’s sales declined 36.5 percent to ¥6.16 billion ($56 million), due to a five percent decline in market share – 16 to 11 percent – in what was a slowing overall market.

Looking the rest of the divisions sales of telescopic loader cranes – most of which are sold in Japan where the company claims a 50 percent share of market - were five percent higher at ¥20.67 billion ($187.8 million). Aerial lift sales though declined almost 26 percent to ¥18.3 billion ($166.4 million) – due to an overall market slowdown, compounded by a three percent drop in market share to 34 percent. Other revenues – mostly replacement parts, services and used equipment – improved 5.2 percent to ¥31.9 billion ($290 million).

The company is forecasting revenues for the current financial year of ¥200 billion ($1.82 billion), with a 12.2 percent improvement in ‘ordinary profits’ to ¥17.5 billion ($159 million), one assumes that both these numbers do not include the Demag mobile crane business, which will almost certainly add further revenues, while possibly depleting bottom line profits, due to integration and restructuring costs.

Vertikal Comment

This is decent set of numbers from Tadano, thanks to strong second half revenues, although lower pricing levels, an unfavourable shift in exchange rates and higher costs hit margins, with the result that little of the additional revenue dropped through to the operating bottom line. The company is ‘cooking on gas’ now in North America and likely to break further records this year, while Europe still languishes well behind its all-time high reached in 2008, but well ahead of the lows seen in 2011 and 2012.

Tadano will be looking to the Demag acquisition to change all that, and this is is almost guaranteed, at least in terms of initial revenue growth. However there are considerable risks associated with the deal, in that Tadano has no experience of rapidly integrating any acquisition, let alone one this big, with so many overlapping products and wildly different production efficiency. As a result it is entirely possible that the distraction it causes will lead to 2+2 = 3, or worse. The deal should close on July the first, meaning that it will be included for three quarters of the current year.

Tadano has though quietly hired some really good and talented senior executives, both in Europe and North America which could help avoid this becoming a reality, as long as they are given the freedom to operate, which in recent times has not always been the case in Europe.
Overall the business is in a very good place and has a great deal of potential to not only gain a substantially larger market share, but also to move alongside Liebherr in terms of sales and market share.

Watch this space