05.05.2007

JLG rises 19%

Oshkosh has reported its first full quarter with JLG on board, the company posted a much stronger set of results than it had forecast with quarterly revenues double that of last year, operating income up by 69 percent and net debt reduced by $221 million.

Looking at JLG which is more than double the size of any other segment in revenue terms, it is hard to compare with last year as both the quarter and the fiscal year dates are different.

Oshkosh says that revenues for the quarter to the end of March are up by 19.6 percent to $708 million. If we use published results we can only compare the quarter to JLG’s three months to the end of April not quite “apples to apples”.

On that basis however sales increased by 12.5 percent with operating income falling by 37 percent from $84.7 million to $53.2 million. As this is not a direct comparison, Oshkosh is also not publishing gross margins for JLG so that comparison cannot be made.

Operating income as a percentage of sales though dropped from 13.4 percent to 7.5 percent. The company says that 3.5 percent of this fall is due to one–off acquisition related inventory revaluations, which would make the comparison 13.4 to 11 percent.

Once again this is comparing Jan/Feb and March 2007 to Feb/March and April 2006 so no conclusions can be drawn.

One comparison that is more relevant is JLG's backlog – the order book – this grew from $927 million in 2006 to $1.29 billion at the end of March.

Sales of aerial lifts increased sharply in the period, particularly in Europe, while not mentioned, European telehandlers sales would also have been significantly higher thanks to the alliance with Caterpillar which is in full flow now.

Sales of telehandlers in North America slowed further as the weakness in the housing sector continues.

Robert G. Bohn, Oshkosh chairman, president and chief executive officer, said, "We're pleased with this most recent performance, and especially encouraged by the strength we continue to experience with JLG, which comprises our new access equipment segment. JLG is the latest and largest of Oshkosh Truck's acquisitions, and is proving to be the strong and transformational business that we thought it would be. In addition to the solid results from JLG this quarter, we also increased our sales and earnings expectations for JLG for fiscal 2007 and now expect the acquisition to be approximately $0.25 - $0.35 accretive to earnings in fiscal 2007."

Vertikal Comment

Oshkosh has had a good quarter with a far better contribution from JLG than it had planned for. Strong cash flow also helped it to cut its high debt levels as well as renegotiate interest rates on its $2.9 billion term note.

One thing that does jump out of this quarters results is the difference in profitability between JLG and the company’s defence segment. With revenues of only $306 million only 43 percent of JLG and yet it achieved an almost identical operating income. In percentage terms the comparison is 17.25 percent for defence, a lower than normal result for this business, compared to a typical 11.5 percent for JLG.

However the other segments within Oshkosh typically deliver operating incomes of eight to nine percent.

Overall the acquisition looks like it will be very good for Oshkosh in the short to medium term. Doubling the size of the company and eventually improving its profitability.