28.07.2022

JLG profit slide

JLG owner Oshkosh has reported its first half results with higher revenues, combined with a sharp drop in profits.
First Half

Looking at the six months to the end of June:
Total revenues were almost 12 percent higher at $1.86 billion, this was made up as follows:
Aerial work platform sales of $891.2 up 10 percent on the same period last year.
Telehandler sales increased 32 percent to $539.5 million and finally
Other revenues - mostly parts services and used equipment sales - were three percent lower at $429.3 million.
Operating profit for the period was 76.9 million, around 60 percent lower than last year, due says the company, to higher input costs which then caused manufacturing inefficiencies.

Second Quarter

Moving on the second quarter:
Total revenues were six percent higher at $977 million, made up as follows:
Aerial work platform sales of $451.5 million less than one percent higher than last year.
Telehandler sales increased 33 percent to $309.8 million and
Other revenues - declined 10 percent lower at $215.7 million
Operating profit declined 39 percent to $69.4 million, due for the same reasons as already mentioned, partly offset by higher prices coming through.

The Order book/backlog at the end of June was more than two and a quarter times higher than a year ago at almost $4 billion ($3.97b).

Oshkosh half year
Oshkosh as a whole reported total revenues of $4.01 billion marginally lower than this time last year. Pre-tax profits however were just a fifth of last year at $61.2 million, due almost entirely to lower margins at the operating level.

Oshkosh chief executive John Pfeifer said: “While we are encouraged by strong demand for our products and our ability to price for inflation, our second quarter results did not meet our expectations due to three principal factors: first, supply chain disruptions reduced sales volume and caused labour inefficiencies, second, Defence recognised unfavourable cumulative catch-up adjustments related to inflationary pressures, and third, we recorded an unfavourable non-cash mark to market adjustment on an equity investment. We continue to believe that supply chain and inflationary challenges will subside over time, and we remain positive in our outlook over the next several years given our strong backlogs and key indicators within the markets we serve.”
“Second quarter performance was highlighted by sequential growth in both sales and operating income driven by a meaningful improvement in price cost dynamics compared to the first quarter of fiscal 2022, particularly at Access Equipment. In Fire & Emergency, we announced the acquisition of Canadian fire truck manufacturer Maximetal, known for its strong culture and customer focus.”
“As a result of the second quarter performance, as well as ongoing supply chain challenges and inflationary pressure, we are lowering our outlook for fiscal 2022, with our results dependent upon supply chain and inflationary conditions for the remainder of the year."
Vertikal Comment
This is not a great set of results from JLG, although it is not at all unexpected, and we will probably see similar issues from Terex/Genie next week. Supply chain issues have a double whammy effect on manufacturers in that the shortages lead to start/stop production runs or placing partially built machines into inventory until the missing parts arrive. Both of which can lead to a decline in initial reliability, pushing up warranty costs. Add to that the inevitable component price increases that come with supply chain challenges, and it is easy to see how profitability suffers.
In addition to all this JLG has reported slower sales in Europe and China, offset by higher North American demand where telehandler sales make up a higher percentage of the total but tend to carry lower margins than aerial lifts.
The production costs increases will eventually be passed on to customers, but that in turn may lead to lower volumes, which brings a new set of challenges.
While we have all been here before, this time round it seems a bit scarier, given the global political situation, economic uncertainty and the inevitable eastern shift of the global economy.
Interesting times for sure.