03.11.2003

Manitowoc Group announces net earnings decline on rising sales

The Manitowoc Company today announced a 7 per cent increase in sales for the third quarter of 2003, compared to the same period of 2002, which it said largely reflects the company's acquisition of of Grove Worldwide in August 2002.

Like-for-like revenues for the quarter declined by 9 per cent, reflecting a weak North American crawler crane market. This was partially offset, however, by improvements in the sales of tower carnes and mobile cranes in Europe and Asia.

Net earnings for the quarter fell by over 50 per cent to US$7.2 (UK£4 million), compared with a figure of $14.7 million (£8.7 million) reported in the same period in 2002.

Year-to-date sales for the first nine months of 2003 improved by 23 per cent to $1.2 billion (£0.7 billion), with the Grove acquisition excluded, but like-for-like revenues were down by 12 per cent.

Net earnings for the nine months rose by almost 50 per cent to $9 million (£5.35 million), compared to $4.6 million (£2.7 million) in 2002. This reflects, however, a $36.8 million (£21.9 million) write-off of goodwill in 2002, driven largely by accounting changes driven by GAAP rules.

Earnings before special charges/write-offs for the nine months dropped to $18.2 million (£10.8 million) this year from $42.3 million (£25.2 million) in 2002.

The decline is driven by falls in operating earnings, which reflect a 3 per cent decline in gross margins to 21 per cent, from 24 per dcent in 2002. Coupled with a naturally expected rise in SG&A costs for the enlarged business.

Sales for the crane businesses were up 20 per cent for the third quarter of 2003 to $263 million (£156 million), compared to a figure of $220 million (£131 million) for the corresponding period of 2002.

Nine months sales for 2003 jumped by 56 per cent to $768 million (£457 million), from $491 million (£292 million) in 2002, largely attributable to acquisition activity.

Operating income for the Crane group dropped by around 50 per cent to $9 million (£5.35 million) for the quarter and $25 million (£14.9 million) for the nine months, compared to $19.3 million (£11.4 million) and $52 million (£31 million) respectively reported in 2002. The poor results in the crane business was blamed on pricing pressures and low volumes stifling margins.

The backlog for the crane companies at the end of September was $150 million (£89 million).

Around 70 per cent of Manitowoc’s crane sales are now outside of North America, reflecting the massive change in the group's crane business profile that the acquisitions of Potain and Grove have brought.

The company stated that one of its key strategies was to expand their global market share in the crane business by investing in new products and product support while simultaneously increasing operating efficiencies.

Terry Growcock, Manitowoc's chairman and chief executive officer said: "We are seeing increased international activity and gains in market share resulting from the strategic acquisitions of Potain and Grove Worldwide, and we are aggressively protecting our market share elsewhere. As we have previously said, we expect that crane industry conditions will remain difficult throughout next year."

"We have taken many steps in our crane businesse's over the past year to improve efficiency and reduce costs. Despite decisive actions, a competitive pricing environment and lack of volume are overshadowing our ability to generate higher margins. When our end markets recover, we are optimistic that our margins will rebound strongly," Growcock added.

A sum of $1.2 million (£0.7 million) was included in the third quarter for ongoing plant rationalizations and closures within the crane sector. A good deal of this reflects the integration of the National crane business into Groves Shady Grove plant, which is ongoing.

Cash generation for the group was by far the highlight, with $70 million (£41.6 million) generated in the quarter and $94 million (£56 million) year to date. Much of this cash was used to pay down debt earlier than expected and at the nine month stage the company is already ahead of its planned reductions for the year.


Third-quarter Highlights:

-Cash from operations of $70 million (£41.6 million) ($94 million (£56 million) year-to-date)

-Year-to-date debt reduction of $57 million (£34 million) coupled with an increase in cash of $27 million (16 million).

-Continued strong operating performance by the foodservice segment, and the successful launch of the new S-series line of ice machines

-Launching the first of three Staten Island Ferries

-Three major shipbuilding contract awards from two commercial customers and the US Navy

-Continued progress integrating National Crane into the Shadygrove facility.