25.07.2008

Tough second quarter for Haulotte

Haulotte the French based aerial lift manufacturer has announced its second half results with revenues of €259 million, a 12 percent drop compared to last year.

The fall, 11 percent when currency factors are stripped out, was driven mainly by slower sales of new machines in Western Europe, particularly in June.

New machine sales were €226 million, a 14 percent fall, with Western Europe down by 23 percent - partially offset by a 22 percent increase in Eastern Europe.

The remaining rental business, largely in the UK dropped seven percent to €15.6 million, almost certainly related to the weakness of sterling rather than slower rentals.

Parts and service activity jumped 27 percent to €17 million.

Net income jumped 39.5 percent to €63 million, but around €30 million of this was a one-off capital gain on the sale of its French rental business – Lev. Without this net income and pre-tax income is down by around 40 percent.

Haulotte said “In light of weakness in the European market in the first half and the wait-and-see approach adopted by a number of equipment rental customers in response to more challenging economic trends, it is not possible to issue reliable forecasts for 2008. However, in this environment of rising raw material prices and the strong euro, we do not expect sales for 2008 to exceed the prior year nor return to double-digit growth in net income.”

In order to adapt to lower sales, Haulotte has initiated a cost-reduction programme, with the aim to reduce its fixed costs by 10 percent. The cuts which are likely to include headcount reductions, will not include Research & Development, its plans to add production capacity in Romania or the expansion of its service coverage in Eastern Europe.

The new manufacturing plant in Romania represents an investment of €23 million and will be operational in the first half of 2009.

In terms of financial position Haulotte says that in spite of a substantial increase in inventory at the end of June, it has a remaining credit line of €255 million with a drawdown period recently extended to the end of 2009. The company has also announced its acquisition of North American manufacturer Bil-Jax today. See Haulotte acquires Bil-Jax

Vertikal Comment

Haulotte is more dependent on Europe than any other manufacturer, and with some major order cancellations by the big consolidator companies such as Lavendon in order to help fund recent takeovers, North American manufacturers have been offering some cut price deals to clear out the excess inventory generated by these cancellations.

Haulotte with its Euro cost base has had difficulty competing with these deals. These machines should drop out of the equation later in the third quarter, while small to medium sized rental companies that continue to perform well, may come back into the market as they realise that headcount reductions by most manufacturers will reduce overall capacity, while rising raw material costs will inevitably lead to sharp increases in the price of new machines next year.

With the large backlogs at most manufacturers switching to sizeable inventories, the battleground has changed significantly in a short space of time. The sellers market that was, is now very much a buyers market,

Haulotte will have to work much harder to achieve the same results as last year and this will not be helped by the high value of the Euro. The company is strong and with the Saubot family still the major shareholders the next 12 months may be tough, but it will also throw up some opportunities.

Haulotte came out of the last slow patch in good shape, there is nothing stopping it doing the same this time round.