Q2 2022 Manitowoc Company Inc Earnings Call
Before I hand, it over to Brian I would like to highlight our continuous improvement efforts I'm incredibly proud of how our team continues to lean in to the Manitowoc way.
Please turn to slide four.
I recently visited our facilities in Porto, Portugal, and the yellow, Italy when.
When I first joined Manitowoc, we had two pretty disappointing factories in Puerto Rico that were reminiscent of the 19 seventies.
There was virtually no real fixed stream for welding, we had a paint booth with a conveyor system that employees had to physically pushed to operate and I think every machine that we owned was older than me.
Fast forward to today, and we have a world class factory with dynamic manipulators, perfect stirring robotic welding, a new paint system and a team culture that would make any CEO of <unk> the organization embodies the Manitowoc way.
Additionally to reduce natural gas consumption and the team recently retrofitted the paint booth and reduce the size of the room that is used to dry parts were just 9000 euros with an immediate payback.
As part of our efforts to reduce our landfill waste the team found a nearby foundry to repurpose our shop last week again, an immediate payback.
And in the fabrication area of the factory driven by TPM. The team held a smid kaizen to machine the cab masked as one assembly rather than two assemblies.
This resulted in a 15% reduction in cycle time, and the changeover time dropped from 90 minutes to 30 minutes.
Finally, as anyone that has visited the factories with me with now one of my biggest pet piece on the shop floor as forklifts.
Every factory has too many forklifts and they typically look like they've been through a demolition derby dots.
<unk> mentioned there are potential safety hazard.
Not so at our Portugal facility, our forklifts or five est TPM controls and they have a digital safety logs system to track, who is using them and how they are using them.
Kudos to our team in Porto and a special over to Gatto to Pedro.
<unk>.
I was equally pleased with our team's work in the la Italy demand for self erecting cranes has been strong which has significantly reduced our tech time at the factory.
In accordance with Murphys law. This is also where we have the most part shortages within the tower Crane business.
Nevertheless, the team has worked diligently to improve flow throughout the factory to meet the lower tax time.
During the August shutdown the team will move for sub assembly production lines and <unk>.
<unk> two stations to our main assembly lines advancing their mission to achieve standard work.
During my visit I was most impressed with a prototype data logging system for managing and controlling manual welding machines are.
Although still in the test phase by using a low cost black box and some smart programming the machines can be automatically put to sleep when they are in use.
We have more than 50 welding machines on site, so reducing their power consumption has a meaningful cost and environmental impact.
In addition to using the same technology. The team has some great concepts for improving welding quality by analyzing why or usage and welding times <unk>.
A big Thank you to the team and best of luck to Alexandra do tow and Diego This month with our line moves.
With that I'll turn the call over to Brian to take us through the financials.
Thanks, Sharon and good morning, everyone. Please move to slide five.
Our second quarter orders totaled totaled $434 million, a decrease of 19% from a year ago.
The year over year decrease was driven by lower demand in all of our segments. Additionally, foreign currency impacted orders unfavorable by approximately $23 million as Aaron mentioned, the global Crane market is clearly slowing which is reflected in our orders for the quarter.
Our June 30 backlog was down $86 million sequentially to $948 million and unfavorably impacted by approximately $24 million from changes in foreign currency exchange rates.
Backlog remains healthy. However, this was buoyed by delays in our shipments.
Net sales in the second quarter of $497 million increased 7% from a year ago. The year over year increase was driven by the stronger shippable backlog entering the quarter, primarily in the Americas, and Europe regions and incremental sales from our acquisitions.
However, revenue continues to be negatively impacted by supply chain constraints, resulting in shipments shifting to the right.
We estimate the revenue impact of this to be approximately $40 million.
Net sales were also unfavorably impacted by $28 million from changes in foreign currency exchange rates.
SG&A expenses increased by approximately $6 million year over year, primarily related to our acquisitions and partially offset by favorable foreign currency exchange rates.
Our adjusted EBITDA for the second quarter was $36 million, a decrease of 11% year over year as a percentage of sales adjusted EBITDA margin was seven 3% a decline of approximately 150 basis points over the prior year.
This decline was primarily due to the price cost dynamic discussed in previous calls.
Second quarter, depreciation and amortization of $17 million increased $7 million.
Compared to the prior year, which was driven again by the acquisitions.
Moving to income taxes on a GAAP basis, we actually had a benefit in the quarter of $7 million.
Due to the release of a tax reserve and the U S.
On an adjusted basis, our income tax expense was $3 million as a reminder, we have tax valuation allowances established for certain countries and therefore losses in those countries are not available to offset income tax expense in profitable jurisdictions.
Our GAAP diluted income per share in the quarter was <unk> 42.
On an adjusted basis diluted income per share was <unk> 21.
A decline of 39 from the prior year.
Net foreign currency exchange losses contributed 16 to the year over year decline.
Our net working capital year over year increased $92 million, primarily due to the acquisitions increased volume supply chain disruptions and inflation.
This increase is net of $22 million from favorable changes in foreign currency exchange rates.
Moving to cash flow, we broke even on cash from operating activities in the quarter in spite of the working capital challenges.
Capital spending was $8 million of which $3 million was for the rental fleet as a result, our free cash flow in the quarter was a use of $8 million.
During the quarter, we repurchased 150000 shares for $2 million to offset our share Creek the remaining balance under our authorization is just shy of $9 million.
We ended the quarter with a cash balance of $43 million a.
A decrease of $9 million from last quarter.
Outstanding borrowings under the ABL was $80 million and total liquidity remained strong at $268 million.
Looking at the full year, we expect adjusted EBITDA to be at the low end of the guidance range. Additionally, we anticipate interest expense to be higher at approximately $33 million, mainly from the higher interest rate from our ABL borrowings.
As it relates to free cash flow, we expect to be breakeven to slightly positive for the year from a timing standpoint, we estimate working capital will peak in the third quarter and begin to trend down in the fourth quarter with that I'll now turn the call back to Aaron.
Thank you Brian please move to slide six.
Roughly 18 months ago commodity prices steel in particular exploded and began the runaway inflation trained which we've been chasing with numerous price increases ever since.
Interestingly commodity prices have finally started to capitulate. However, my concerns for inflation and concurrently shifted to wages energy prices and component pricing.
Fact is that labor and parts shortages have disrupted the supply and demand equilibrium when demand outstrips supply prices go up and.
And when we look at our list of shortages, you can pretty well match it up with our input cost increases to our components.
With respect to energy, particularly in the EU. This applecart was clearly upset by Russia's aggression towards Ukraine, and Theres no predicting when the situation will begin to improve.
All of that being said I am less concerned with inflation and the potential impact price elasticity and FX have on demand for sure. We haven't seen the end of inflation, but the current nature of inflation is far more manageable than when we had steel prices tripling overnight.
Strangely inflation has become more predictable, which makes it more manageable.
Moving to price elasticity, we have implemented price increases in the range of 20% over the last 18 months.
The fed has finally made meaningful increases to interest rates and then attempt to squash inflation.
It is unfortunate however that the combination of higher prices and higher interest rates makes financing and expensive asset like a crane more difficult.
Just consider the math.
If you finance 25, 100 ton rough terrain cranes 18 months ago today that same buying power would only get to 18 cranes. It's.
It's tough to beat demand demand for cranes will be inhibited by this dynamic.
The second shoe to drop is FX, while I've been sharing further interest rate increases to slow inflation. This is also significantly strengthened the dollar which creates a disadvantage for U S manufacturers to compete with imports.
Fortunately, we have a few levers to pull given our strong manufacturing base in the EU.
Nevertheless, we are closely tracking how some of our foreign competitors are behaving relative to the strong dollar so far everyone has been rational.
Great and Omics continue to evolve as anticipated during the first quarter conference call, increasing uncertainty amongst our customers with slowing demand.
Looking at the major geographic regions Europe is my biggest concern.
There is simply no way around it.
Europe is on edge, everyone is nervously speculating, how the Russian gas situation will evolve.
In response, we have accelerated solar panel investments in Portugal, and Italy to help mitigate our risks around electricity availability and cost.
With respect to the German tower Crane market, which is normally the most stable market in our portfolio.
It showed some signs of an inflection point during the second quarter.
Several factors are delaying construction projects regarding an intense renegotiations throughout the value chain.
Likewise, the French tower Crane market is facing its own challenges.
Harris has been under construction construction for the last several years as the city prepares for the 2024 Olympics, which has been great for the tower Crane business. The last couple of years.
Unfortunately, however projects are beginning to wind down and many top slowing tower cranes is starting to come off rent.
The European mobile Crane market is currently rather muted despite good utilization and talks of rising rental rates the market is likely to remain quiet in the coming quarters.
Moving to the U S. The market is filled with conflicting good news and bad news on.
On one hand fleet utilization as favorable as usual during the summer months and Theres, even chatter about rental rate increases.
This however will be a slow process active.
Activity in places like Florida also remains robust.
On the other hand oil patch activity, though improved is nowhere near the expected levels given the current oil prices.
Moreover, residential construction is cooling.
As for our dealer inventories I would describe our channel inventory levels is reasonable.
The actual level of inventory at dealers today is on the low end, but this is largely a reflection of supply chain challenges and our related delays to ship backlog.
When I overlay open orders with dealer inventory I believe that our dealers are in good shape for the next six months.
As I always say the crane business is built on confidence.
And there is a lot of uncertainty at the moment in the EU and the United States.
Looking at some of the other markets I remain positive on the Middle East led by Saudi Arabia.
The Chinese construction market remained sluggish due to its zero COVID-19 policy and persistent lockdowns.
South Korea continues to hold up and we are beginning to see encouraging activity levels in southeast Asia and.
And last but not least Australia remains in good shape.
As I pointed out last quarter and <unk> is the name of the game for 2022.
Although some of our backlog is in the ideally priced we have enough to cover the remainder of the year.
With the global economy struggling to find its footing the team at Manitowoc remains laser focused on what we can control, namely.
Namely continuing to execute on our four breakthrough initiatives, while delivering on our cranes plus 50 goals. Please move to slide seven.
With pharma just around the corner I would like to highlight our progress on our breakthrough initiatives for altering cranes.
Due to the delay of the show we've launched a few cranes ahead of the big event, but we still have a couple of surprises.
Last quarter, we began shipping the $51 50, XL, which is a five axle crane with an extra long boom as.
As well as the GM K 6400 dash one.
The 6400 was originally launched in 2011 on.
On paper it was one of the best cranes that we've ever launched with outstanding lifting power on six axis.
Unfortunately, this crane has become infamous where its long list of quality problems rather than its start lifting capabilities.
Since then we've adopted the Manitowoc way and applied a strict tollgate system to our NPD process that ensure successful product launches.
In addition to implementing all of our lessons learned from the legacy model, we've incorporated our new Max based variable outrigger positioning system for improved load charts increased speeds on the hydraulic system and incorporated Ccs in the refreshed GMK 6400 dash one.
This crane is the strongest and the most versatile crane in its class and the initial feedback has been outstanding.
During the third quarter, we will begin to ship the GMK 50, 120 L. A light.
IMAX. So crane. This model is designed to increase customer productivity for taxi work improving the roadability of the crane.
Heading into Vienna bomber, we have one additional new all terrain model to unveil and it will feature our new growth connect telematics solution.
We look forward to another great reception for this model and we hope to see you at the show and.
In closing the Manitowoc team continues to deal with inflation and supply chain shortages.
Both of which will persist into 2023.
There is however, a lot of optimism about the long term outlook.
Over the coming years customers will begin to refresh their aging fleets many of which are heavily populated with cranes purchased during the market boom from 2004 to 2008.
I expect this pending replacement cycle to be a crane Renaissance a significant multiyear tailwind for our business.
While this is inevitable crane Renaissance draws near Manitowoc will continue to strengthen its product offering and aftermarket focus fueling our long term growth and driving shareholder value.
With that operator, please open the lines for questions.
Thank you so much sir.
Ladies and gentlemen, if you'd like to ask that audio questions. Please press star one on your telephone keypads. Please also ensure that your mute function is estimated slicing future equivalent.
So once again, ladies and gentlemen, please press star one.
Please first question is coming from Mr. Jamie Cook from Credit Suisse. Please go ahead, Sir your line is open.
Hi, good morning.
Good morning, Jamie.
Some of Mr now, but anyway.
Question Sandy you Guy.
<unk> kept your guidance the same in terms of using the low end of EBITDA I'm wondering if the puts and takes to get there are different.
Because I guess I was encouraged that.
The aftermarket business was up 21%, perhaps youre, assuming lower sales with a weakening in orders and then just what are your expectations now on price cost in the back half of the year for Etsy changed with the price increases and with <unk>.
Commodity costs coming down to some degree thank you.
Hi, Jamie.
Looking at the second half in particular around the price cost.
There is still a decent amount of headwind coming from cost in the back half. We're estimating that the full year is about as close to $60 million of inflation impact negatively impacting us.
Q2, we did see a better mix as you've mentioned related to non new machine sales as well as just.
The new equipment mix as well so the seven 3% margin was a bit favorable and remember Q3, we have the shutdowns in Europe , which impact our margin as well so yes.
Thinking about the full year, we're still cannot.
We're pretty comfortable about the $1 30 at the low end of the guidance and there is opportunity there just based on the volume.
I'd add Jamie commodity prices are down with the issue. We have is energy, particularly in Europe is up components continue to show inflation and the other thing is a lot of times with deal that comes in is actually fabrications or lot of fabrications, we get from eastern Europe . So with all of the things happening with the Russia, Ukraine situation has been.
Out of inflation that we are still battling in that front.
Okay, and then could you just talk to you.
I guess, Erin how do you think about assuming.
We are calling into a downturn.
Is there any change in the resilience of Manitowoc earnings given.
The focused on with help from some of the M&A that you've done and to focus on growing the aftermarket business.
Yes, I mean I think.
The difficulty in answering your question is as we still sit this crossroads. We're we're not through all deflation if think about what we've gone through the last 18 months, we had two big waves that we've been battling but I mean.
I mean, my hope is that we get through this issue of getting through adult renting the backlog that's in there and get to a more normalized basis.
I feel good in terms of our ability to challenge cost. The team has really done a good job of managing it along the way.
So I think and I'm hopeful that we get to even if it's a <unk>.
Predictable inflation, which is what we're seeing now rather than what we saw with the big Spike on steel and the big Spike on coming out of the Russian invasion that we'd get back to more normalized business, but.
We are still battling this into the first half of next year I think the supply chain constraints, just keeping keeping its moving to the right.
Yes.
Okay. Thank you I'll get back in queue.
Thanks, Jamie Thank you Mr <unk>.
Alright, sorry about that those folks.
The next question is coming from Stephen Volkmann, calling from Jefferies. Please go ahead.
Good morning, Steve.
Alright, good morning, guys.
It's a pleasure followed Mr Cook.
<unk>.
I guess im just.
Alright, those questions if I could.
Again, if we are going to have some sort of a downturn in 'twenty.
Three I guess I can see a lot of cross currents because.
My guess is price cost for the year, we should probably be a little bit better you should catch up on the supply chain, probably gets a little bit easier helps with some productivity issues mix might even be a little bit better because of the work youre doing on service. So I guess I'm just trying to figure out is that even possible in your mind.
We could actually have margins sort of flat or up in a modest downturn.
I think it's too early to.
To predict that.
I think the other thing to keep in mind, Steve is in the normal supply chain situation, we'd be eating through our backlog significantly faster than we are at the moment, So I think that subs.
Hello.
From the challenges that we may see in 2003.
Okay.
And then just sort of an end market demand or are there any areas, which are still feeling pretty robust to you I know you sort of called out Europe on the downside, but anything to call out on the upside.
Yeah. It means Saudi Arabia is going gangbusters right now with all the infrastructure projects, they have particularly the <unk> and the investments in the Red Sea. So.
That looks great.
All the businesses and its nice turnaround more than the last six years in Saudi.
Great. Thank you.
Thanks, Steve.
Yeah.
Thank you Sir we'll now go to timing as a carrier calling from Jpmorgan. Please go ahead.
Good morning, Tammy good morning, how are you.
Thanks for taking my question.
I have a couple of quick ones.
First one.
Said price increases do you think have hit an inflection point.
And so can you remind us what has been the cumulative price inclusive of the last two years, the math that I'm doing.
You said 25 clean now.
18 claims cost Athena 25.
A few years ago, so that's like a 40% increase.
Claims.
Is that Directionally correct.
Yeah. So the math is 100% correct because it incorporates what we implemented in terms of price increases, but it also incorporates the financing that we offer through <unk>.
Financing. So we know what the interest rate trains changes have been for folks that are using that in terms of our overall in place price increases we've done somewhere between 15% and 20% over the last 18 months just depending on.
The product line is so when I sort of looking backwards and then when I look forwards.
We've been trying to be restrictive in terms of how long out will take an order and we use provisional pricing to help folks get onto the build schedules, which means their prices will change along with it.
Different commodity changes.
And overall components and all the things that we're seeing and then even within that sort of six to nine month window. We've got some small price increases that we've started to implement for stuff. That's will be shipped in the first quarter. So I'd say, it's an inflection point because for us having to endure what we went through its still 18 months ago, and then what the Russia situation.
Back in February it's felt like we're constantly chasing to catch up where now hopefully fingers crossed we're in a situation, where we see the inflation coming a little more.
A little better than we did in the last couple of months.
Got it so just to clarify the 40 ish percent.
So the split between actual price increase and increased financing costs.
That's correct.
Yeah got it got it and and so along the same lines.
15% to 20% and Youtube.
How much of that is let's say raw materials.
Inflation, driven labor driven versus just demand outpacing supply.
I would say the majority of it would have been driven by just inputs of raw materials.
I think the wages, that's the big challenge that we're going to battle over the next 12 months.
Yes, I think I think wages and then.
Other components.
Inflation on other components, whether it be related to energy in Europe , or just overall labor labor inflation is another component.
Got it and if I can squeeze one more.
Sure orders were down 19% ex FX down 15 so.
Are you able to quantify how much orders were down by product and by region.
We generally don't give that level of detail.
So.
If you look at the overall, we mentioned that it was down throughout.
Our regions. So I think yes, all three of the regions that we report on they were down I mean, we're seeing weakness across the board, but one thing I would say Tammy that's been interesting is I mean normally every month and we have our normal monthly seasonality and there is ups and downs throughout the years.
However, if I look at the last six months.
Pretty consistent number including July .
$141 50 range.
Which is.
If I look at 2021, I think our average per month was 181, so but ironically when I look at the charts.
It's not normal in our business that had sort of flat over a six month period at least consistent maybe is a better word.
There is always ups and downs.
I think it's at least been consistent I think.
Thank a lot of that has do with the fact that the way we've been managing the prices as well.
Okay got it thank you so much.
Thanks Damian.
Thank you ma'am.
We'll now go to make deliberate calling from R. W. Baird. Please go ahead.
Hey, good morning, guys Thats trigger basket on for Mig This morning.
Hi, Joe how are you doing.
Well, thanks for taking my question.
So the delay in shipments in the second quarter $40 million I guess.
Slightly worse than first quarter better than the.
In the fourth quarter.
Pretty pretty constant amount of orders getting moved to the right maybe just talk about the.
Supply chain issues in part shortages as you saw in the quarter or are they similar to the issues. The prior two quarters or maybe are the.
Headaches kind of moving around a little bit.
Yes, the headaches continue to move I would actually argue that the supply chain situation was worse.
During this quarter than the past two quarters.
So if I look at Avaya line item standpoint.
But it's definitely not getting better.
Yes, the $40 million mentioned revenue was based on our re forecast. So there was already an expectation that's something.
Billable started the shippable backlog was some of it was already moving to the right. So the $40 million is really based on what our expectations were going into the quarter.
Got it okay. Thanks for that color and I guess my my follow up question.
When you kind of talked about different end markets, you didn't really mentioned infrastructure U S infrastructure were.
Nine months past.
The timing of the infrastructure Bill have you heard any.
Discussions about some some infrastructure projects that are going to start to gain traction and then maybe on top of that there's been some talk I think caterpillar mentioned this week about maybe an infrastructure program in Europe are you hearing anything about that.
Yes, I mean, there's lots of discussions out there in the.
Engineering House is always have lots of projects to review, but nothing is starting to break loose. So it's still I'd say too early to make any significant comments around.
With respect to Europe .
They had some different programs that they ran us 12.
12 to 18 months 24 months relative to depreciation rates and taxes, but again, we're not really seeing anything clearly in terms of infrastructure projects from some sort of stimulus program yet.
Got it okay. Thanks, guys. Thanks for taking my questions.
Thanks, Joe.
Thank you Sir.
Seth Weber, who is calling from Wells Fargo Securities. Please go ahead.
Hey, guys good morning.
Good morning, Thanks for taking the question.
I wanted to ask you on the 28% growth in the non new.
Non new sales can you just break out how much of that is organic.
Backing out the acquisitions and then how much of that is from used crane sales I'm, just trying to get a sense for.
Underlying parts and service revenue traditional kind of aftermarket revenue growth.
Yes, it was.
Primarily driven from the acquisitions and we don't break out the different components of.
That number.
Okay.
Yes.
Okay.
Alright, and can you just comment on your capex expectations for the year, sorry, if I missed it but I think previously it was $85 million and that included <unk>.
$25 million for the European Tower business are you continuing to go forward with that $25 million number.
And just maybe just talk about your capex expectations for the year. Thanks.
Brian right.
Right now, we're thinking about $65 million of Capex, but we can flex that based on.
How the year plays out relative to cash as I mentioned from a free cash flow standpoint, and we're going to be flat to slightly positive for the year.
So the 65 is really what we're currently targeting.
Of that about 20% to $25 million relates to the rental fleet.
Okay. Thank you and then maybe if I could squeeze one last one are you actually seeing.
Cancellations.
Of orders or is it just the new orders are coming in at this point.
Yes, there is nothing material, it's all new orders coming in.
Okay, Alright, guys I appreciate it thank you.
Thanks, Jeff.
We'll now go to Steven Fisher, calling from UBS. Please go ahead Sir.
Thanks Steven.
Regarding European concerns to what extent do you separate demand concerns from energy costs of your own manufacturing and how much of your energy Bill can you mitigate wood with solar investments.
Yeah.
So first the demand as it is.
Not driven necessarily by our ability to produce that's driven just by the concerns that folks have just the impacts that and theres been a lot of stories out there in Germany right now they are trying to preserve.
Showering and cold showers with China preserves energy for the winter Thats coming so I think thats, the sort of thing thats driving everyone to be cautious.
In terms of the solar panels.
We continue to move a couple of those projects forward, particularly in Portugal, and Italy or to <unk>.
Struggled to lockdown pricing, but it's not enough to offset the overall impact because it's not just electricity. It's also.
It's also the gas and we use a lot of gas and oil paint booths.
Okay.
And then maybe just to follow up on the earlier question about the U S market.
I appreciate that there is some cross currents.
The U S at the moment.
And maybe you are not seeing the infrastructure, yet, but why isn't the outlook that we have for industrial there is a lot of big industrial projects going on right now that are just getting started.
Clearly there is all the infrastructure funding, what why isn't that enough.
<unk> to make the U S grain market kind of more of having more of a confident growth paths.
Yes, I think some of that is just we had low utilization of claims so at the moment everyone's just getting there.
<unk> fleets utilized its not above and beyond this really start to drive demand.
Sort of two elements there.
Actual crane usage on the front end, which.
And while my conversation folks utilization is pretty good and rates are inching up and things are moving in right direction.
But everyone's pretty cautious relative to price increases in lead times and interest rates.
Theyre going to actually grow their fleets so.
That's where we see them.
Sure.
Okay.
Good Thanks a lot.
Thanks, Steve Thank you Sir.
We'll now move to Timothy pain, calling from Citigroup. Please go ahead.
Thanks, Good morning.
<unk>.
Kind of a longer term.
A question on the cycle.
And you alluded to earlier that you've got this all the assets that eventually we will need to be replaced from the big Big years in the early two thousands when we had that kind of the commodity super cycle.
It's obviously a totally different business, but.
A lot of them the mining equipment companies have kind of been banking on.
That same dynamic playing out.
Just based on the historical patterns of rules of thumb in terms of when their customers would replace their assets but.
It's kind of lagged expectation that kind of it has lagged expectations just because.
Liners and found various ways to kind of extend their trade cycles.
Curious.
Presuming that a similar dynamic me.
May be employed by your customers.
Maybe not.
What what are you seeing in terms of.
Has there been a pushout of historically they'd replace in nine years X and now it's X plus.
Just how reliable is that I guess the related question, how reliable that it kind of that.
That age component.
Yes speak anecdotally or not.
Hey, specifics, but for sure I mean, if you just look at RT cranes, the quality of our T cranes today versus where they would have been say 2005 as it's drastically different when we review warranty I mean, all of these new products that we launched we compare ourselves to the former model the competition and theirs.
Difficult improvement, so I think thats, the sort of thing that allows folks to continue to push out manner.
Managed the business a little bit I think the other side of it is when you look at the Crane business like on <unk> you guys.
You had an asset in the last 30 years, so do I push of one year or two year.
That's very doable for those sorts of things.
Yeah, Okay and then.
Going back to the point about the new.
Inflation on the new side.
Just as you have that.
That dynamic as you had just slower and less output from your factories.
Presumably those those dynamics are helping to support used prices and such.
As from a trade differential standpoint, maybe there's been some help.
And maybe I am off of that can you just comment on just the.
Overall used market and is that providing any cushion in terms of yes, the new stuff's going up but but it's also being is helping to pull up used.
Yes, I mean, I think it just depends on the models quite frankly.
There are certain models that for sure that it has helped with than not.
Not unlike the automotive industry, where.
Or are there certain models that folks need and they are willing to pay more because they can't get their hands on a new machine.
But I think it is this balancing act there are certain older models that are I don't want to say that they are just they are obsolete for that.
The top class or that you see out there.
And those just don't get the get the value that you would think they would rather some other trains out there that there is a need for and they do.
Got it.
Right. Thanks, a lot.
Thank you.
Thank you, Sir ladies and gentlemen, once again this cleanup questions. Please press star one.
We'll now go to Larry de Maria calling from William Blair. Please go ahead.
Good morning, Larry Hey, guys good morning, everybody.
Staying on the same line there.
I'm curious if this EU weakness does it imply that residual values and you have huge pricing risk and kind of wondering if thats. The next shoe to drop and how thats going to implicate pricing because really the spirit of the question is I'm trying to get at what your view of pricing next year and if its going to inflect negatively with lower materials lower demand.
Opening supply change and lower residual value. So just kind of I know you don't have guidance, but just high level thoughts on the idea that new.
New equipment pricing will inflect negatively in part because of potentially residual value weakness.
No I don't think that I don't see prices going down on residual values going down I think.
Folks are just smartly managing through the current scenario and they're concerned about what may happen in the next six to 12 months with the Russia, Ukraine situation in gas.
And with the <unk>.
All of the utilization rates are good here, probably more more progress in Europe bond increases in rental rates than I do in the U S. So.
I don't think that theres risk to residual values at least not in the foreseeable future.
And therefore also.
Don't feel big rift and negative pricing for new equipment.
No.
I don't see okay.
I mean, we're not we still have a lot of inflation, even when you look at wages I mean, we have our normal cycle in the first quarter I would say that negotiations we had in the first quarter.
Still not presented not representative of the situation. If you think about it because the negotiations happen at the same time in February March.
But now when you start to mean Petro for a gallon Petro in Europe was $9.50 a gallon.
So.
Those things and the food that is going to start driving wages.
Right Okay.
If I could also to follow up on the infrastructure Bill obviously as has been mentioned at cross currents out. There. This has to be potential upside maybe not now but next year have you guys looked at.
The bill the amount of activity that's going to come over the next few years and think about a bottoms up approach to what demand might look like because I have to think it's going to be fairly nice tailwind but.
It sounds like Theres, a lot of Doom and gloom out there too.
Yes, I mean I think.
We're optimistic about it that's why we think there's a clean renaissance between that.
Just the normal replacement cycle that should all work to our favor.
And I'll be honest with you Larry the thing that I don't understand it and we see a lot of discussion is more on the electrical side and building out.
A network in terms of getting all this electricity and where it's going to be used but there is still an issue around production because solar and wind is never going to produce the amount of <unk>.
Electricity is actually required if the country is going to make the change that the politicians are talking about then.
The other thing I know nobody's talking about nuclear but at some point someone's going to have a serious conversation about how they produce significantly more I mean, the utility companies can produce 10% more on new solar and wind to help a little bit but at some point youre going to do something to significantly increase the amount of electricity in the United States. So.
That would be used for the crane business quite frankly, but I think as we get into this and folks really start to understand the math behind how much electricity it takes to charge.
As eight trucks, you're going to realize that we've got a huge shortage in the United States over the next.
20 years, So I think all of that is good news for the Crane business. It's just.
It's early it's a long process, it's only been a couple of months since the infrastructure Bill assigned.
Thinking about the midterm elections, so I think there is enough.
Distractions out there to really catch on yet.
Alright, Sir fair enough and thanks for the color good luck.
Thanks Cynthia.
Secondly, sir.
Ladies and gentlemen, as a final reminder, if you have any questions. Please do press star one at this time.
Yes.
As we do not appear to have any further questions. So I'll turn the call back over to Michel <unk> for any additional or closing remarks. Thank you. Thank you before before we conclude today's call. Please note that a replay of our second quarter 2022 conference call will be available later this morning by accessing the Investor Relations section of our website at.
Www Dot Manitowoc Dot com. Thank you everyone for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again next quarter.
Okay.
Thank you so much sir ladies and gentlemen that will conclude today's conference and thank you for your participation. You may now disconnect have a good day and goodbye.