Q4 2022 Hyster-Yale Materials Handling Inc Earnings Call
We're gaining ground and looking ahead, we expect the combination of our higher priced backlogs and moderating cost inflation trend to create a margin uplift through 2023 and into 2024.
We will continue to monitor our material and labor costs closely including the potential impact from tariffs and we'll adjust pricing as needed to maintain progress towards our long term unit margin goals.
Now I will share my views on the global market.
Demand for lift truck remains strong, but has moderated around the globe while extending.
Fourth quarter market data is not yet available our internal estimates indicate that the global lift truck market declined in the quarters.
Across all geographic regions.
Compared to fourth quarter 2021 use.
Using the same data global market volumes improved versus the third quarter due to progress in EMEA.
Looking ahead, we expect the lift truck market a decrease in each 2023 quarter when compared to 2022.
Despite these declines market should remain above pre pandemic levels, even in the context of broad recessionary concerns.
Lift truck bookings decreased in the fourth quarter compared to a robust prior year. Several factors contributed to the drop first the global market declined compared to record levels second we continued to book.
<unk> focus on booking orders with solid margins and lastly, because of lead times.
Beyond our normal levels.
Sequentially bookings increased modestly versus the third quarter of 2022, largely due to a seasonal rebound in EMEA and better than expected conditions in Americas looking.
Looking forward to a full year 2023, we expect.
Lower year over year bookings trend to continue due to slowing economic activity combined with a continued focus on booking orders with higher margins.
As the year progresses.
Work to balance our booking rate and decrease production lead times on a line by line basis.
Although increased production rates and lower bookings of decrease that backlog by about 10% since its peak in first quarter of 2022, it remains well above our historical averages.
As we noted last quarter increased order selectivity and higher production rate have led to higher average.
Unit price and margins in our backlog.
Said differently.
We've been producing the oldest and lowest margin unit and adding booking and shipping units with much improved economics.
With each passing quarter to quantify this benefit the average sales price of our backlog unit increased by nearly 35% year over year and almost 7% sequentially.
As we continue to work to us.
Through our backlog in 2023, the majority of the remaining lower margin unit price in prior years are expected to be produced in the first half of the year.
As a result average unit margins are expected to improve in 2023.
In early 2024.
We evolved.
Further into our extended backlogs.
Beyond this baseline perspective.
We are considering various economic scenarios over the next 12 months to 24 months, including the potential for global or significant regional recession as part of our planning process.
Current backlog of higher margin trucks extends through 2023 and into 2024. This should provide a shock absorber against any recession related market downturn help.
Helping to sustain.
Business through a recession.
It's worth noting as part of this analysis that our current order cancellation rate is quite low.
Historical standards.
Reflecting the underlying need for new replacement lift trucks, and a sound value proposition, we provide to our customers.
We expect this demand trend to continue.
I'll summarize my comments by saying, we remain focused on mitigating the impacts from our supply chain challenges.
Our teams are working closely with our suppliers to obtain what's needed for production when it's needed.
As we increase production rates across 2023, we believe that high unit prices and margins.
Baked into our backlog should provide a significant operating profit improvement.
Ongoing order bookings.
Discipline.
We will support this profitability trend over the longer term.
As a higher shipments can increase.
And the market decline drive lower bookings we expect.
Backlog to contract and reduce lead times back to normalized levels.
This process will take time, and we will remain focused on profitability and cash generation throughout now I will turn the call over to Scott to update you on the financial results and provide our financial outlook.
Thanks Rajiv.
As Rajeev mentioned, we had a solid quarter returning to profitability and ahead of our expectations.
I'll start with some high level comments on our consolidated financial results and then add perspective on the three individual businesses.
In the fourth quarter, our consolidated revenues of $985 million were a quarterly record they increased almost 19% or more than $155 million year over year.
This growth was due to a roughly 20% increase in the lift truck business, which significantly outpaced.
It's one 5% shipment growth over the same period I'll give some additional lift truck details in a moment.
Versus the third quarter shipments increased nearly 11% while bookings remained flat around 21000 units.
Overall, our backlog dropped by nearly 6% and ended the year at 102100 units down almost 9% from its peak level in the second quarter 2022.
Looking at profitability the company reported a consolidated operating profit of roughly $20 million for the fourth quarter.
This compared to an operating loss of $107 million in the fourth quarter 2021.
The 2021 operating loss included a noncash goodwill impairment charge of about $56 million related to the lift truck business in Asia.
We reported net income of $7 6 million for the fourth quarter 2022, compared with a net loss of $103 million in the prior year.
In addition to the prior year's goodwill impairment to 2021 net loss included a $19 million charge to establish valuation allowances on deferred tax assets.
Now, let's look at the results in more detail.
Our lift truck business generated an operating profit of $27 million in the fourth quarter, which was ahead of our expectations.
This compared to an operating loss of $93 million in the prior year.
Excluding the impairment charge I mentioned earlier this substantial improvement was largely due to increased prices in excess of material and freight inflation in the quarter.
This favorable price to cost ratio helps to compensate for inflation in excess of our prices for units booked in 2020 and 2021.
Higher unit and parts volumes, along with increased fleet revenues also helped to drive the favorable comparison.
The lift truck businesses fourth quarter operating profit improved substantially year over year, Despite a $16 million increase in manufacturing costs caused by component shortage related inefficiencies.
Higher labor related costs and $10 million of unfavorable foreign currency impacts.
As Rajeev mentioned, despite continued progress on clearing lower margin products production of units booked prior to more recent price increases acted as a drag on our fourth quarter margins.
We expect production of these lower margin units to reduce significantly in the coming quarters.
Turning to ball zoning.
In the fourth quarter, the business reported an operating profit of $2 million versus a loss of roughly $2 million in the prior year.
The benefits from price increases and lower material and manufacturing costs more than offset the negative impact from lower sales volumes, primarily related to components used by our lift truck business.
A loss of $2 $4 million on the sale of a subsidiary and unfavorable currency movements also negatively impacted the quarter.
As Ara to fourth quarter, 2020, two's operating loss of about $9 million decreased by 15% compared to the prior year's loss of $11 million.
2021 operating loss included a $1 $2 million charge to reduce inventory values.
Excluding the prior year charge increased revenues and improved margin drove the modest year on year improvement.
We exited 2022 at the high profit quarter of the year as we look ahead, we expect to build on that progress in 2023. These.
These improvements are supported by what you've heard from Rajeev <unk>.
Fewer parts shortages and increased manufacturing efficiencies as component shortages moderate <unk>.
Leading to increased lift truck and attachment production and shipments.
Lower inflation rates and the ongoing benefits from our cost savings program and disciplined sequential price increases to counter inflation.
Our strategic programs, which al will touch on in a moment should further enhance margins as they mature.
As a result of these improvements to lift truck business expects a significant year over year increase in revenues and to generate a substantial operating profit in 2023.
We expect expect lift trucks 2023 quarterly operating profit to build on 2020 twos fourth quarter, while following its normal seasonal pattern.
Moving to <unk>, we anticipate continued moderation in component shortages.
Increased customer demand and further pricing gains in 2023.
As a result, while Sony is expected to improve margins and generate higher operating profit in 2023 compared to 2022.
Finally, as new Vera continues to ramp up product demonstrations in bookings, we expect the benefits from sales growth to be offset by higher costs.
As a result, the anticipated 2023 operating loss is expected to be roughly in line with 2020 twos level.
Taking a longer term view these demonstrations provide testing opportunities in live applications and lay the foundation for future technology adoption and improved financial returns at Newberg in the years to come.
Before I hand, the call over to Al I'll quickly cover the balance sheet results in.
In 2022, we generated positive cash flow before financing activities of $5 million versus a nearly $280 million use of cash in 2022.
The big improvement, but more is required.
As of year end, the company had cash on hand of $59 million and total debt of $553 million.
This compared to cash on hand of $69 million.
And total debt of $545 million at the end of the third quarter.
While our net debt showed a modest increase sequentially year end levels were below the peak reached in June of 2022.
We ended the quarter with available borrowing capacity of approximately $183 million versus $191 million at the end of the third quarter or.
Our leverage ratio measured by debt to total capital reduced by 900 basis points versus the third quarter, mainly due to a return to profitability as.
As production ramps up using components already on hand, we expect inventory to decline throughout 2023, resulting in a significant reduction in inventory days on hand by year end.
The assumptions underpinning our outlook predict particularly production rates are highly sensitive to events that could impact global supply chains. However, we're focused on controlling the things that we can and we're better prepared to manage the things that are outside of our control. We will keep you updated as 2023.
Unfolds now I will turn the call over to al to give his strategic perspective.
Yes.
As you just heard from Rajiv and Scott, we're making progress operationally and financially our fourth quarter earnings reflected the improving profit quality of the robust backlog for which we are now producing trucks and we continue to have solid back bookings despite softening market conditions.
Looking forward, we expect continued gains from building more higher margin backlog units. We believe this will lead to substantial consolidated operating profit and net income in 2023 with the quarters building on the fourth quarter of last year.
Scott you indicated the steps we've taken to improve profitability to date are producing tangible results. They are evident in our fourth quarter results and even more so in our 2023 outlook.
Our efforts to reduce inventory and generate cash are progressing, albeit at a slower pace. We're laser focused on increasing our cash flows and maintaining adequate liquidity with ongoing action plans to improve future results.
We've already made progress in the first quarter of 2023 to date.
We expect these improved results to accelerate particularly in the second half of the year to.
To achieve our objectives, we're working intensely to reduce inventory levels as our supply chain becomes more consistent in our production rates gradually increase.
Got very capable people from around the company focus on how to make the most units in the shortest amount of time, while maximizing the use of on hand materials and reducing manufacturing inefficiencies.
We're collaborating with our suppliers to minimize disruptions and ensure an efficient and consistent flow of materials.
We're working closely with our dealer partners to balanced order timing with their customers delivery needs. It's a complex global hyster Yale lift truck challenge, but our teams are focused on it and we're making progress as we are operationally balls oney and <unk> as well.
While we pursue working capital reductions will maintain discipline over our cash flows.
We anticipate higher 2023 capital expenditures compared to the significantly restrained 2022 levels, particularly in the second half of the year.
Projected spending increases are necessary to ensure that we adequately maintaining our facilities and reasonably invest in projects that enhance our long term profitable growth opportunities.
As a result of these actions we expect a significant increase in cash flow before financing activities in 2023 compared with 2022.
Despite the near term headwinds, we will remain focused on executing our core strategies and will continue to invest for long term profitable growth over time.
Our strategic initiatives remain consistent but I want to provide a few key updates for each business.
The lift truck business is primary strategic focus continues to be on introducing its new modular and scalable products as well as projects geared toward.
Truck electrification in providing technology advancements. We're also focused on transforming our sales process by using an industry focused approach to meeting our customers' needs.
Progress on these key initiatives continues the initial modular scalable products are currently being introduced in the Americas, and we expect to introduce them in the <unk> markets in mid 2023.
Last quarter I indicated that our first hydrogen fuel cell powered container handler using <unk> fuel cell engines. It started its pilot phase in the port of Los Angeles.
After successfully performing and lighter applications. This truck is advanced to more difficult applications and continues to form perform well the lift truck business also is developing an electrified fuel cell reach stacker, which is expected to be delivered to the port of Valencia, Spain in the first half of.
2023 for testing.
The lift truck business and <unk> are working jointly with Humbarger Hoffman and logistic AG to provide two heister electric container handling vehicles.
These vehicles include the first ever empty container handler powered by <unk> fuel cell technology, and the first heister terminal tractor in Europe .
Terminal tractor is expected to be delivered to the customer for testing in mid 2023.
Beyond the lift truck business <unk> continues to work on streamlining and strengthening its operations. They are increasing their revenues in the Americas, while also enhancing their ability to serve key attachment industries and customers in all global markets.
In conjunction with this they're working to expand their broad industry sales marketing and product support capabilities.
<unk> continues to focus on ramping up demonstrations and increasing bookings for its 45 kw and 60 kw of engines. They are also developing a heavy duty 125 kw engine capable of operating in more power demanding applications in 2022, new Vera.
Several projects with various third parties, we're testing we're planning to test new Vera engines in heavy duty applications in.
In addition, <unk> is ready to launch two new products, a 360 kw and a 460 kw fuel cell power generator.
Which offer a modular zero emission power solutions for commercial and industrial applications and.
In summary, we've come through a difficult year, we ended 2022 on a high note.
We're focused on controlling the things we focus then on controlling the things, we could including particularly our cost structures and our prices and we work diligently to manage the external factors that we couldnt control.
Returned to profitability in the fourth quarter represents a significant milestone in our business recovery plan, we have innovative products and we've built deep customer relationships. These provide a strong foundation for our business. We're encouraged by our progress but believe that there's more work ahead.
We're poised for more significant business improvements as a result of work in 2021 and 2022.
We expect continued progress on our key strategic programs in 2023.
We've got the right business structure with the core strategies in place to achieve our long term financial goals over time.
I'll now turn to any questions you may have.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone keypad now.
To cancel the question press Star followed by two and pleased to also remember to a need to microphone.
Our first question is from Chip Moore from F. Hilton Chip. Your line is now open. Please go ahead.
Hey, good morning, Thanks for taking the question congrats on all the progress this quarter.
Wanted to ask about your commentary around operating profit improving from Q4 each quarter in 2003 can you maybe speak to.
The cadence of that improvement as you work through the last of the lower margin backlog that you've got I think you talked about maybe fishing.
Finishing that up in the first half and then as a follow up.
What are you factoring in.
For Europe .
As well.
Well, let me just comment on the quarterly cadence as you pointed out we had a good fourth quarter.
I think we see.
Every indication that the fourth quarter level.
<unk>.
The first quarter.
We're very encouraged.
With and we see after the first quarter.
Continuing improvements over the course of the quarters.
During the year.
Some of the quarters of considerable significance.
But recognizing also that our third quarter is always seasonally.
Lower quarter.
And then other quarters in the year or at least the surrounding <unk>.
Second and fourth quarter. So we're very encouraged with the progression we see it moving in the right direction.
Yeah.
To get a second.
On Europe .
<unk> comment on Europe Rajiv.
Europe continue as I said in my remarks that Europe continues to have some constraints supply chain issues were working through those we expect through the year for Europe volume to increase.
We've got our plants have a gradual increase of volume.
As we've discussed with our supply chain.
That's where that's the way we feel the market is going to evolve.
So gradual increase I think in both markets in terms of volume I think as al said the margins.
We will.
Again said in our remarks or in the first half of the year will be mostly through the.
The bookings from prior years.
At a good margin.
We expect that to flow through both in Europe and in North America I think.
We had.
Pretty good margins.
Day adjusted standard margin level.
In the fourth quarter.
I think.
We see them getting better as we look through the year.
But as Rajeev said Theres still are some laggard.
Low margin trucks in the first half.
On the other hand, there were quite a few of those trucks in the fourth quarter, yes, So just to put that in.
Perspective, and I think another dynamic too to really focus on that.
On the one hand, we will be increasing our production levels.
In a moderate way over the course of the year.
We think that that is in line with a page that our suppliers can.
Work constructively with.
And in that context, as the year progresses, where youre certainly.
Hoping and expecting that our suppliers will resolve their supply problems and be able to supply components.
<unk>.
A much more timely basis that should allow us to become significantly more efficient in our manufacturing operations.
Then we have been in the fourth quarter.
And we expect to be in the first part of the year.
So there are a lot of things that are moving in the right.
Direction.
We're continuing to work closely with our supply base to make sure that their capabilities are what we need and the environment for doing that.
Improving.
Yes, it's improving because suppliers are.
Our solving their own shortage problems.
And I think to some degree it's improving because.
Excess demand in the system.
Is it.
Moving.
Is moderating and so that gives us suppliers.
More capability to serve our needs and to work us through this.
This period of our extended backlogs perhaps.
Perhaps in the context of a more moderate economic.
<unk> growth.
Even the potential for a decline in some areas of the world as we look through 2023.
That's very helpful and I guess.
Follow on that if we think about potential deeper recession.
Talked again about this sort of shock absorber of the backlog position.
You also mentioned I think very low cancellation rates, maybe you could speak to.
Historical replacement cycles.
It feels like maybe this is a unique site.
Cycle in terms of what you could see in a recession scenario for the company.
Well, it's unique for us in the sense that we have never had a backlog.
Anywhere near these levels.
The silver lining for some of the troubles that we've been working our way through here.
We think that the.
<unk>.
Rajeev indicated in his remarks.
The global markets will be turning down we.
We don't see a deep prolong recession, because there's an awful lot of pent up demand as rajeev suggestion for.
Forklift trucks and four.
Enhanced productivity on the part of our customers.
So.
I think.
We don't see a deep global recession and a big.
Drop off we see.
Just a downturn that brings us back to a much more sustainable long term levels, but in the meantime, whatever downturn. There is we've got a good chance of riding through it because of our backlog, but understand also that as we produce and.
From our backlog, we are adding to our backlog each months.
And at least at the current time, we're continuing to book more.
Sure good margin trucks than we anticipated in our plan. So that's been continuing in January and February .
And we hope that that trend may continue but at the moment.
Well the backlog is reducing its more moderate than what we were expecting and it means that we're extending further out into 2024 on most product lines and it's not 100% of them, but on most product lines or certainly the high value and I think most markets.
Performing better than we expected.
We expect more declines in generally the markets are some of them, we thought they were going to be.
Great.
If I could sneak one more in on.
<unk> great to see those.
Vessel pilots underway can you comment maybe around bidding activity more broadly and then.
You mentioned.
But new much larger.
Engines coming to market, maybe you can expand on that.
And with that target.
Yes, sure I mean the way.
Nevada is going to market is to have some we have some focus segments that we think will really need to transition to fuel cells in their electrification journey.
These are typically the heavier duty type of.
Larger trucks and a good example of that is out port equipment. That's why we're focused on transitioning those first.
But there are other.
Industries that would do that if you think about electrified buses.
We're also looking at <unk>.
<unk> seen power generation.
Both static which is the new offering from Nevada, but theyre also working with.
Partners, who have got mobile generators.
Incredibly enough to to charge.
Lithium ion battery cars.
Another vehicle so that the mobile charges to have a fuel cell onboard with lithium ion batteries and acts as a charger for vehicles. So.
Some new segments are appearing that they're connected to <unk>.
We think that putting the demos out there.
Best way that they have found too.
To really get customers engaged.
And to pursue their target market.
So the best way to monitor how.
Nevada is doing is to look at announcements that.
That <unk> be making around demonstrations and partnerships as we move forward.
In terms of the size of the engines, we are seeing demand for larger engines.
More for truck applications and also starting to see some marine applications that theyre involved in along with locomotive.
I need just those need larger platforms to support the power needs. So thats why we are developing the 125 kilowatt engine.
Combination of those will be used in those applications.
Got it I appreciate it I'll hop back in queue. Thanks.
Okay.
Our next question is from Steve <unk> from Sidoti Steve.
Steve Your line is now open. Please go ahead.
Good morning, everyone. Thanks for all the detail on the call I.
I did want to revisit a little bit.
Previous callers initial questions in terms of backlog and go a little bit further in terms of looking at the.
Sure.
Orders in dollars per unit in the last three quarters remained pretty pretty steady trying to think of not only the stickiness of backlog.
But how youre thinking about pricing given your backlog remained so significant in how much business you might be just turning away right now for us is starting to pick up again, and maybe being a little bit more.
Flexible on pricing.
Yes, so I think certainly.
The share of the market is down because of the approach we're taking.
Because of the approach.
We've been very strict on our pricing and margin requirements given.
Backlog condition.
And our ability to deliver trucks.
So and we've seen the market except that.
Again I'll said this is an unusual market that we haven't seen before and we've got customers now talking to us about that 2024 needs.
As we move towards taking this industry.
Based solution approach to solving a customer's problem.
We are kind of working with them to really put the right truck in the application.
And.
And.
Because of the modular scalable solutions that we have.
We can at the right price you can get the right cost for the application and that will support our margins. So I think it's not just the firmness on the pricing, but also some of the initiatives we've put in place over the last.
Three years.
It's really supporting our approach now there are customers who.
Yes.
Not yet adopting that approach.
Still trying to bid and buy on pricing terms and those are the ones that.
We are not.
Staying away from but we're.
Trying to work with them to find the right solution for the value proposition, they're looking for.
And this is where our investment in China could be.
And in full Yang is production facility will become more and more important as we put the right trucks and the right solution at our target margin again, our focus is to <unk>.
Have an economic model and we want to.
In a place these trucks that customers at target margins.
<unk> margins, we can get but at target margin.
Could it be.
Very very much.
Reinforcement, indeed, almost duplicative comment but.
It's really important from our vantage point that.
As our backlogs.
And our current <unk>.
Again to contract.
And we need to be.
More competitive more broadly in the marketplace, we expect to have new products, particularly including this liang products coming on.
And our claims cycle, which very much fish.
The need pattern that we anticipate as the backlog comes down so.
That's a very fortunate to condition from our point of view, but it's also the result of the.
Some of the strategic programs that I outlined, particularly the modular and scalable.
Our product program and the way it comes online.
First with the two to three.
Tun pneumatic trucks and then.
Cash gauge into.
Other trucks.
Including the.
The.
The more standard types of trucks.
Trucks that are below the base levels of our most recently introduced.
Modular and scalable trucks. So it's a good fit we're encouraged.
We're very passionate about putting the right truck in the application and getting our target margin. That's the way we want to develop the market and our commercial strategy. So the way I think to think about it is that.
We expect to maintain good margins, but we'll do it in a little different way than we're doing it right at the moment.
Yes.
Thanks, Thanks for the detail on that.
When I think about and I know this isn't a one quarter two quarter story, but when I think about the expectations that working capital trends down for multiple factors go to supply chain constraints ease and you catch up on sales to orders certainly that trend should.
Grow in 2023, which would indicate much healthier cash flow as we think about that.
Priority.
Immediate priority, reducing debt is that reasonable to think that one.
Producing what reducing debt.
Yes.
Just to make it crystal clear here.
Our.
<unk> is on producing trucks for which we already have the parts.
A significant proportion of the parts.
And so if we can find those one or two parts that are missing on individual trucks, we can work through without bringing in a lot of new.
Additional inventory.
And it.
It isn't so much a focus on bringing down debt, but is working capital.
Comes down to that automatically reduces.
Because we just we don't have the need for the debt in order to finance the working capital that we've already paid for so there are a number of things that are going to be at work here on the one hand.
<unk> are going to trend up.
On the other hand inventory is going to move down for the reasons that we've described.
One of the things that's also going to be happening is it payables that are going to be moving up.
<unk> at the moment so much of the inventory that we have we've already paid for.
And we will come back to more normalized levels of payables as we move through the course of the year. So that's kind of the dynamic that's at play and.
And we would expect that the cash flows into the business with more than sustain any other uses in cash.
Any other uses of cash and allow us to bring the debt down.
At the same time.
Scott can set a little bit more about this but that we have two types of debt. We have that term loan which is really there for the long term then we have our revolver, which we used for operationally and our revolver has been higher than normal over the last couple of years that we've gone through this challenge we wanted to bring that back to a normal.
Fate.
We drove during the trough period in the month and by the end of the month if in good state good shape.
Pretty much not drawn so that's what we're working to US we think we will get there in the second half of the year some time so.
The primary mission.
And then Andy.
Any excess cash we have beyond that will be used for some of the strategic initiatives that we had planned which we've held off on do too.
This dynamic that we've gone through over the last couple of years.
This is Scott I think you've covered it well at the end of 2023, and we expect to have lower debt balances at the working capital comes down.
And use of cash as Rajiv outlined beyond debt pay down or to fund our growth initiatives and to maintain our factories to ensure.
<unk> produced the increasing levels throughout the year.
Yeah.
Perfect. Thanks, everyone for that.
Last one for me just on Paul Soni.
Thank you to re probably but Europe has held up a lot better than we were probably thinking six months ago I would say that I'm guessing that you have seen the same thing, noting that volatility a lot of that business is in Europe , how much does that improve as lift truck not just from you, but some of your competitors picks up as supply chains.
Or is that really more with the replacement with replacement parts, how do we need to think about Paul Soni.
No.
Think about bolt zoning is some ratio of lift trucks.
And because it's an attachment that goes on lift truck and typically.
They're involved in new truck sales, because it's a new attachment that goes with a new truck.
And as our shipments rise in our competitors' shipment rise that.
That'll be good for both zoning.
Because typically their lead times are shorter than lyft lift truck lead time.
Customers and dealers typically order those later than they are to lift trucks. Once they have a solid delivery date for the lift truck they'll go back eight or 10 weeks from that in order. The attachment. So we do expect their attachment to very much correlate with lift truck sales, especially.
Plus five in North America class four five trucks and increasingly now platform, but counterbalance trucks in the.
I would say in that two to five ton range.
So that would be a good.
And a correlation.
The other thing I would say, it's the America both on the Americas team is doing very very well beyond our expectation they are.
Starting to gain traction.
<unk>.
We are booking.
Very well.
I would just add that.
You should note that.
Numbers that.
Scott went through in some detail in the fourth quarter.
Because.
While Sony performed on underlying basis really vary quite well in the fourth.
This quarter.
<unk>.
There was just a one time.
Sale.
All of that.
Write off of goodwill that was allocated to that particular small distribution entity at the time of the acquisition such a very non operating and rather artificial.
Write offs that just happens to come from the way of goodwill was allocated at the time of.
The acquisition so.
There's momentum behind <unk> zone not.
Not just in the future, but also in the fourth quarter.
Thanks for the responses everyone appreciate it.
Thank you.
As a reminder, ladies and gentlemen to ask any further questions. Please press star followed by one on your telephone keypad now.
Our next question is from Brett Kearney from Gabelli <unk> Company Brett. Your line is now open. Please go ahead.
Hi, Good morning, Thanks for taking my question and congratulations on the demonstrated progress after all the hard work last couple of years.
Thanks, Brett.
You're seeing the opportunity to kind of accelerate momentum on investing behind our strategic initiatives. This year.
Curious if you could help us think about kind of the major buckets of.
Capital Capex investments the company will be making this year.
And al you talked about.
Increasingly solving for productivity productivity challenges that customers are facing obviously the modular scalable program is endpoint piece of that can you also touch on.
Some of the <unk> advanced operator assist system telematics offerings kind of tie into the challenges you're solving for your customer base.
Let me ask Rajiv to address that but with a preface for me.
It is still early in the year, we want to be darn sure that everything we think is sustainable as sustainable.
But there are some things that we would very much like to do and which we certainly hope to do as we move.
Through the year, assuming it continues to move in the direction that we expect and indeed in our own thinking we've baked those in and see the kinds of progressions that we've described to you even with those things.
Taken into account.
But.
I think you'll see the initiatives start to play out.
In the second half more than in the first half because we're going to watch to make sure that all of the pieces of the equation continue to hold together.
But against that backdrop, let me ask Rajiv to expand on some of the.
Momentum I think is the best word to describe it that we feel we have going on to our technology projects sure.
Let me just in terms of buckets.
Capital investment, we've got some catch up things to do which would.
Which we need to do to.
A number of our plants and also some of our development center, which will do in the second half of the year.
As we launched a modular scalable trucks, we are optimizing the footprint of our production capability, we want to have.
The supply resiliency.
Both for incoming materials, but also for trucks, so we will produce.
Very similar or the same trucks in multiple plants, so that needs to be done.
And then.
Our product and technology plans as well as our commercial strategies that we are going to invest and so those are the loose budget buckets.
Buckets.
Terms of technology what.
What we see the difficulties that we see for our customers' productivity is definitely one.
And really there is a huge amount of desire to understand their application to figure out what the trucks are doing and therefore data is required to do that.
In terms of what the trucks are doing who is operating the trucks are there any issues on the drug and so our solution to that is the elementary on our trucks.
You have real time information on what the truck is doing.
And who is driving it and how it's performing.
The next area.
Early around safety, what's happening at our customers if they get seeing a high turnover.
Of operators and difficult to recruit operators and so they are moving to a less experienced operators and that's creating issues in their application and their operations.
And Thats, where our operator assist systems have come in.
They are really backup kind of become a bit of a support system for our next inexperienced operate that ensures that they are not going to have that.
People around the truck can be detected goods around the truck can be detected and the truck can be slowed down automatically if trucks are popping each other that can slow down to.
To ensure there's no collision to a lot of support for.
That operate that keep the truck.
Stability triangle and awareness.
To operate.
So some dust that in support of the operate the operator is still responsible but these.
Support systems work behind behind the scene.
And certainly customers are seeing huge benefits from this type of system.
Now the ultimate for.
Operator.
Availability is to automate trucks.
And we have a comprehensive automation program.
Running.
We have well over now 300 trucks automate the trucks running.
And we're learning from that and we are developing a next generation system, which we call internally developed automation ore Ida.
Those are getting ready to bid we're trialing those in our own facilities.
Sometime in 'twenty late 2023 early 2024, we will start to launch them and versions of those trucks will come out over the next three or four years. So automation is a critical part and then of course the work I've already said around these large trucks, putting fuel cells in electrification.
To reduce the carbon footprint of our truck is a critical part of our strategy, so whether thats with advanced batteries, such as lithium ion or with fuel cells.
That's a huge transition and it's a difficult transition for our customers, we understand that and so where we're putting in all the infrastructure to help.
Customers transition from the current fuel system, whether that LPG diesel battery lead acid batteries to either advanced batteries fuel cells.
So those are the primary technology drivers that theres a lot of other work going on.
And we will talk about that in the future.
Just to elaborate.
Small bet about the.
Automation side.
The backdrop of course is appointed Rajiv made many times, which is the most expensive aspect of the operating cost of electronics that driver.
So that's sort of the core backdrop.
And then if you put it in the context of.
The computing power that can be deployed.
In today's world.
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On a vehicle and in the context of the management of the vehicle and then put that together with the.
Increased sophistication of sensors that has developed over the last I don't know Rajeev five years seven years.
Particularly pushed along by the automotive industry, which drives for low cost and so we're in a position of being able to bring on.
Automation.
Forward and what I would call a highly controlled warehousing or a manufacturing environment, where.
The sophistication of our software systems can really manage that environment very effectively and we can use of sensors that are being used on automobiles, but without the huge number of variables that automated.
Automotive deals have to face.
In a real world environment that is not inside a warehouse or a factory so.
We see.
Very great opportunity.
As we look forward and we think that these are going to be very much sort of project approaches and not just the sale of.
Product, but they will also be packaged in a way that allows them to be deployed by our dealers sufficiently and relatively easily into installation. So it's a it's a pretty exciting arm of the business as we look look forward and we do think that I think rajeev you would agree that.
We think our approach to in our internally developed.
Technology.
As.
Distinctive and has competitive advantage.
Of consequence.
So thats the backdrop for what we're up to in that area a little bit of elaboration.
Excellent.
Very helpful. Thanks, so much al and Rajiv.
Perhaps you well thank you.
Okay and with that we'll conclude our Q&A session. We will close with a few final reminder, a replay of our call will be available online. Later. This morning, we'll also post a transcript on the Investor Relations website. When it becomes available. If you have any questions. Please reach out to me you can reach me at the phone number in the press.
Release, I hope you enjoy the rest of your day and now I will turn the call back to <unk> to conclude the call. Thank you.
Yeah.
Ladies and gentlemen, this concludes today's call.
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