Q1 2025 The Manitowoc Co Inc Earnings Call
Speaker Change: Good morning and welcome to the Manitowoc Company First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist, representing the star key followed by zero.
Speaker Change: Good morning, everyone and welcome to our earnings call to review the company's first quarter 2025.
Speaker Change: And actual performance and business update as outlined in last evening's press release, joining me. This morning with prepared remarks are Aaron Ravenscroft, our president and Chief Executive Officer, and Brian Reegan, Our executive Vice President and Chief Financial Officer earlier. This morning, we posted our slide presentation on the Investor Relations section of our website at <unk>.
Speaker Change: To walk Dot Com, which you can use to follow along with our prepared remarks, please turn to slide two.
Speaker Change: We start please note our safe Harbor statement in the material provided for this call. During today's call forward looking statements as defined in the private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied.
Speaker Change: Or actual projections due to one or more of the factors among others described in the company's latest FCC filings.
Speaker Change: The Manitowoc company does not undertake any obligation to update or revise any forward looking statement, whether the result of new information future events or other circumstances and with that I will now turn the call over to Aaron.
Aaron Ravenscroft: Thank you Ian and good morning, everyone. Please turn to slide three.
Aaron Ravenscroft: I want to begin by thanking the Manitowoc team for successfully managing a difficult quarter, we generated $471 million in revenue and $22 million and adjusted EBITDA exceeding our expectations.
Aaron Ravenscroft: Orders were a strong $610 million in backlog ended the period, just short of $800 million are non new machine sales were $161 million up 11% year over year.
Aaron Ravenscroft: In April we participated in the pharma trade show in Munich, and I was extremely pleased with the industry sentiment and customer feedback throughout the event.
Aaron Ravenscroft: We showcased the only hybrid all terrain crane in the industry that is capable of operating for an entire ship. Additionally.
Aaron Ravenscroft: Additionally, crane operators and owners greatly appreciated the upgraded features on our new altering house.
Aaron Ravenscroft: Customers were thrilled with our new tower cranes as well as the wide range of new aftermarket products and solutions that we exhibited.
Speaker Change: A big thank you to ion Warner enzyme and the entire Manitowoc team that made this show a great success I also send a big thank you to all of our customers and partners that showed up in force.
Speaker Change: In terms of tariffs based on what we know today, we are modeling $60 million of incremental costs and have mitigation plans to cover 80% to 90%.
Speaker Change: This combined with our strong backlog and growing confidence in the European Tower Crane business supports our current guidance.
Given the fluid nature of the situation and the price elasticity of claims we have not factored any major change in demand into our forecast, Brian will provide greater color in terms of exposure.
Speaker Change: Lastly in reaction to a recent antidumping claim the department of Congress as initiated investigation in the crawler cranes coming from Japan.
Speaker Change: First hearing was held on may 1st.
Speaker Change: The bottom line is that we believe in free and fair trade and will strongly defend it since I joined Manitowoc nine years ago, we have taken significant actions to improve the competitiveness of our crawler crane product line.
Speaker Change: Closed our namesake factory and reduced head count significantly to reduce costs.
Speaker Change: We revamped all of our small and medium sized cranes and upgraded.
Speaker Change: Value engineered our large cranes to improve our value proposition.
Speaker Change: And lastly over three years ago, we even started to sell these products directly through MBS.
Speaker Change: Despite taking all of these actions our crawler cranes continued to be undersold bikes about though.
Speaker Change: The filing was not an easy decision and it wasn't taken lightly at.
Speaker Change: At the end of the day, it's up to the United States government's determined whether or not those trade practices have been predatory in nature. Our datasets suggest that it has been.
Speaker Change: With that let's return to our normal programming.
Speaker Change: We had a couple of breakthroughs with the men swap way during the first quarter first we had our best quarter ever in terms of safety metrics.
Speaker Change: Although our recordable rate zero, yet it's important to acknowledge the significant progress that we've made great job to every minutes what employee.
Speaker Change: Second we integrated AI into our Manitowoc way improvement process for the first time.
Speaker Change: Our I S Department recently began to use AI to convert several computer programs.
Speaker Change: And this process AI automates repetitive tasks normally done by developers.
Speaker Change: As a result, we can save 2000 man hours and avoid spending $400000.
Speaker Change: We're now using AI as another tool in our lean practice.
Speaker Change: Please move to slide four for my market update.
Speaker Change: In North America first quarter orders through our third party dealer channel increased 35% year over year.
Speaker Change: Overall crane rental houses remain busy and we've been seeing quick success at some of the bigger players to reduce the age of their fleets. This is encouraging for the overall health of the industry and I remain cautiously optimistic about demand in the region.
Speaker Change: We simply have to wait and see how tariffs will play out.
Speaker Change: In Europe, the outcome of the recent election in Germany, almost by an announcement of a 500 billion Euro infrastructure fund has been welcomed by all.
Speaker Change: It will take some time for the money to flow this new significantly boosted customer outlook and provided some level of uncertainty we're very uncertain market.
Speaker Change: Mobile Crane machine orders were lower year over year against extremely tough comps. However orders were up sequentially and the level of customer engagement pharma was spring.
Speaker Change: First quarter orders significantly outperformed our expectations and it feels like momentum is building.
Speaker Change: Turning to European Tower cranes are machine orders were up nearly 70% year over year.
Speaker Change: This was the third quarter in a row that we outperformed our year over year comps. This gives me confidence that the market continues to move in the right direction and a recovery is beginning to take shape.
Speaker Change: In the Middle East, we saw a small year over year decline in first quarter orders.
Speaker Change: Nevertheless deal activity remains robust Saudi continues to be strong and the UAE has a lot of interesting projects in the pipeline, including the massive new Dubai Airport.
The airport is expected to be five times larger than the current airport and comprises 400 gig and five parallel runways, which will require a lot of frames.
Speaker Change: Continuing east India remains very strong.
Speaker Change: Unfortunately, there hasn't been any major change in China.
Speaker Change: As for South Korea, and Australia, two of our bigger markets in the region, we're in a wait and see mode.
Speaker Change: Korea is on hold until its elections on June 3rd.
Speaker Change: And in Australia, the exchange rates with Europe turned unfavorable recently.
Speaker Change: Under mentally demand is there the customers are waiting for greater clarity before they'll pull the trigger on orders.
Speaker Change: Looking broadly at dealer inventory, there's been a lot of friends in recent quarters regarding high dealer inventory levels for construction equipment companies.
Speaker Change: This has not been the case for our products.
Speaker Change: Overall, we've held at a pretty steady and healthy level in fact, our dealer inventory for tower cranes in Europe is at historically low levels and many major crane customers have been aggressively selling their old used cranes, which is helping lead our recovery.
Speaker Change: And then the U S is the tariff negotiations take longer than plan I expect dealer inventory levels quickly wind down which will inevitably lead to a faster rebound.
Speaker Change: With that I'll pass it onto Brian to walk you through the financials before I close with our strategy update.
Brian Reegan: Thanks, Aaron and good morning, everyone. Please move to slide five.
Brian Reegan: Overall, our first quarter results exceeded our expectations. During the period, we had orders of $610 million, an increase of 10% from a year ago, bringing our march 31st backlog to $798 million.
Brian Reegan: Higher order intake was primarily driven by the Americas. We also saw a 68% year over year increase in new machine orders in the European Tower Crane business. This is now the third quarter in a row that we've seen a year over year increase signaling what we believe is the beginning of a market recovery.
Brian Reegan: Net sales in the quarter were $471 million.
Brian Reegan: Decrease of 5% from a year ago, our non new machine sales were $161 million up 11% year over year.
Brian Reegan: Mailing 12 months non new machine sales were $645 million another record continuing the great progress, we've been making on our cranes plus 50 strategy.
Brian Reegan: SG&A expenses were $83 million or 18% of sales in line with our expectations, which included a portion of the pharma trade show costs.
Brian Reegan: Our adjusted EBITDA for the quarter was $22 million, a decrease of 31% year over year. The adjusted EBITDA margin was four 6%.
Brian Reegan: Please turn to slide six.
Brian Reegan: Net working capital ended the quarter at $489 million.
Brian Reegan: Which is down $20 million year over year, driven by inventory as we continue to manage our build schedules.
Brian Reegan: Moving to cash flows operating activities provided $13 million of cash during the quarter.
Brian Reegan: Capital expenditures were $11 million.
Brian Reegan: Of which $4 million was for our rental fleet and <unk>.
Brian Reegan: <unk>, we spent $13 million to acquire certain assets in territories from ring Power Corporation.
Brian Reegan: Total outstanding borrowings under the ABL increased $4 million during the quarter, leaving $83 million outstanding are.
Brian Reegan: Our net leverage ratio was right at our target of three times and total liquidity was $307 million as of March 31.
Brian Reegan: In April we made a $43 million payment to settle the EPA matter in spite of this payment we expect our liquidity remains strong.
Brian Reegan: Please turn to slide seven.
Before getting into quantifying the potential impact of tariffs. Please note that the figures I present did not assume a change in current forecasted demand and are based on enacted tariffs today.
Brian Reegan: That in mind, we are maintaining our full year 2025 guidance.
Brian Reegan: We can summarize the impact of tariffs into three buckets number one the import of cranes to the U S from Europe number two global sourcing of components for cranes manufactured in the U S and number three demand which were simply unable to quantify at this time.
Brian Reegan: Starting with bucket number one to put things in perspective, our U S sales make up approximately 50% of our total sales and of that 70% are new machines roughly.
Brian Reegan: Roughly 25% of the cranes that we sell in the U S are imported from factories in Europe.
Brian Reegan: At this time, we calculate the potential incremental cost impact of these tariffs this year to be approximately $15 million.
Brian Reegan: Moving to bucket number two.
Brian Reegan: Approximately 75% of the new machines sold in the U S are manufactured in Shady Grove.
Brian Reegan: As you would expect to manufacture these machines, we source raw materials and components for a variety of countries around the world we.
Brian Reegan: We estimate the incremental tariff costs to be around $45 million. This year with the biggest impact coming from imports from China.
Brian Reegan: In summary, we expect the current tariffs to impact us by approximately $60 million. This year and we have detailed plans to mitigate roughly 80% to 90% of these costs through various actions.
Brian Reegan: Please appreciate that the situation is very dynamic and we expect these figures to evolve as trade deals are negotiated. Moreover, it's simply too early in the process to predict exactly where demand and pricing will go over the next 60 or so days based on what we know today, we are maintaining our guidance of net sales of $2 175.
Brian Reegan: Two to $2 75 billion and adjusted EBITDA of $120 million to $145 million.
Eric: With that I will now turn the call back to Eric.
Thank you Brian Please turn to slide eight.
Eric: Now, let's walk was founded in 19 O. Two since that time the company has faced plenty of periods of economic our people.
Eric: We managed through two World Wars to global Pandemics, the Great Depression, and the more recent great recession, and now we face the great global trade reset.
Eric: The silver lining of Covid was that it shifted our way of thinking which eventually led to a frame specific strategy.
Eric: It became clear that the only way to effectively drive our return on invested capital and reduce our cyclicality was to grow our aftermarket which is less capital intensive more predictable and much more attractive in terms of margins.
Eric: It was time for us to transition from a product dominant business to a customer focused company.
Eric: As a result, we made numerous moves that position us to better navigate difficult economic times.
Eric: And our European Tower Crane business, we continued to invest new products, despite the market downturn, which puts us in a great spot as the market starts to rebound.
Eric: In addition, we built a small rental fleet that allows greater flexibility to serve our customers and participate more aggressively in the aftermarket.
Eric: Extremely proud of the fact that our team was able to maintain our non new machine sales throughout the recent downturn.
Eric: Team has done a great job of positioning us for the recovery that is taking shape.
Eric: In the Middle East we have spent a considerable amount of time in Saudi over the last couple of years listening to the construction companies and our partner in ft.
Eric: As a result, beginning two years ago, we fast tracked several new large tower cranes tailored to the regions gigabit projects and.
Eric: In addition, we upgraded our facilities to provide us the needed capability and capacity to build these trains and volume.
Eric: We've already begun to see the benefits that we want a $10 million order just two weeks ago, which is made possible by these investments.
Eric: With our all terrain product line in Germany, we transformed our factory increased new product development and invested in the aftermarket support.
Speaker Change: Since I joined the company, we've done a good job getting the voice of the customer from Ukraine owners and I am pleased that over the last couple of years, we've gotten much better at working more closely with depot managers in crane operators as they received new machines with new technology.
Eric: 2016, and five days of online getting hammered by customers over quality.
Eric: This year was night and day different versus nine years ago, we received lots of compliments and accolades from some of the most respected crane rental houses in the world.
Eric: In Latin America, we've learned how to service customers and make money by selling used cranes rebuilding old machines, and providing world class service and Brazil, we broaden our service capabilities to cover more of our customers' needs, including Chinese cramps.
Eric: In the U S. We've invested roughly $200 million to our several dealers and expand our north American service footprint today.
Eric: Today, we cover 16 states and we even have other adjacent construction equipped companies talking to us about servicing their machines.
Eric: In total we significantly enhanced our aftermarket presence worldwide and developed numerous revenue opportunities beyond just selling new claims.
Eric: Since 2020, we doubled our number of field service technicians globally to almost 500 and have grown our non new machine sales for the trailing 12 months, 70% to $645 million.
Eric: The tide goes in and out twice, a day, which almost seems as frequent as the crane cycle. These days, we can't control the physical nature of the global economy, but we can service our customers over the last 20 years, we've put almost 100000 pieces of iron into the market.
Eric: That's a lot of day to day aftermarket business.
Eric: The better we serve our customers so that our customers will serve us.
Eric: So many times before we will manage through the global trade reset.
Eric: When the tide eventually comes in will be rewarded in the meantime, we will continue to execute our <unk> strategy, which is a proven blueprint for driving our ROIC and shareholder value long term through the crane cycle.
Eric: With that we'll open the line for questions.
Eric: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad effusion.
Eric: If you are using a speakerphone, please pick up perhaps it would be for questions Keith.
Eric: As Charlie a question. Please press Star then two.
Eric: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question will come from Jerry Revich with Goldman Sachs. You May now go ahead.
Speaker Change: Good morning, Jerry.
Jerry Revich: Hi, good morning, everyone.
Speaker Change: And nice performance this quarter.
Speaker Change: I wanted to ask you if we could just unpack the mitigation to the tariff numbers that you shared what proportion of that is changes in the supply base versus pricing and just given your relative.
Speaker Change: Our competitive position in terms of U S manufacturing could this be an opportunity for you folks to actually benefit from price cost because.
Speaker Change: Your competitors could be pushing pricing more aggressively given.
Speaker Change: Their footprint, if tariffs do pick up.
Speaker Change: So in terms of the mitigation is Jerry there's four big buckets of course, theres going to be price increases and surcharges and we've done some alternate alternative sourcing as well as some of our key vendors have been willing to share in the pain. So thats. Good news I think in general everyone feels that this is going to be a short term situation and so we're trying to find way.
Speaker Change: He has to work through it as we get more clarity on on the overall <unk>.
Speaker Change: That being said I will say that one of the big challenges, we have is with where the yen is in.
Speaker Change: And the tariff is only 10% if you look at where the yen's moved over the last five six years.
Speaker Change: Has moved well more than 10% so it'll be we'll have to wait and see how that plays out in terms of pricing in the United States. So it's not so clear to say that there is.
Speaker Change: Big benefits.
Speaker Change: For us, but again I think there's a lot that has to play out before we can really answer.
Speaker Change: Okay Super and then the biggest variable in terms of percent tariff rate.
Speaker Change: Is on the China side of the 45 million that you gentlemen spoke about it in the prepared remarks, how much of that was China and what level of tariff are you assuming for China. Just so we can set our models. If there is progress on that front.
Speaker Change: Yes, it's not easy to I'm not going to give a clear breakdown because it's not just China. It's also the steel and aluminum to 32 tariffs.
Speaker Change: Some of that is mix and match and some of it just depends on what our mix is relative to what machines, we make so.
Speaker Change: It will be a combination of the two.
Speaker Change: And obviously the mitigation factors or play into what tariffs, we're actually going to get hit with as well so.
Speaker Change: If they try to tariffs comes down and then the mitigation factors likely come down as well.
Speaker Change: And lastly, nice to see the increased demand in Europe with the orders.
Speaker Change: You folks spoke about can you just.
Speaker Change: Unpack that in terms of what you see on the ground at what's driving that acceleration is it.
Speaker Change: Illustration is cycle high levels or what's driving the level of inflection that you.
Speaker Change: You folks are seeing in house, good current order cadence that youre, seeing obviously up significantly year over year, but how does that compare versus prior cycle highs.
Speaker Change: Yeah to me. This is typical recovery because you have easy comps.
Speaker Change: Don't think that there is it's pretty broad based I.
Speaker Change: I would say if you're in France people are still very nervous because theres still a lot of concerns relative to the overall economy there.
Speaker Change: Germany of course, we had lots of good news in the last couple weeks relative to what the government is doing but it's not as if we've seen a big boom I mean dealer inventory was really low utilization was really low so when you add all those pieces together that's piecing together the recovery.
Speaker Change: Thank you. So we're a long way, we're a long ways from any peak or anything like that I think the base was just so so low.
Speaker Change: But it is nice to see that we're moving in the right direction finally.
Speaker Change: I appreciate it thank you.
Jack Fisher: Thank you Jack Fisher.
Jack Fisher: Again, if you have a question. Please press Star then one.
Speaker Change: Our next question will come from Steven Fisher with UBS you May now go ahead.
Speaker Change: Steve Steve.
Speaker Change: Good morning. Thanks, just wanted to clarify a couple of things on the tariffs first in terms of the the raw materials, such as steel and aluminum.
Speaker Change: That are within your production within the United States.
Speaker Change: Are you experiencing higher costs, there is that part of what you've factored into that $45 million of sort of tariff cost impact within shady Grove.
Speaker Change: Yeah, that's a portion of it.
Speaker Change: Okay.
Speaker Change: That's helpful and then in terms of the backlog.
Speaker Change: Again, not sure kind of what you've factored into those estimates.
Speaker Change: Of being able to reprice.
Speaker Change: You have in the backlog currently or is.
Speaker Change: Kind of forecasted more just on mitigation efforts on new units going forward.
Speaker Change: Yeah, because it just because of the nature of tariffs will be.
Speaker Change: Hits as the units are imported we intend to use surcharges to to hit what's in the backlog.
Speaker Change: Okay got it and then wondering if you could just give a little more color.
Speaker Change: The U S nonresidential construction markets kind of where you're seeing the momentum in terms of kind of creating utilization and order patterns.
Speaker Change: Kind of a positive momentum and where maybe it's a little more subdued.
Speaker Change: I think it reflects everything that you see in terms of the data in data centers are going crazy.
Speaker Change: I think bigger part for us, especially if you sort of take a step back and look at where we've been over the last six months and there was a lot of excitement and just as we saw 2016 around trumps appointment or his election win and so there is multiple elements for us. They go into is just as important or like utilization how that crane rental house is still at the age of their fleets are as well as what our.
Speaker Change: Dealers that so I don't think we necessarily have the clearest view right into every single end market.
Speaker Change: But overall I mean, the utilization has been strong up to this point and there is plenty of big projects out there that keep getting announced every single day.
Speaker Change: Okay, and then just lastly on the non new machine sales.
Speaker Change: Growth there can you just maybe unpack some of the drivers there and the visibility that you have that kind of continuing for the balance of the year.
Speaker Change: Yeah, I'd say, it's pretty broad based I mean, we've seen a little bit of weakness in our parts in the U S, but nothing dramatic.
Speaker Change: We've done well in use we've done what we've done great in terms of the European Tower Crane business quite frankly.
Speaker Change: But as.
Speaker Change: As we add new locations and we're constantly adding field service techs and we're pushing really hard on used machines and rebuild machines.
Speaker Change: Say its pretty well across the board, there's a lag in the surface tech utilization too just because of training and things like that so.
Speaker Change: As we continue to grow those service techs the ones that we hired a year ago start to become more utilized and start to generate more and more revenue for us.
Speaker Change: Perfect. Thanks very much.
Speaker Change: Thanks, Steve.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to ion Warner for any closing remarks.
Speaker Change: Thank you, but please note that a replay of our first quarter 2025 earnings call will be available later this morning by accessing the Investor Relations section of our website at Manitowoc Dot com. Thank you everyone for joining us today and for your continued interest in the Manitowoc Company. We look forward to speaking with you again next quarter.
Speaker Change: Yeah.
Speaker Change: The conference has now concluded.
Speaker Change: You for attending today's presentation you may now disconnect.