Q2 2025 Hyster-Yale Inc EarningsCall
Good day and welcome to the history. Yale in second quarter 2025 earnings conference call.
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Please note today's event is being recorded.
I would now like to turn the conference over to Andrea Saba, director of Professor relations, and treasury. Please go ahead.
Good morning, and thank you for joining us for Hyster-Yale's second quarter 2025 earnings call.
I'm Andrea Saba, director of investor relations and Treasury.
Joining me today are L. Rankin, Executive Chairman; Rajiv Prasad, President and Chief Executive Officer; and Scott Minder, Senior Vice President, Chief Financial Officer, and Treasurer.
During our call, we'll discuss our second quarter 2025 earnings release issued. Yesterday, you can find the earnings release and replay of this webcast on the higher Yale website.
The replay will remain available for approximately 12 months.
Today's conference call contains forward-looking statements which are subject to risks that could cause actual results to be materially different from those expressed or implied.
these risks are described in Greater detail in the earnings release and in our reports filed with the SEC,
Evaluating the company's operating performance.
Reconciliations of adjusted operating profit, net, income, and earnings per share to the most directly comparable. Gaap Financial measure can be found in the company's earnings release and investor presentation filed with the FCC.
With the formalities out of the way. Let me turn the call over to Rajiv to begin.
Thanks, Andrea. And good morning everyone. I'll start by sharing our view on the current economic environment. How it impacts High scale and how we plan to address these challenges in our business.
Scott will follow with a detailed Financial results. The assumptions built into our 2024 5 forecast,
and our outlook for the third quarter and full year,
I will provide his perspective to wrap up our remarks and then we'll open up the call for questions.
since our last update in May,
Economic uncertainty continues to influence our business in significant ways.
Fluctuating tariff levels, impacting demand, and cost structures. Require us to maintain Nimble and responsive.
We're keeping a close eye on these changes. Assessing how they might affect our business and responding proactively. This keeps us. Well, positioned in the market and ensures that we can consistently deliver on our key promises.
Transparency is critical to our efforts.
We are maintaining regular dealer communication, adjusting unit prices, monthly based on actual product costs. Raising prices as tariffs, increase lowering prices. When tariff levels, decrease to ensure that our unit economics reflect the current environment,
this ongoing dialogue is strengthened our relationship and shows our commitment to win-win Partnerships.
In the near term, we're taking clear steps to protect our Financial Health drawing on what we learned during the pandemic, we're monitoring input costs closely adjusting sales prices.
Based on input costs, changes, and diligently controlling our overhead costs.
The support our dealer partners and other customers and protecting the order backlog. We chose not to
Retroactively raised prices on orders placed before recent tariff related cost escalation.
This build trust within our customer base and dealer Network while also creating a temporary lag in cost recovery efforts.
For the medium to long-term. We're building on a strategic initiatives that strengthen our business across all economic conditions, our strategy emphasizes manufacturing, and selling products within the same region helping to lower shipping costs and speed delivery.
At the same time, Global component sourcing exposes us to tariffs?
While we work to limit purchases from the highest rate countries for some materials alternative sources aren't yet available at the scale required.
As we continue to seek out, new cost-effective Supply partners and modular vehicle design allows us to produce the same models at different locations around the world. This flexibility ultimately helps us control cost.
Balance production and react quickly as market conditions change.
as tariff levels stabilized, will optimize production globally to ensure the most competitive
product cost for each region.
Despite these challenges our dedication to providing the best customer Solutions remains strong.
We are increasing our ability to achieve steady long-term growth and profitability through Innovation and efficiency as we adapt to global economic complexities.
Our long-term Focus ensures that every decision we make supports the company's ongoing health and success recent announcements, such as optimizing our manufacturing footprint and realigning. Our Nea business demonstrates, our ability to adapt swiftly to changing economic conditions.
Our resilience built through the pandemic related difficulties, along with our clear sense of direction ensures that we prepare to handle uncertainty and make progress on our goals.
We'll continue to keep you updated as our plans. Develop
This projection is based on several important assumptions.
specially those regarding tariffs and the steps we're taking to reduce their impact, our proactive measures, including price, adjustments, Global sourcing, and
Supply Chain management and cost optimization are designed to help offset.
The expected tariff related, expense increases. Next, I would like to provide some context on the global Lift Truck booking smarter.
During the second quarter, Lift Truck Market, bookings, contracted compared to the strong first quarter levels.
This softening is a natural market reaction to the widespread economic uncertainty causing many customers to defer Capital expenditures.
The hesitancy to commit to large.
Purchases specially in our customer base in the current climate led to a temporary Lift Truck order slowdown, which was exasperated by Co booking boom.
This trend is not unique to our industry, but is reflective of the broader capital. Goods sector these industries. Often require long-term investment decisions that are sensitive to tariff volatility, interest rates and geopolitical developments.
Despite current challenges, our second quarter, quoting activity remains solid and comparable to the first quarter's improved levels.
This sustained volume for new business, proposals, and price quote is a positive business indicator. It demonstrates resilient, underlying demand for our products, despite customer postponing, their purchase decisions.
This trend should position as favorably for a production and sales rebound. Once macroeconomic conditions, stabilize
specific to high STL in the second quarter, our bookings decline to 330 million down from 590 million in the first quarter of 2025.
The majority of this decrease was driven by softer demand in both Europe and the Americas while booking in asia-pacific remains steady.
First quarter, bookings benefited from accelerated. Customer purchases ahead of tariff related price increases in contrast. Second quarter bookings. Reflected heightened parapher related uncertainty.
Negatively impacted buying activity.
Compared to the same quarter last year. Second quarter bookings, decreased by 50 million largely due to weaker demand in Europe, partially offset by an improvement in the Americas.
These Regional fluctuations highlight how quickly demand can shift.
We continue to closely monitor market trends at a granular level.
Staying close to our dealers and our customers remaining agile to capture additional market share with our new product and Technologies.
At the end of the second quarter, our order backlog was 1.7 billion dollars down from 1.9 billion in the previous quarter.
This decrease was primarily due to shipments outpacing new bookings, particularly in the Americas, the current low, and variable demand environment is challenging, our ability to maintain a solid production backlog while also optimizing inventory levels.
We are balancing factory output and material supply with evolving demand signals across a global supply chain. Ultimately, our goal is a healthy multi-month production backlog with reduced working capital levels.
to further strengthen our Market position management is
prioritizing Proactiv, customer engagement, we're communicating with our customers to better understand their evolving needs partnering to create products and purchasing solutions that help solve their most pressing challenges, while navigating the ongoing economic uncertainty
these efforts are designed to build loyalty and ensure that when our customers investment confidence returns where their preferred partners,
At the same time, we're keeping a close watch on key markets and macroeconomic indicators. We are positioning our operations to flexibly scale production while aligning inventories longer term.
We're optimizing our Global manufacturing footprint as new products, create opportunities to increase facility utilization.
Enabling us to respond quickly, to shifting demand patterns and ultimately reducing our break, even point to be more sustainably profitable.
looking ahead to the second half of 2025, we're planning to increase production rates to meet the expected demand uptick however, while the ongoing economic uncertainty and tariff environment,
Will remain cautious.
if booking do not materialize our anticipated,
we're prepared to adjust production accordingly.
As global economic conditions stabilize, we believe growth strategies position the company to accelerate bookings and capture additional market share.
Our continued investments in product Innovation. Customer facing sales and Technology. Resources supply chain resilience and Regional manufacturing. Flexibility are crucial to Our Success.
By maintaining an operational excellence focus.
And by putting customers at the center of all we do, we're confident in our ability to navigate near-term, challenges, and deliver sustainable long-term growth, for our stakeholders over the time.
now, I'll turn it over to Scott to provide more detailed Financial results and our financial Outlook
Thank you, Reggie and good morning. I'll start by covering q2's results.
For Lift Truck Q2 revenues declined. 19% year-over-year reflecting lower volumes across all product lines.
This compares to exceptionally strong prior year results that were driven by record market demand levels.
Revenue decline was primarily due to weaker industry, booking rates since early 2024 and more recently tariff related economic uncertainty and its impact on End. Customer order patterns.
Additionally, our sales mix shifted toward lower Revenue, class 3 products.
By region, America's sales volumes decreased, particularly for higher value class 4 and 5, internal combustion engine trucks.
And then emea product revenues declined year-over-year, primarily due to lower class 1, electric products sales
Globally revenues, improved 5% sequentially, indicating modest positive momentum as we move through the year.
In particular sales of higher value, class 4 and 5, internal combustion engine trucks. Grew
Q2 adjusted operating profit was million dollars marking a significant decrease from prior year.
Adjusted Q2 results exclude $15 million in Severance and asset impairment costs related to nuvera strategic realignment.
Lift Trucks, adjusted Q2, operating profit declined year-over-year, largely due to lower volumes in reduced manufacturing. Overhead absorption.
Q2 product margins were negatively impacted by $10 million worth of tariff-driven material and freight increases.
To counter these headwinds, we implemented price increases starting in Q1.
Benefits from these measures have a time lag, due to our production, backlog and various customer specific programs.
Looking at our cost structure operating expenses decreased year-over-year, mainly due to lower employee costs from the early completion of novera, strategic realignment actions and reduced incentive compensation.
These benefits were partially offset by continued investments in Information, Technology systems and customer support programs.
Turning to regional earnings performance. America's operating profit decreased as a result of lower volumes.
this was partially offset by reduced warranty costs as recently, launched products matured in the field,
EMA's operating loss was driven by decreased volumes elevated material and freight costs and lower pricing to increase Market competitiveness.
Compared to q1 lift truck profit declines, reflecting lower product. Margins from increased costs. Largely due to tariffs
At ball zoning year-over-year Revenue declined as expected due to the ongoing phase out of lower margin Legacy products.
While this strategic decision reduces near-term volumes, it's fundamental to our longer-term focus on higher-value products with enhanced profitability.
For production volumes decreased manufacturing absorption and higher employee related costs stemming from wage inflation in Europe.
Improved material costs and a favorable product mix served as partial gross margin offsets.
On a sequential basis, Balon's revenue grew due to higher volumes. This improvement was led by increased attachment and fork sales in the Americas, as targeted commercial initiatives gained traction.
Adjusted operating profit improved as a result of a continued favorable product mix shift, diligent operating expense control.
Next, I'll cover the company's tax position.
in Q2 the company reported 200,000 dollars of income tax expense compared to 26 million in the prior year, primarily due to lower current year pre-tax earnings,
2025, year-to-date income tax, expense includes the capitalization of research and development costs for us tax purposes.
As well as the company's inability to recognize deferred tax assets due to its us valuation allowance position.
Moving to the balance sheet and cash flow statement.
In Q2 we successfully renewed, our million dollar revolving. Credit facility bringing several benefits to the company including lower borrowing margins
Greater Covenant flexibility, and a maturity extension to June 2030.
During the quarter, we continue to reduce outstanding debt compared to Prior year and prior quarter using excess cash generation.
As a result, our net debt position improved year-over-year.
Returns steady as we balanced lower debt with reduced but healthy cash levels.
The company maintained, its strong liquidity position. Increasing unused, borrowing capacity by
3%, to nearly 260 million at the end of Q2 compared to q1.
Financial leverage as measured by net debt, to adjusted Eva increased versus both prior periods, due to lower earnings.
We remain focused on liquidity management as we navigate reduced production volumes in the trough of the current industry cycle.
These actions underscore are Financial adaptability to Dynamic market conditions.
Moving to cash flow, we generated approximately $X dollars in operating cash in Q2, improving versus the previous quarter in the prior year.
These gains reflect strong, working Capital Management, including enhanced receivables Collections, and lower manufacturing inventory.
Q2 working capital was 21% of sales down from prior quarter. But well above desired levels. Working capital optimization remains a top priority for the organization.
Inventory Remains the company's largest cash Improvement opportunity.
Our Q2 results were hampered by geopolitical headwinds as tariffs increased material costs, and a weaker US dollar increased foreign inventory values.
As of June 30th, the combined unfavorable impact of foreign currency in tariffs on reported inventory was approximately 40 million dollars.
Excluding these effects are Q2 inventory decreased by more than 60 million dollars year-over-year and approximately 30 million dollars sequentially.
These reductions reflect our ongoing efforts to optimize inventory and align production schedules with material availability.
With that, I'll move to our Q3 and full year 2025 outlooks.
First, I'll outline key assumptions included in our guidance.
We use us tariffs in place as of July 9th 2025 as our Baseline.
Our Section 301 tariff exemption for lift truck parts ends on August 31, 2025.
No additional product.
Tariffs are put into place.
Our demand projections are grounded in bookings, backlog, and market trends.
We assume no demand declined due to a U.S. or global economic recession.
and finally, our proactive initiatives, including price adjustments, Global product sourcing changes and cost cutting are expected to reduce negative tariff impacts
Based on these assumptions, tariffs are anticipated to negatively affect our financial results in the second half of 2025. Net of our mitigation actions.
Doing strategies to further reduce this impact.
The Tariff rate, volatility creates uncertainty and makes it difficult to provide a precise impact estimate at this time.
Something will continue to maintain pricing strategies aligned with material cost changes and enforce cost discipline across the organization, regardless of tariff developments.
With that as a foundation, I'll provide our outlook for the coming quarters, starting with the Lift Truck business.
As regime discussed, we saw a sequential booking was decline in Q2. And as a result reduced, our Revenue reduction in shipment expectations for the remainder of the year.
Second half revenue and production are still anticipated to outpace the first half 2025 results.
Our revenue outlook reflects continued market uncertainties, along with our proactive measures to adapt.
striking at careful balance between recovering care of related costs. And positioning ourselves to seize new opportunities as market conditions, improve
In this difficult environment, we will remain committed to selling units with healthy margins.
By launching Innovative flexible products in maintaining pricing and cost disciplines, we expect product margins to remain above targeted levels, but decline year-over-year due to heightened competitive intensity, in a softer Market.
As the global tariff landscape evolved, we initiated a monthly price adjustment process that better reflects actual material costs in our inventory.
This approach helps protect our profit margins during unstable times.
We'll maintain this process, as changing tariff rates continue to impact our product costs.
We're investing in projects to streamline manufacturing, making our operations more efficient to capitalize, on our modular and scalable design philosophy.
Year to date, we spent 1.4 million dollars on these efforts.
We plan to spend an additional 4 to 7 million dollars in 2025 and 10 to 23 million in 2026.
Overall total project spending aligns with earlier estimates for some costs. Moving from 2025 to 2026.
In line with prior expectations benefits realized in late, 2025 and into 2026 are likely to be offset by reduced production volumes year-over-year.
On fully implemented in 2027, these programs should generate annualized savings of $30 to $40 million, which will help to further insulate the business from future market downturns.
Operating expenses should decrease modestly in 2025 versus prior year. Mainly due to new Vera's restructuring actions
We expect an annualized run rate savings of $15 to $20 million in the second half of 2025 from this effort.
Additionally 10 to 15 million dollars of new. Vera's costs are being absorbed by The Lift Truck business. As we fill open roles and accelerate battery and charger product development.
We expect Q3 operating profit to improve sequentially as a result of stronger sales and better manufacturing efficiency as list truck consumer demand, improves
For full year 2025, we anticipate operating profit to decline significantly compared to Prior Year and be slightly below our previous guidance. This is mainly due to lower bookings in production as well as the timing of our tariff mitigation efforts.
Returning to bonds Outlook.
Bonds Q3 revenues are projected to improve modestly compared to Q2 as higher attachment sales are mostly offset by reduced Legacy component sales.
Q3 operating profit is expected to increase moderately versus Q2 as a result of lower manufacturing costs and improved factory utilization.
Full year 2025 revenues are anticipated to decline year-over-year reflecting weaker demand of Bonds, customer base.
Product. Mix and cost control, improvements are not likely to fully offset. The impact of lower sales.
As a result, 2025 operating profit is projected to be below 2024 adjusted operating profit levels.
Coming up our Consolidated Outlook. We expect modest sequential improvements in q3's revenue and operating profits.
Some ballon segments.
U3 is adjusted operating profit Improvement, reflects the positive impact of higher sales and increased production volumes.
Looking ahead, our full year 2025 expectations remain below 202.
Ore levels.
Revenues production output and profits are expected to fall short of the prior Year's robust results.
Our recent Outlook has deteriorated somewhat primarily due to the effects of higher tariffs on material costs and a greater than expected year-over-year. Demand decline in the second half of 2025.
Global trade dynamics and geopolitical uncertainties remain significant variables in our outlook.
Tax results may differ materially from our current projections as a result.
Our commitment to resiliency built over several years is driving improved liquidity and stronger more consistent profitability across Market Cycles.
We're focused on achieving a 7% operating profit across the business cycle.
During periods of robust backlog, driven Productions. Like we saw in early 2024, we expect to outperform that Target.
Conversely when markets decline were determined to limit profit degradation through financial and operational disciplines aiming to perform better than in previous downturns.
Progress on strategic products and manufacturing initiatives is encouraging.
We expect these efforts to deliver increasing benefits over time, creating strong growth opportunities. While reducing our financial Break Even points ultimately increasing long-term shareholder value
Around out our profit Outlook with taxes.
Tax legislation signed into law on July 4th contains various provisions that could benefit the company, particularly through the immediate expensing of research and development costs.
while we're currently evaluating the impact of the recent legislation,
We anticipate lower tax expense and related cash outflows as we leverage these new provisions.
These benefits should favorably. Impact 2025 Financial results.
Becoming increasingly visible through the second half of the year. They were not reflected in our Q2 results as the law was enacted in Q3.
According to cash flow.
The company continues to prioritize strong operating cash flow generation and strategic capital deployment.
As our 2025 Lift Truck, demand Outlook continues to evolve with global economic uncertainty. We're focused on aligning production schedules. While optimizing working capital levels.
We expect these actions to yield strong, cash flow generation despite the projected significant net income decline.
Strategic and effective Capital allocation is Central to our ongoing transformation including Capital investments in advanced Products, Manufacturing efficiency, initiatives and critical upgrades to Information Technology systems.
For 2025, we expect Capital expenditures to range between 50 and 60 million dollars, reflecting continued project prioritization. As we navigate, this Dynamic Market environment,
We'll adjust investment levels and project timing as our visibility improves.
As we generate cash, our capital allocation approach remains disciplined.
We plan to reduce leverage and make targeted Investments to support profitable growth.
Delivering sustained, long-term value and strong returns to our shareholders.
Now, I'll turn the call over to Al for his comments.
The updates provided by Rajiv and Scott today are particularly important.
Barrett's remain a large and important concern?
And a key focus of our attention.
At High Street, Yale, our long-term vision is to revolutionize the way materials move from port to home.
This vision is built on a mission with 2 core promises, delivering Optimal Solutions to our customers and providing exceptional customer care.
To achieve this, our Focus remains on executing key strategic projects, that will transform our core Lift Truck business while expanding complimentary high growth opportunities.
We Believe Warehouse Lift Trucks, vehicle automation, Energy Solutions and attachments will supplement growth in the core counterbalance forklift truck business and Propel significant additional growth in Revenue opportunities.
Drive long-term Revenue growth and operating profit in position. High Street, Yale ahead, of Materials Handling market trends. Over time, we believe these key projects will create a sustainable competitive Advantage for higher yield businesses to benefit both our customers and shareholders.
And now I'll turn over the discussion for questions.
Thank you. We will now begin the question and answer session.
to ask a question, you may press star then 1 on your telephone keypad,
If your question has already been addressed, the invite to remove yourself from Q please. Press star, then 2 once again that stars and 1, if you have a question
And today's first question comes from, Ted Jackson at Northland Securities. Please go ahead.
Wow, I never get to be first, That's so exciting. Um, good morning everyone.
Good morning, Ted.
So my first question. Um, I wanted to start in um
On the left truck you know so you're expecting to see second half revenue of production on top of this person. Um typically with regards to the Americas your um your third quarter is day on and you get a big Rebound in the fourth quarter. So we expect that same seasonality in North America and then shifting over to um, Amia um,
Yeah, you know, you you had a good rebound after a week or first quarter. I mean, when we think about Amia in the second half,
um, should we be thinking about AIA following, you know, kind of typical seasonal Trends based off that second quarter or was the strength and the second quarter?
A result of stuff that might have been in the first quarter shifting to the second quarter. So that's my first question for a couple of questions.
Yeah, I'll take it and then uh others can input. So for America's we you know we do expect
It, it's difficult to, you know, what the way our customers are. Uh, operating right now is huge amount of Market activity. So rfqs and quoting activities are all very good. Um,
Really to kind of, um, our expected levels. Uh, what happening is with the Tariff volatility decision making has slowed down
Um, so we expect that to stabilize as, as the Tariff kind of rules stabilize.
Um, and that we have more steady pricing, uh, because I think that's the big element that's concerning act, you know, customers is, they can't predict what the pricing is going to be because of the, uh, the volatility. Um, so we do expect those to stabilize and, you know, we're seeing a little bit more stability. Um,
On the, uh, on the regions that are important to us, probably the main exception being India. That seems to be, um,
pretty volatile. Um,
So we we think on the basis of that, some of the um backlog on quotes and rfqs decisions will be made because our customers are indicating. They need the trucks. So
so that's what we expect to happen in. America is obviously that conditional to if there is increased volatility,
Due to tariffs or any other kind of economic conditions, they may continue delaying decision-making.
But our expectation right now is that we'll see more decisions being made by our customers.
Um, in Europe, we had a pretty strong booking in the first quarter. Um, second quarter booking was down by shipments. Were up from the booking that came in on the first quarter.
There's still a fair bit of weakness in Europe again, predominantly driven by
You know, kind of expectations on tariff.
Um, in a focus on building up, um, military capability, as you've seen, you know?
Europe as a whole has committed to a higher spending on on Military. Um, so we do expect uh, there to be a some uh,
Impact on spending patterns due to that. Um,
Slower quarter because of the shutdowns in Europe.
Europe, uh, for the holidays. So I think the behavior is going to be pretty similar to what we normally see in Europe, with probably Q3 being the weakest quarter from a, uh.
From a shipment point of view.
Um,
Uh, the next question, um, going into, um, uh, terrorists. So, two things: one is, you know, having gone through at this point dozens of quarterly calls with, you know, various equipment OEMs. Um, a lot of the OEMs have seen the view with terrorists as being probably.
Better than it was with the last quarterly call, but maybe, um,
You know so the the aggregate for the year is better but maybe some s*** to more of it being in the second half. So I guess I'm curious with regards to your view on tariffs and their impact on High Street. Yale, how has that changed relative to the first quarter and then have there been any changes in in how you viewed the timing of that impact on your business? And then, um, following up on that, you know, I find it interesting and actually smart that, you know, with regards to your pricing that you're um, you're you're putting in regular adjustments based around tariffs on a monthly basis um and I and you're but you've held steady.
With regards to how you've placed things that were already sold. So when I think about your backlog in your orders on the kind of a simple math basis, would I be thinking about the, um, the uh, the booking for 3:30 of having had that price adjustment. And then, you know, let's say, none of that stuff is going out the door and it's in second half and then that would mean that, you know, for for a conversational perspective that the remaining College, you know, ability in 3 or 5 word is
Price.
At pre.
Tariff flexibility, if that makes sense to you, for this, my questions on tariffs.
Yeah. Um, I think we've gotten used to the idea of it, right? So I think that we're kind of, uh, got over the shock of the numbers and got used to the numbers. It's still very impactful to our business. Um, and yes, compared to what came out.
you know, as the um,
The initial kind of April uh tariffs. Obviously they've changed quite a bit from that and those numbers were just on sustainable, I think, um and I think there were from our perspective that we were used for negotiation purposes, I think we've set seeing a settle down now, you know, around this 10 to 15% on.
With the exception being for the countries that are important to us, China and India.
um, that's
still High. Um,
the we
you know, are adjusting, um,
For those.
uh, the
issue for the bookings. In the second quarter is
We're not only protected.
What was in our backlog, but also some of the key points.
Uh, deals that were in the quote process.
So in the second quarter, we'll have a mix of um uh, you know, kind of pricing pre. Um,
Tariff, but it's going to be mostly post tariff. Um, pricing
um,
So I think that's the way that will pan out. Um,
In, you know, we've accounted for the tariffs in in our look forward for the rest of the year.
Um,
we are also planning to make some production where we're going to make trucks adjustments, um, based on some of this.
um,
So I, I think it's still going to be quite a quite a bit of moving pieces to adjust.
Uh, to the Tariff.
Um,
I think that's that's probably the best way to to reflect your question. I know it's uh,
It's a, it's a.
Moving story. Um, it is for us as well and how we uh how we reacting to it.
That's okay.
Give other people a chance. Thanks.
Thank you. And our next question comes from Brian Sponheimer with Gabelli Funds. Please go ahead.
Hi, good morning everyone. I'm just curious as to any thoughts or comments on Toyota taking Toyota Industries, private, obviously a significant competitor to yours and what that does from a competitive environment and a and a pricing. Uh anything that you're seeing out there yet or any expectations going forward,
Um, you know, I was in Japan a couple of months ago, you know? This is more a Japan effort. You know, if you look at Toyota's, certainly done it.
You know, one of our partners, NTT, has done it now or is in the process of doing it. We expect others to do it too.
And I think it's so that they can have a little bit, you know, more flexibility in the way they. Um,
Really align their internal. Um,
Capabilities.
Um, I don't think we expect there to be a market dynamic in the short to medium term.
Uh, I think a lot of the strategies they're following in automotive will um will be similar to uh what will happen in lift trucks.
Good. Good examples are electrification. You know, continuing to put technology.
Uh, a transition technology from automotive to lift trucks. So, I think those are, uh, important ones. Supply chains are also converging. So, I think there are some of those, uh, those elements. But at the end of the day, there seems to be a trend in the way, you know, Japan wants to structure it. Uh, companies.
Regarding autonomous lift trucks, there clearly seems to be a labor productivity benefit with your profitability, obviously.
Um, hampered by externalities right now, um, any concerns as to your own ability, to invest, to keep up, um, from a technological standpoint.
No, I think, um, you know, we launched our automated solutions at the uh Promatch show. We demonstrated our horizontal mover, um, that will be going into production very soon. Um, and, uh, yeah, so there's a huge amount of activity going on with all of our technology solutions where we're talking about automation or communication through telemetry.
or our operator assist systems.
yeah Brian this is Scott I would say you know if you look at our capex it's north of depreciation and amortization so that shows that we're continuing to invest in our future both Technologies and inefficiency
Appreciate that and good luck for the uh, the back half.
Thank you.
Thank you. And our next question comes from Eric Ballentine with CBC. Please, go ahead.
Hey guys, thanks for taking the time. Just maybe we could drill down on a couple things on within the backlog. You know what is the kind of the mix there? Um, you know, in the, in the profitability, I know that, uh, you guys did, you know, a pretty good job coming out of Co and making sure that, uh, within the backlog there would be, um, you know, all all trucks would be a profitable if you will. Um, and obviously that was
Kind of prior to Trump coming in but maybe you could just give some color on how we should think about that. I mean, is there a chance that some of the backlog trucks?
Are going to be negative like in the past. Um you know, maybe maybe just a little more color on. That would be great. Thanks.
Yeah, I think um, you know there's a couple of things that are going on. Firstly you know our discipline on pricing has been very good um and continues to be good. Um, you know, obviously the market is a little bit more aggressive as the uh the overall size of the markets come down, um,
the so, but we still feel good about uh,
Our margin due to, you know, our pricing discipline. Uh, the other thing that is helping us and we'll
Product line, uh, so that we can match especially uh, for our 1 to 3 and a half ton, internal combustion engine trucks. We can better m match the application with the solution and that will also help. Um, you know, the margin profile of our backlog.
What has been difficult has been the tariff dynamic, and we do see that as a pulse that will go through our profitability because it's really a bit of an overlay. Because it'll take, you know, I would imagine that...
In the third and fourth quarter, we'll be back to.
pricing, you know the um,
The tariffs things stabilize, we'll put it back into it, our normal pricing process. Um, so
I, I think that will provide us with stability, but we are very committed to maintaining our pricing discipline.
Yeah, Eric, um, you know, average selling prices booked in the quarter were actually up year-over-year nearly 10%. So I think that reflects the discipline regime was talking about. It really comes down to the volume, and in this lower volume environment, you know, our challenges are around manufacturing efficiency, but we've announced projects.
to take a significant, uh,
To our manufacturing overhead costs in the next couple of years. So I think, as regime said we're we're committed to pricing discipline and reducing costs to to meet our
demand in future.
Okay, and then I just have a...
A couple of quick more questions just on the components that you're sourcing from China and India. I mean, which are, you know, you're saying that you're doing, you know, in Region 4, region if you will, but you still have to source some components. Um, which are being impacted? What are the major components that are being impacted for you that you can't necessarily get, you know, in Region 4, region, which I guess basically means you can't get it in America?
Yeah, I don't think we'll get into specific components, but maybe I can talk about the category of components. Um, so, you know, the way we categorize components are highly engineered components.
You know, High investment, uh, you know, kind of components such as our um, costings. And then there are
The, uh, low, you know, low investment, low-engineered, uh, components such as our fabrications.
um,
So, the most difficult for us to move quickly are the highly engineered components. However, for the majority of those, we have suppliers that can produce them in multiple regions.
You know, obviously, given a no-tariff environment, we had major, you know, the vast majority of the volume in low-cost countries such as India and China.
Um,
1 of the new platforms is predominantly in India, um, but they can be transitioned now, it it takes some time to make that happen. Uh, and we're in discussions with those suppliers to transition those to, uh, the country either the country of, uh, assembly or the next best. Um, country from a cost point of view, um, based on the tariffs that are already in place,
So that those discussions with those suppliers are going on as we speak.
Then for some of the highly tools, uh but simpler components um like castings.
Part of the issue is the capacity.
By far, the biggest capacity for castings in the world is in China right now.
Uh, in both India and other Southeast Asian countries, as well as Eastern Europe, we are developing casting capacity, but it's going to take us some time. Um, so those are going to be a little slower to move, just.
to, you know, match up with capacity that opens up in other regions.
Hopefully, that gives you a sense for the direction we're heading.
What we're going, uh, how we approach, you know, progressing looking at our sourcing.
Yeah, great. Thanks. I'll jump back. Thank you. Thank you.
Go ahead.
Thanks. Um, so I wanted to jump over to Ballonet. I mean, the quarter, at least, to buy it relative to my expectations was better than I expected. You know, you're clearly seeing it in the margins, you know, the shift in business involves only, you know, where your legacy, low-margin products are fading away. So I was curious, within Ballonet, what was the mix in the quarter between, you know, kind of, you know, you know, like the new core Ball Zone, you know, those old legacy products, and then what was it in?
The same period of last year, and does it ever go to zero? Where it's just, you know, the newer higher-margin product? That's my first. Yeah, the legacy will ultimately go to zero—this, so those are the transmissions, axles. Um, and in fact, our plan was to make that happen.
Sometime during 2026. Um, but again with the tariffs.
That slowed things down a bit because, again, we knew where we wanted to move it. It's one of our joint venture plants.
Um, in one of the countries that was heavily hit with tariffs. Um,
That 1's not settled down yet but our our objective is 1 where another will move those uh that volume uh to um 1 of our other facilities.
Um, so Bond, uh, will essentially, I think by 2027 will be down to close to zero for legacy. Now, I just want to remind us Legacy does not include cylinders because cylinders will continue to be a core, um, business for Ballon. So those, what we're really talking about are transmissions, axles, and steer axles.
Drive axles and steer axles.
And then my next question, and my last question is, um, when I, uh,
think back, you know, kind of the
you've had for,
2025, you know, a part of that was a taking of market share within the warehouse market as you, you know, you've rebranded, you've refocused, you have a bunch of, you know, stellar new.
In that area. Um, the um
There's been, you know, a clear, you know, uh, slowdown if you would in terms of, you know, Warehouse openings, within North America. And so, I guess the question is is, is has there been a change with regards to, you know, your views on the warehouse macro obesity? The beginning of the year?
I mean, is it because it deteriorated? And then how has that impacted your efforts to take market share within that vertical? That's my final question.
Yeah, so although the market size is smaller and the competition is pretty stiff.
Uh, we have, uh, made some progress in market share this year.
um, I think, um,
You know, the some key.
Customers that are going to make decisions over the next, you know, in the second half of the year, and that will really map out.
You know how much gain we're going to end up making during 2025, but we're pleased with, um,
The traction that the team is making in the marketplace, especially in North America at the moment.
Okay, thanks very much.
Thank you, thanks.
Thank you. And our next question is a follow-up from Eric Valentine at CBC. Please go ahead.
Hey guys, um, maybe you could give a little color, you know, uh someone earlier asked about Toyota, but maybe you could give some color on kind of the competitive landscape, uh out there. If you're seeing, you know, are all the players being rational and key on and so forth out there, and, you know, do you see any players that are...
Trying to take advantage of this time on you guys. That'd be great. Thanks.
You know, I think generally, um,
You know, if you look at the key thing that's changed in the landscape, it has been the participation of the Chinese competitors.
And to some extent, driving a, um,
Really a recalibration within our customer base of, um, what is the right truck for them. Um.
and I think,
Was getting ahead of some of that. Um,
as far as our traditional competitors are concerned, you know, we see do do, do see some pricing action being taken from time to time, uh, to get specific deals, but, uh, but nothing across the board. I think that just, they're being pretty disciplined. Like they are, uh, they have been, in the past to adjust the production volume and, uh, participate in the market, you know,
1 other comment that I add to. That is
The uh, Chinese economy is weak.
and they've been encouraged and, um, stimulated by government resources to, uh, continue to manufacture and export and to, um,
uh, a level which has meant that they've been accumulating inventory in
Other countries around the world are a disruptive factor, for sure, in the short term. So, I think this just reinforces Reggie's comment that the Chinese are being the most disruptive, with a lot of government support for doing it right now.
Yeah, thank you. Thank you so much. Thank you.
Thank you. This concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.
We thank you for your closing remarks. No, no.
This is, in my mind, a period of extraordinary.
Transition.
Uh, first and foremost are the tariffs.
Uh, when they do stabilize—and I think they will eventually—uh, stabilize, it's hard to say at what level.
but they will stabilize and the prices uh will go up to recover, uh the costs
Because pretty much everybody is being affected one way or another, directly or indirectly, by the tariffs.
Both importers and domestic producers.
So that will settle down.
It's hard to estimate exactly when that'll happen, but certainly not before the end of this year. There will continue to be the lagging effects that Scott mentioned in his material.
Uh second is the overall demand situation and there are 2 aspects to the demand transition that we're in 1. Is that it in a sense where the a cyclical low, uh the in the industry we had the uh, very large booking period. Uh, extraordinary volumes that, uh, bookings that occurred during koide.
And so we have an exacerbated low, uh, cyclically in the marketplace, uh, that's beginning to work its way through, but it certainly hasn't recovered at this point, and adding to the transitional impact.
Uh is the Tariff issue that I mentioned before because it's not just a question of uh costs and prices. It's also a question of
Uh, demand, uh, in the context of uncertainty before, uh, the tariff situation settles down. Uh, and finally, uh, there's a transitional aspect in terms of the strength of the economy and the general manufacturing sector.
Sure, that all the people on this call are well aware.
Uh, about the, um, the fed's stance on interest rates. And, of course, they're thinking about the economy and total with consumer purchases. Being a very, by far, the largest portion, the manufacturing, uh, orders and it's more broadly, are, are not, uh, putting the low order rates in, in Electra business, uh, in in as a separate matter. They're, they're part of the same, uh, sort of problems. So, we've got, uh, the potential for some cyclical weakness in the economy as well as the Tariff transition, uh, as well as the um,
Uh, uh, the demand, the the normal cycle, and the industry. So all those factors, I think mean there's a lot of short-term pressure, but the companies really positioned to take advantage of the upturn when that, uh, comes along and it should be given the, the, uh, the number of projects that we've undertaken a very dramatic, uh, upturn uh, in the company's revenues and profitability and and when I say revenues, it's really absolute uh unit policy.
Because we've had such an inflationary impact due to the tariffs. So all those factors make this a transitionary transition period and 1, I think that's a core thing to think about when you're uh uh thinking about uh uh history Yale. It's not a short-term story of the next couple of quarters. This is uh um got to be put in a broader and longer term context.
Thank you, Al, for your closing comments. To the participants, we appreciate your questions during the second quarter earnings call. A replay will be available online later. Today, we'll also post a transcript on the Hyster-Yale website when it becomes available. If you have any questions, please reach out to me. My contact information is available in the press release. I hope you enjoy the rest of your day, and now I'll turn it back to Rockco to complete the call.
Thank you, ma'am. This does conclude today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful rest of the day.