Q2 2025 Manitowoc Co Inc (The) Earnings Call
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I would now like to turn the call over to Ion Warner Vice President marketing and Investor Relations. Please go ahead. Good morning, everyone and welcome to our earnings call to review the company's second quarter 2025 financial performance and business update as outlined in last evening's press release joining.
Joining me this morning with prepared remarks are Aaron Ravenscroft, our president and Chief Executive Officer, and Brian Regan.
<unk>, Vice President and Chief Financial Officer.
Earlier. This morning, we posted our slide presentation on the Investor Relations section on our website <unk> Dot com, which you can use to follow along with our prepared remarks.
Please turn to slide two.
Before 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 1095 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.
Or actual projections due to one or more of the factors among others described in the company's latest SEC filings. 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.
Thank you Ian and good morning, everyone. Please turn to slide three to start I'd like to express my deep appreciation for the hard work of the Manitowoc team.
Great trade reset continues I'm really proud of how our team is continuously reacts to the ever changing tariff landscape and focuses on finding solutions to service our customers.
During the second quarter, we generated $540 million in revenue and $26 million and adjusted EBITDA orders were $454 million in backlog ended the period at $729 million or non new machine sales were $162 million up 10% year over year.
In terms of tariffs during our first quarter call, we were modeling $60 million in incremental tariffs for the year with plans to mitigate 80% to 90% of these costs today, we believe the full year gross impact of tariffs was $35 million.
And our assumption is due to a combination of lower purchases and a different mix of various tariffs, we expect to mitigate 90% of these costs.
The fluid nature of the situation and the price elasticity of cranes in the short term, we see a drag on demand in the United States.
Moving to the Manitowoc way, we recently held our annual corporate Kaizen in Italy for this Kaiser and reorganized for dedicated teams to focus on enhancing the information and material flow essential to building rough terrain cranes.
As always a good kaizen is a humbling experience.
It reminds us that running a production line smoothing is only possible if all of the necessary parts are available exactly when needed.
Sometimes that's a big if.
He walked away with a year's worth of action items, but what stood out most was the continued growth in collaboration and teamwork across the organization.
It's inspiring to see how we keep getting better together.
Also I'd like to thank ransom research and front Street capital management for their valuable participation in the event.
Quickly touching on safety I'd like to recognize our team's steadfast efforts to improve our working environment.
For the first half of the year, we achieved a recordable injury rate or our IR of 0.67.
Which is another new safety record our goal is zero, but I'm proud that we continue to make progress towards it. Please.
Please move to slide four for my market update.
Starting with Europe, we're seeing two distinct market dynamics, depending on the country in the U K, Netherlands, and France demand has been slow and contrast customers in Spain, Italy, and Germany are showing signs of optimism and we since that business is starting to rebound.
Across Europe, we've recently seen three encouraging data points.
Number one the UK launched a 39 billion pounds housing program for the next 10 years with a goal of building 300000 homes.
Number two last month in Germany, the government passed a new accelerated depreciation scheme, which complements the <unk> 500 billion Euro infrastructure funds that was recently created.
And number three in France, we saw May housing permits turned favorable up 20% year over year.
On a product line basis, despite great excitement following the April bomber Tradeshow momentum in the mobile crane market moderated during the quarter at this point, we need to wait until after the summer holiday.
Get a clearer picture on demand.
Conversely, however, the tower Crane market has continued to be positive while the market hasn't fully recovered we still have easy comparisons, which is always the birth of a rebound.
During the quarter, our new tower Crane orders were up 104% versus the same period a year ago. This is the fourth quarter in a row that we have seen orders improve on a year over year basis.
Turning to the Middle East the market continues its dynamic growth with especially strong activity in Saudi Arabia and UAE.
During my recent visit to the Middle East I was struck by the remarkable pace at which infrastructural projects move in this region.
Major luxury residential developers like <unk> are reshaping the skylines of Dubai and.
In addition, the Stargate UAE datacenter project was kicked off outside of Abu Dhabi.
Starting with the 200 megawatt data center, where we won an order for 16 large capacity tower cranes.
Upon completion the campus will span 10 square miles and is expected to host five gigawatts of capacity.
Likewise, Saudi remains highly active with our local partner playing a key role in several major stadium projects.
Overall pipeline remains very strong.
Shifting our focus to Asia, China continues to face economic headwinds and we don't anticipate a meaningful rebound in the near term.
Elsewhere, however sentiment is improving.
During my recent visits to Korea, coinciding with the national election, a common view prevailed regardless of political preference.
President scene is pragmatic and supportive of pro business initiatives.
In addition renewed interest in the Samsung Fab five semiconductor project has boosted confidence.
We anticipate the Korean market could regain traction within the next six months.
Nam, we secured crane orders for multiple projects this quarter.
<unk> signal of the market reawakening means.
Meanwhile, in Australia conditions remain mixed the Australian dollar has been hovering at 0.56 to the Euro which has hindered the market, but crane activity has been strong with early signs of activity emerging in preparation for the 2032 Brisbane Olympics.
Finally in North America, the market remains in a holding pattern with significant uncertainty around how various tariffs may unfold, both dealers and crane rental houses are delaying purchasing decisions until there is more stability around tariffs and pricing.
Overall crane rental houses remain busy and we've seen success at some of the bigger players to reduce the age of their fleets. This is encouraging for the health of the overall industry and I remain cautiously optimistic about long term demand in the region.
Looking at the next 12 months, however, I have two views around U S demand depending on the time horizon.
For the next six months, it's hard to see a scenario where demand accelerates trained buyers can afford to wait and at the moment. They prefer to buy units that are sitting on the ground at pre tariff prices. If I consider the Europeans reciprocal tariffs lots of buyers had been hoping that the tariff will drop below 10%.
So we'll have to see.
How customers react to the 15% tariff on a $2 million altering crane, that's real money and rental rates would need to increase the financially justify buying decision Mauro.
Moreover, dealers are reluctant to place new orders and dealer inventory has been declining.
Looking beyond the next six months dealer inventory in the U S could reach all time lows if current trends continue.
As a result of the one big beautiful Bill, 100% accelerated depreciation has been re enacted.
The previous program stimulated demand in December and this could drive dealer inventories even lower.
Point being dealer inventory could be exceptionally low which is a classic signal for the market to accelerate at the beginning of next year.
Unfortunately, we cannot turn our manufacturing on a dime and we have to align our build schedules with current demand. This adjustment will impact our financial performance in the second half of the year, which is why we are guiding to the low end of our EBITDA range.
With that I'll pass it onto Brian to walk you through the financials before I close with our strategy update.
Thanks, Erin and good morning, everyone. Please move to slide five.
During the period, we had orders of $454 million, an increase of 6% from a year ago, resulting in Q2, ending backlog of $729 million. The higher order intake was driven primarily by our European tower Crane business.
New machine orders were up 104% year over year. In addition, we saw an increase in our non new machine orders as Aaron mentioned, our third party dealers in the U S are reluctant to commit to orders at this time due to the uncertainty around tariffs for.
For the quarter the slowdown in demand was more than offset by higher orders in <unk>, our wholly owned distribution business as end customers place orders to lock in pricing on in stock units.
Net sales in the quarter were $540 million, a decrease of 4% from a year ago, we missed several deliveries due to supply chain constraints and last minute commercial delays.
Our non new machine sales were $162 million during the quarter up 10% year over year, demonstrating the momentum we continue to build around our cranes plus 50 strategy.
Trailing 12 month basis, non new machine sales were $659 million another record.
SG&A was $87 million in the quarter up $4 million year over year on an adjusted basis SG&A was up $9 million year over year foreign currency accounted for $2 million with the balance driven by the bomber Tradeshow and other employee related costs.
Our adjusted EBITDA was $26 million down $10 million year over year. This was primarily driven by the lower sales and higher SG&A.
That headwinds from tariffs in the quarter was approximately $1 million.
Our GAAP diluted income per share in the quarter was <unk> <unk> on an adjusted basis.
Income per share was <unk> <unk>, a decrease of 17 cents year over year.
Please turn to slide six.
Net working capital ended the quarter at $580 million up $63 million year over year of which $43 million was due to the payment of the EPA matter in April Adil.
Additionally, foreign currency accounted for $14 million of the increase.
Moving to cash flows we used $68 million of cash in operating activities during the quarter, which includes the $43 million payment to resolve the EPA matter cap.
Capital expenditures were $6 million.
Of which $3 million was for our rental fleet.
Our cash balance was $33 million and total liquidity was $238 million at the end of the quarter.
As anticipated our net leverage ratio increased to approximately four times, we are focused on bringing our leverage back below our targeted three times by year end.
Looking to the full year between the tariffs and the build plan reductions mentioned by Aaron We have line of sight to achieving the low end of our previously issued adjusted EBITDA guidance of $120 million to $145 million with that I'll now turn the call back to Aaron.
Thank you Brian Please turn to slide seven while we anxiously wait to see how the global trade Recept plays out we remain steadfast in our Greenfields 50 strategy during the quarter. We continued executing our strategy to strengthen our aftermarket business. We opened a new service branch near Warsaw, Poland, We expanded locations in Sydney, Australia, Nance, France and Nashville.
Our culture continues to evolve from being product focused to customer oriented and.
A good example of this is in Australia, where we started to offer aftermarket tires, outrigger pads and rigging hardware to our customers.
Finding more of a one stop shop every day, we get better at servicing our customers.
In terms of improving our effectiveness as an aftermarket organization. We recently went live with service mix. This.
Our system replaces over a dozen different legacy system and enhances technician productivity significantly upgrades, our ability to managed service contracts and reduces administrative overhead.
My favorite part of the tool is that it provides us global asset management. So we can track every machine, we manufacture from cradle to grave.
It's a great repository for all of the maintenance and service work on any crane, we sell and it will keep us more closely connected to the iron when it gets traded or sold into the secondary market Needless to say service Max is a big leap forward from the legacy AD hoc excel based systems our teams previously used.
Our Greenfields 50 strategy is driving growth in higher margin recurring revenue streams, and creating long term value for our business while.
While the turbulent second quarter was hard on the Aro business, our <unk> business in the west posted great results.
This is proof that our strategy is working.
In closing, while the global political and economic situation remains unpredictable are focused squarely on servicing our customers better we serve them the stronger our partnerships become when conditions improve we will be ready in the meantime, we remain committed to executing our <unk> strategy and creating long term shareholder value with that well open the line for questions.
<unk>.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
And our first question here will come from Steven Fisher with UBS. Please go ahead.
Good morning, Steve.
And it sounds like a very challenging overall backdrop, but.
Just.
Wanted to ask you about the backlog and the.
Cadence of EBITDA.
EBITDA for the next couple of quarters within the context of that $730 million roughly in backlog.
Well, what's the duration of that at all is that all.
To be shipped within this year.
Just curious how much coverage you have on your plan for Q3.
And then Q4 and then if there's a cadence of the roughly $70 million of EBITDA that you still expect for Q3 versus Q4.
Yes.
It's Brian.
We always have seasonality with Q3, and Q4 with Q4 being the better of the two quarters from a backlog standpoint, I'd say most of that backlog is expected to ship this year.
Pretty normal when you look at our backlog with the vast majority of that being for Q3 and then we've got some good coverage in Q4 as well.
Okay.
And then just wanted to understand maybe a little bit more about the.
The regional dynamics on the the orders.
It sounds like obviously.
Pretty strong orders in.
In.
In Europe, just kind of curious how to think about the book to Bill here.
In the various regions within your kind of overall.
At this 0.9 times.
And under <unk>.
Five in Europe, with kind of a north of a one time.
How do we think about sort of that.
Regional dynamics on orders.
Yes, so with respect to the orders and to me the main area to focus on right now is the Americas and we sort of live in two worlds because we have the mdx distribution business, which of course, they had inventory sitting on the ground that's pre tariff so I mean.
There was really good and business was good on the other side.
The legacy portion of the business, which is much more dealer oriented.
Where.
And we are closely tracking what our orders are and what are the challenges.
Okay.
And then just on the tariffs alright that sounds like a lower overall impact, but it has lower unit can you talk a little bit about the.
Sort of the per unit tariff impact and kind of price versus cost dynamics, you're expecting for both Q3 and Q4.
Yes, so we.
We can't speak about every single model, but.
Literally every single model varies depending on where the cranes coming from where the parts are coming from so thats.
Quite the mix Likewise, most of our competitors are either Japan, or Germany, So theres a lot to shake out in terms of.
The way that the tariffs flow through and then actually hit the customer yet.
Okay and then just lastly for me on the U S market.
Can you just talk about some of the puts and takes.
I mean, it seems like.
Yes general message from the broad value chain are hearing public sector is still pretty good.
In terms of demand.
The private side.
Still lots of structural investment in terms of data centers and various other projects are you seeing those areas.
<unk> Dream.
Is that what sort of just.
Causing people to buy the units that are pre tariff, but there's just not enough.
And in that demand going forward to kind of put new orders in.
Without knowing really what kind of the pricing dynamics that are going to be is that how to think about it.
Other element you have to consider is people managing their fleets and so they can choose to wait and see where pricing ends up and Thats what were really seeing is.
Folks managing the day to day in terms of actual activity Crane rental houses are busy and positive and it all looks good. It's just there's so much uncertainty around what the price of a crane is going to be and as I said on the call. If you've got a machine is two or 3 million Bucks.
Of a sudden it's 15 bridge that you were hoping it's going to be five.
That's a big it's a pretty dramatic change in terms of expectations. So and then in order to finance to justify youre going to have to rental rates go up so the market needs to play out in the next six months before we really get a good feel for.
Where we land.
Okay. Thanks, very much for the time.
Alright, Thanks, Steve Thank you.
And again, if you have a question you May press Star then one to join the queue.
Our next question will come from Mig <unk> with Baird. Please go ahead.
Good morning, Matt.
Yes. Good morning, Thank you for the time.
So just to pick up where Steve sort of.
Lasted here with his questions.
What's interesting to me is that it.
In the U S market right I mean, if you're if you're talking about this this uncertainty.
Around pricing that is impacting customers.
Right.
Wouldn't that create an incentive for customers to actually order ahead of these price increases and tried to be a little more proactive at securing whatever units they have it at pre tariff tariff levels.
To me it would have seemed like Q2 would have been would have been a quarter in which a bunch of that activity could have could have occurred so that so that people can actually lock in prices before you.
Really kind of start making your adjustments as the year progresses.
Well, if youre shipping from Germany.
And then just like all terrain cranes, everyone is from my point of view I think customers, who are hoping that we would end up with even the 10% tariff announced turned out to be <unk>. So people were holding off erinn.
Anytime youre shipping something from that far away that creates more reluctance and concerns us.
Don't really lock yourself into a price whenever you cut the deal.
So the vast majority of our orders.
They're going to include the price adjustment because we knew during the quarter that there was going to be.
Some level of tariffs.
Oh.
Okay. So now we have 15% tariffs.
What is what does that do for demand is that.
Because your commentary is obviously more and more cautious than it was three months ago.
Are these tariffs.
And within the framework that you provided you are saying $35 million as opposed to something that was much larger previously.
In terms of these offsets first I guess, how are you offsetting the tariffs and then second is the customers now know that there was a 15% tariff does does that imply that demand here is going to be curtailed for a prolonged period of time or do you think this is just the <unk>.
<unk>.
We need a near term adjustment and eventually they're going to digest that and we're back to the races and 26, yes.
I think there's two dynamics here one is relative to the dealer inventory and then one is relative to what the crane rental house blowing by it so in terms of our dealers.
Hit the pause button and certain point there nothing have any inventory not gonna have to make some decisions.
So from my point of view. This is probably I mean, I think it's six months to sort of sort out even if I look at July July was roughly the same as the previous three months. So folks are making the purchases that they need to make or has to make and if they have any more flexibility in terms of timing, which most crane rental houses do.
Given the nature cranes.
There have been a little more cautious, but don't forget from a pricing standpoint, when you got the yen at $1 50.
There's room for folks to potentially or.
Tariffs, we don't know exactly how that's going to play out in the lower.
But how are you offsetting these tariffs the $35 million, you say youre going to mitigate at 90% how are you doing that price increases.
Youre doing that with price increases.
<unk>, if I am looking at your Americas revenue and I'm looking at.
The call it $30 million of incremental tariff headwinds.
That does not appear to be very significant we're only talking like two 5% So I.
Recognize that I'm basically spreading it across the entire business, while only certain products are impacted here, but my question to you would be does it makes sense to spread the tariff impact across all your product and tried to sort of minimize that.
Drag on demand or are you being sort of very targeted and saying Hey, you know this models coming from Europe, we're going to put the full bulk tariff pricing on this one as opposed to something that's manufactured domestically. We're very targeted you have to remember we have to go through piles of HTS codes for every component that goes onto the low.
So as.
I have to go unit by unit and remember there's different tariffs we talked about in Q1, you've got the reciprocal tariffs that are coming from whole goods that we produce in Europe that we're bringing.
Two customers in the U S. So theres that aspect of it but then there's also tariffs.
Steel tariffs that we're getting that is in our product. So so how we're addressing it and the percentage of impact obviously the ones that are the reciprocal tariff is on it's going to be about 15% on those products. So the other stuff.
We're.
It's less of a direct.
Offset of the tariff, it's a price increase.
Okay, Yes.
I guess lastly for me and I don't know if this question maybe maybe it's a comment and you can comment back.
When when I'm looking at your updated tariff view.
Less bad than it was three months ago. Your commentary is more cautious there is a divergence here that I think is.
At least to me personally a little bit surprising so.
I guess I'll leave it at that.
I said on the last call that was I'm always nervous about price elasticity in the crane business.
That's what we're seeing right now as folks are hitting the brakes, because the tariffs are 15% on the reciprocals and of course, we have all the 230 to 300 ones that are impacting our locally produced stuff. So.
My point of view, it's yes, we're in the middle of the or the either storm and were seeing exactly how folks are behaving and on the last call. It was more of a.
Sort of guess at that point, because we didn't have enough data to know.
How they would respond.
And when we gave the information last quarter.
You said Hey. This is this is our expectation based on current demand, we don't know what it's going to do to demand and.
We've seen impact on demand during Q2, which is going to impact our full year.
Fair enough I appreciate the time.
Yes.
And our next question will come from Cliff Ransom with Ransom Research. Please go ahead.
Good morning folks.
Thank you again for the opportunity to work with your folks in Italy. It was very instructive.
Look after.
50 years around that Damned Lyft business.
Recovery from cycles.
Going into dawn strokes.
Very difficult.
Let me ask you sorry.
35000 foot question.
If you look back three to five years at Manitowoc institution of the Manitowoc way.
What about lean thinking has enhanced your ability to respond to rapidly changing.
Exterior events.
What do you think has happened to your culture.
Yes, I think a big a big part of what we've done if you look back historically, we were very very vertically integrated and so we didn't have the flexibility to go up or go down quite frankly very easily a fast. So we've done a lot of work on our supply chain in order to have more access to more parts.
To move so if we go up 10% to 20%, we can reactivate faster than we could have say five years ago or 10 years ago.
I was really thinking more about.
What happens internally.
Maybe I'm asking a mindset question, which is too hard to answer.
One of the things about lean thinking is it.
As a whole.
What's the right word.
The whole review process so disciplined.
You tend to discover trends faster than e-commerce.
Companies that don't exercise that methodology and my Barking up the wrong tree here or is that something real.
No I think it's 100% real when we talk about a lot of times is the feedback from our customers is almost incident, where a lot of industry.
We talked to the owners of the people that own the crane rental houses or the Ceos because everyone's so involved in their big purchases. So in terms of how we build our build schedules as our tack times and how they run the lines I think getting that input we get it pretty instantly I mean, even this morning, I was getting feedback from customers. So.
I think that makes a big difference in terms of how we look out the next six months and how we see the dynamics play out.
Got it and you talked about.
<unk>.
Making adjustments in the second half of the year.
Two.
Let's call it protect cash flow.
What specific things.
Whether you would be doing.
Yes, so we took down our build schedules and a couple of different locations. So at shady Grove in Williams.
Specifically and it's just dependent on the product line relative to what we do is we track our backlog we track the orders we track the trends and how much dealer inventories out there trying to guess, where we think demand will be six months from now so based on where current rates are we need to start to adjust our build schedules now to make sure that our supply chain doesn't get overwhelmed or over overheated.
We get into the back end of the year and I got cut off the call twice, but got reconnected.
When you talk about getting your net leverage down.
Did you did you at some point give us an estimate of free cash flow for the year.
Yes, our free cash flow for the year is expected to be on the low end of our original range. So we're thinking that $10 million to $15 million.
Full year, Okay, and what was your best expectation in the year for free cash flow.
When we gave our plan I think it was 40 fives, Okay got it that's fine I remember that number thanks.
I have one last question if I may.
Just have to find it.
No that'll do it thanks guys appreciate it.
Thanks. Thanks go ahead good day.
And this concludes our question and answer session I would like to turn the conference back over to ion Warner for any closing remarks.
Thank you. Please note note that a replay of our second quarter 2025 earnings call will be available later this morning by accessing the Investor Relations section of our website at <unk> 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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.