Manitowoc Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to the Manitowoc Second Quarter 2023 Earnings Call. My name is Regina, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Mr. Ion Warner, Senior Vice President of Marketing and Investor Relations.

Operator

Please proceed.

Speaker 1

Good morning, and welcome to the Manitowoc conference call to review the company's Q2 2023 financial performance and business update As outlined in last evening's press release, today, I'm joined by Aaron Ravenscroft, President and Chief Executive Officer and Brian Regan, Executive Vice President and Chief Financial Officer. Our call includes a slide presentation, which can be found in the Investor Relations We will reserve time for questions and answers after our prepared remarks. I would like to ask that you limit your questions to 1 and a follow-up and return to the queue to ensure everyone has an opportunity to ask their questions. Let's move to Slide 2 on to our Safe Harbor statement and 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.

Speaker 1

However, actual results could differ materially from any implied or actual projections due to 1 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 as a result of new information, future events or other circumstances. And with that, I will now turn the call over to Aaron.

Speaker 2

Thank you, Ion, and good morning, everyone. Please turn to Slide 3. I'd like to start today's call by Thank you, the Manitowoc team for their outstanding performance during the quarter. Our second quarter results capped an excellent first half of the year. Net sales were $603,000,000 for the quarter and our adjusted EBITDA was $60,000,000 or 10% margin.

Speaker 2

In addition, non new machine sales For the quarter, it increased 8% year over year. Please turn to Slide 4. Our Cranes Plus fifty strategy is our top priority. During the quarter, I had the opportunity to visit several NGX and Aspen locations, and I was continuously struck by our local team's enthusiasm to service their customers For example, at our new branch in Kansas City, the team recently rented their very first Proton self erecting tower crane. And you won't find a more passionate group of crawler crane folks than our team in Belle Chasse, Louisiana.

Speaker 2

When I visited, the team was rebuilding an MLC 300 crawler crane, An old Manitowoc 4600 and an old barge crane that must have been older than me. Frankly, what's been most How these acquisitions enable Manitowoc to better serve our customers through a broad range of service and remanufacturing solutions. I'd like to extend my appreciation to Keith Poff, General Manager of MGX and Mark Kauffman, General Manager of Aspen for their hard work and leadership. It's been a lot of fun to watch these organizations evolve over the last 2 years. Please turn to Slide 5.

Speaker 2

It's amazing how time flies when you're having fun. In the 7 years since we launched the Manitowoc Way, we have continued to mature our lean mentality across our businesses. Each time I visit our factories, I'm amazed by how far we've come, I'm extremely proud of how the organization has embraced the philosophy of continuous improvement, making small improvements step by step each day. During the quarter, I visited our tower crane facilities in Europe. In Portugal, we held our annual global Kaizen for our lean leaders.

Speaker 2

The Balltar facility is nothing short of world class and you won't find a more motivated team. In addition to sharing best practices, the global team identified great opportunities to improve cycle times Well done, Dovasco Rocha, our Director of Operations and the Baltar team. In Milan, France, I saw great progress. Our energy Kaizens were born at this location last year, and they are already producing significant savings at this site. Our digitalization efforts are also gaining traction.

Speaker 2

We've digitalized our visual pre delivery inspections, and we continue to find ways to optimize our easy planning tool My next stop was Charu, France. This was the worst performing plant among our European facilities when I moved to France in 2017. The aisleways were torn up. There were no signs of 5S or TPM. The paint system was new, but totally dysfunctional.

Speaker 2

We had an electrical department that I wanted to close. They had just installed one used robot, and I think we had one machining center that was younger than me. Today, you walked into a completely different facility. The team is in the process of integrating a state of the art robot for welding iGo T Masks and they recently commissioned a brand new horizontal machining center for milling large parts, Reducing the cycle time on every major part by at least 50%. In addition, they had a very special surprise for me.

Speaker 2

For years, we dreamed of remanufacturing NAFT elements. With the new machining center, the team ran its first trial part. This could be a major breakthrough for our cleanse facility strategy. Elsewhere in the plant, the electrical department is now a work of art and a 5S haven. As for the paint system, the team was running the sandblaster paint booth and oven on 2 shifts 6 months ago.

Speaker 2

Today, the team completes the same amount of work in one shift, thanks to Ingenuity, digitization and sequencing. This will have a significant financial benefit as well as improve our environmental sustainability. To our Director of Operations, Jean Luc Kubota and the entire SKREU team for a job well done. Please move to Slide 6. Lastly, I visited our China facility a few weeks ago I came away astonished with where we've come in the last three and a half years.

Speaker 2

Led by Zheng Hua Shi, our General Manager, the team has completely streamlined the plant layout. I'll let the pictures do the talking. In summary, I'm very proud of how our organization has embraced the Manitowoc Way. We've come a long way and we are still finding new opportunities for improvement. A huge thank you to the organization.

Speaker 2

Please move to slide 7. Turning to the market, order intake during the quarter was $551,000,000 Which exceeded expectations. Our backlog remained above $1,000,000,000 and our mix continues to shift towards the Americas. Crane demand in the U. S.

Speaker 2

Continues to be strong in spite of inflation and higher interest rates. Crane utilization is strong among major crane houses and business activity has been good. This quarter, we heard the first hints of the infrastructure bill coming to fruition in the Northeast. While I remain cautious on the U. S.

Speaker 2

Market due to the economic headwinds, It's encouraging to hear that money is starting to flow from this major government investment program. As for dealer inventory, I would describe it as well balanced at the end of June. Nevertheless, we have a lot of cranes to ship scheduled to our dealers in the second half, which always leaves me a bit cautious. Even the slightest slowdown in retail activity could create a headwind by year end. Although the ride might be a little bumpy in the medium term, we remain very optimistic About the North American market long term as infrastructure and chips builds gain momentum.

Speaker 2

Unlike the U. S. Marketplace, however, the European economy has been We've seen construction activity slow across the continent for several quarters. Thus far, this has mostly impacted our Tower Crane business, We saw orders decline in the Q2 by almost 30% year over year. Although we are clearly in a cyclical downturn in the tower crane market, we see some tilt The U.

Speaker 2

K. And French governments are pushing hard for large scale offshore wind farms and nuclear energy projects, And there are still significant housing shortages in every major European country. The European mobile business has the same underlying economic dynamics, But the story is a little different thanks to some self help in recent years. I would certainly not describe the market as robust, The large Crane rental houses have been modestly refreshing their fleets, while the smaller rental houses have pulled back. Fortunately, with the help of several successful new product launches over the last 2 years, we've seen our market share tick up, which is helping to offset the market softness.

Speaker 2

Mobile business levels in Europe remain stable. Moving to the Middle East, during my trip to Riyadh last month, I saw two things. First, how quickly Saudi Vision 2,030 is coming to life And second, the strong presence of our biggest tower crane dealer NFP, known locally as Arabian Towers. A big thank you to Nabil Zalawi, who has been our Since 1975. His presence in the kingdom dates back to the 1980s.

Speaker 2

On my trip, I had the opportunity to visit King Salman Park, One of the Kingdom's mega projects. When completed, the park will be 5 times the size of New York City Central Park and the first major construction project is the Royal Art Complex where there are 30 Photon Tower Cranes in operation. I also visited the Avenue Mall project, which will be one of the largest malls in the world In addition to these projects, NFT is heavily engaged in every major project in Saudi. Although the Middle East is one of our smaller regions, it's growing rapidly with orders for the quarter up 40% versus the prior year. Lastly, Asia Pacific remains a mixed bag.

Speaker 2

The Indian crane market has been very strong this year, although China remains extremely muted. In South Korea, the semiconductor market has slowed as we wait for the next big fab project to begin, although the shipbuilding and petrochem markets are beginning to pick up. And Australia continues to be a good market, although it's become very difficult to get vessels out of Europe. In fact, we recently chartered our own ship to get machines delivered. With that, I'll turn the call over to Brian.

Speaker 3

Thanks, Aaron, and good morning, everyone. Please move to Slide 8. Let's start with orders. During the quarter, we had orders of $551,000,000 an increase of 27% from a year ago, exceeding our expectations. The year over year increase was driven by higher orders in all our segments.

Speaker 3

Looking more closely at the European market, mobile crane orders more than offset the towers decline. Foreign currency favorably impacted orders by $4,000,000 Our June 30 backlog was slightly down sequentially At $1,025,000,000 an increase 8% year over year. The makeup of our backlog is consistent with the Q1. It's predominantly in the Americas region. Net sales in the 2nd quarter were $603,000,000 an increase 21% from a year ago.

Speaker 3

The year over year increase was driven by pricing in response to inflationary pressures, higher crane shipments and higher non new machine sales as a result of executing On our Cranes Plus 50 strategy, non new machine sales increased 8% year over year to $150,000,000 Net sales were favorably impacted by $3,000,000 from changes in foreign currency exchange rates. SG and A expenses were $18,000,000 higher year over year at $88,000,000 During the quarter, SG and A Included an $11,000,000 charge related to a legal matter with the EPA. After adjusting for this, SG and A expenses were $7,000,000 higher, Primarily due to inflation. Adjusted SG and A expenses as a percentage of sales were 13%, a decrease of 120 basis points year over year. Our adjusted EBITDA for the quarter was $60,000,000 an increase of $24,000,000 or 66% year over year.

Speaker 3

Adjusted EBITDA margin was 10%, an increase of 2 70 basis points over the prior year, a great accomplishment during the quarter and reflective of the team's hard work. Flow through on the year over year incremental sales was 23%. 1st quarter depreciation and amortization of $15,000,000 Decreased $1,000,000 compared to the prior year. Other expense for the quarter was $10,000,000 an increase of $8,000,000 year over year. Included in other expense during the quarter was a $9,000,000 non cash charge related to the curtailment of operations in Russia.

Speaker 3

Our benefit for income taxes in the quarter was $5,000,000 driven by a $14,000,000 reversal of a valuation allowance. Adjusting for this, our provision for income taxes in the quarter was $9,000,000 As a reminder, we have tax valuation allowances established for certain countries, And therefore, losses in those countries are not available to offset income tax expense in profitable jurisdictions. Our adjusted diluted net income per share in the quarter was $0.75 an increase of $0.54 from the prior year. Please move to Slide 9. Our net working capital increased year over year $77,000,000 This increase is from a combination of inventory and accounts receivable Driven by inflation, supply chain and logistics constraints, along with our normal seasonality.

Speaker 3

As a percentage of trailing 12 month sales, Net working capital was 22%, flat year over year. As it relates to inventory, we are targeting a $75,000,000 reduction by the end of the year. Moving to cash flows. We had a usage of $17,000,000 of cash from operating activities in the quarter, primarily due to the growth in our working capital. Capital expenditures were $27,000,000 of which $20,000,000 was for the rental fleet.

Speaker 3

This included $17,000,000 for rental fleet growth And $3,000,000 for replacement. As a result, our free cash flows in the quarter were a use of $44,000,000 We ended the quarter with a cash balance of $26,000,000 which was a decrease of $31,000,000 sequentially. Total outstanding borrowings under our ABL increased $12,000,000 resulting in $82,000,000 outstanding at quarter end. Additionally, during the quarter, we repurchased $2,000,000 of our common stock. Total liquidity decreased $41,000,000 sequentially to $255,000,000 Due to our strong adjusted EBITDA, net leverage ratio remained at 2 times at the end of the quarter, well under the targeted 3 times.

Speaker 3

Please turn to Slide 10. We are updating our full year guidance as follows. Net sales $2,100,000,000 to $2,200,000,000 adjusted EBITDA, dollars 150,000,000 to $180,000,000 Depreciation and amortization, dollars 58,000,000 to $62,000,000 Interest expense, dollars 33,000,000 Provision for income taxes excluding discrete items $16,000,000 to $20,000,000 and adjusted diluted earnings per share $1.10 to 1 0.70 As a reminder, the Q3 is historically our lowest quarter due to summer shutdowns in Europe. In addition, we expect the slowdown in the European tower crane business To be a $30,000,000 adjusted EBITDA headwind in the second half versus the first half. With that, I will now turn the call back to Aaron.

Speaker 2

Thank you, Brian. Please turn to Slide 11. At the start of the year, I said that our results would rely on 2 major factors: How quickly our production of mobile cranes would rebound from the shortages and how badly the European tower crane market would trail off. The good news is that the mobile shipments Accelerated faster than I anticipated. The bad news is that the European Tower Crane market has slumped further than I expected.

Speaker 2

Fortunately, as we have reflected in our updated guidance, the good news exceeds the bad news. While the first half was a great performance in terms of EBITDA, we will be laser focused on working capital in the 2nd half. Strategically, we continue to drive our Cranes plus 50 strategy, investing in organic growth initiatives while searching for our next acquisition opportunity. As for my medium term view of the crane market, although infrastructure projects are beginning to move through the halls of government, spending hasn't begun to ramp up yet. I could see a lull in demand as we work through our dealer inventory and the U.

Speaker 2

S. Election cycle heats up. Nevertheless, I remain extremely optimistic About the long term nature of the Crane business, Saudi Vision 2,030 is in motion, the U. S. Infrastructure and semiconductor bills will eventually begin to let And the large offshore wind and nuclear projects coming down the pike in Europe will be a big boost to the crane market.

Speaker 2

Concurrently, Most rental fleets are 10 to 15 years old on average. These broad trends will provide the confidence and fuel to refresh aging fleets. Manitowoc is well positioned to benefit from this cranes renaissance. With that, operator, please open the line for questions.

Operator

Our first question comes from the line of Jamie Cook with Credit Suisse. Please go ahead.

Speaker 3

Good morning, Jamie. Hi, Jamie.

Speaker 4

Hi, good morning and congrats on

Speaker 5

a nice quarter. I guess, Aaron, understanding The puts and takes to the back half of the year in terms of what you're seeing with EBITDA margins, but related to the Q2, even with Tower Cranes, it It sounds like it's softer than you'd expected. What drove the outperformance on the EBITDA relative to your expectations? And then my second question is, can you sort of talk to how you see orders trending over the next two quarters and How your dealers are approaching inventory as they're thinking about 2024 and the potential for IIJA, etcetera kicking in? Thank you.

Speaker 2

Yes. So I mean for the Q2, I think it's lots of small things. I mean our pricing continues to get better. I'd say that's Almost normalized now. We had good mix.

Speaker 2

FX was in our favor on a few things.

Speaker 3

Yes. And maybe a correction, Jerry, just Jamie, just The tower crane business, we had decent backlog coming into the quarter. So really the softness is going to be in the second half, not the second quarter.

Speaker 5

Okay. And then my other question is just in terms of Dealer inventory like how your dealers are approaching as you think about 2024 and order cadence in the second half?

Speaker 2

Yes. It's always difficult to predict the order cadence because some of it's so chunky. But I mean, we're still in lots of dialogue with several of our large dealers particularly in the U. S. I think we'll get Decent orders.

Speaker 2

So, I mean, we're just I'm very you know me, Jamie, I'm always conservative about how we view the future and Looking at the way that the number of machines we got to ship into our dealers, it's good to see that they're still actively looking at the 2024 build schedules. But July was a little bit lower than it was last year, although it was still in that sort of $150,000,000 range, which I think is a good sign. The difficulty in commenting at this point is We're in the middle of the summer and there's just very little activity.

Speaker 3

And then the

Speaker 2

Sorry, I think we lost you, Jamie.

Speaker 6

Go ahead, Jamie.

Speaker 5

Just the last question on dealer inventory. Thanks.

Speaker 3

So The question is just where dealer inventory is currently or where we're seeing it in the second half, Jamie?

Speaker 5

Yes. Like how dealers are approaching, how they're thinking about inventory as Exiting 2023, getting ready for 2024, wondering if they want to start to increase inventories given what they're seeing out there.

Speaker 2

Based on the shipments that we have lined up, I'd say that they're increasing their inventory. So that's just a question of how high they plan on increasing in the second half. I think a lot of activity looking towards 2024 is more about just being on the build schedule given the long lead times at the moment.

Speaker 5

Okay. Thank you.

Speaker 3

Thanks, Jamie. Thanks, Jamie.

Operator

Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Speaker 2

Good morning, Jerry. Hi, Jerry.

Speaker 7

Hey, this is Clay on for Jerry. Quick question here. Can you talk about the utilization trends for your U. S. Fleet in this quarter compared to Same period last year.

Speaker 2

Yes. We don't share that information. Our fleet's not that large. I'd say In total, even when we talk to our customers, if you look more broadly, utilization rates in the United States have been very good.

Speaker 7

All right. Thanks. And then I guess as a quick follow-up on the regarding the new the non new equipment growth, can you add more color on what the key drivers were within that?

Speaker 2

And then also on top of that, can you break down the

Speaker 7

price versus volume on the new non new equipment sales? Thanks.

Speaker 2

Yes. In terms of what drove the 8% increase, I would say it was we continue to add service techs, which helps service and parts. But Hughes sales have been strong too, and that's usually a big mover because it's a bigger number.

Speaker 3

Yes. And when I look Year over year, the big part of it is just those service techs being more and more utilized. So most of it's on the service and parts side.

Speaker 7

Thanks. I'll pass it on.

Operator

Your next question comes from the line of Mig Dobre with Baird. Please go ahead.

Speaker 6

Hi, Mae. Good morning, guys. Good morning and very, very nice job this quarter. Picking up where you just left commentary on used cranes, I'm kind of curious as to what you're seeing on that side. I know you're very active in that market.

Speaker 6

What's going on with used crane prices? And what is going on with the availability of used Cranes on the market too. Can you comment on that?

Speaker 2

Yes. I mean for sure there's a lot less availability I would say than there was say 2 years ago. But activity still remains good. And I mean for us a big part of it is we didn't we never free purchase units that were out there. So I mean we're Actively looking to buy used machines and we're actively looking at trade ins for instance on ATs in Europe, which we never really did that in the past.

Speaker 2

So that's some of the reason it's been Good for us. In terms of used pricing, I would say it's okay. I mean, if you really look at bifurcated world, I mean, the U. S, Given that utilization is so strong, they're much better in Europe. However, specifically on the TyraCream business, I mean, with the business being so soft, I would say that Old machines, if you got a 15 year old cat head that's got the old legacy software systems, those prices are going to be very low At this point.

Speaker 6

But I'm wondering if there's a dynamic here because we've kind of seen it in other categories of equipment where Used equipment prices have come a lot and come up a lot and that to some degree supports the economics of a trade in for people that are looking to upgrade to new equipment. Is that happening in the crane market or maybe not given what you just kind of mentioned?

Speaker 2

I think the difficulty is You got to look at every individual deal. And if you've got cranes that are 15 years old, those aren't very productive and It's difficult to move those machines. I think if you had new machines that were 3 years old, yes, prices would be great, interest would be huge. If you got machines that are 15 years old, I mean there's a lot of old fleets out there, folks that are looking at sitting on machines that are even 2025 years old. So It's those prices are challenging.

Speaker 3

And that's some of our strategy is to take some of the used cranes and refurbish them and I'll have them as more of like a certified used from our perspective. But I'd say that that's more in its infancy and we're trying to drive that.

Speaker 6

I see. Then my follow-up is on the price cost dynamic. You talked a little bit about pricing. I think I heard a term normalizing. I'm kind of curious as to the contribution, how you think about the contribution from price that you're getting in the back half On a year over year basis relative to what you've seen in the front half and on the cost side, material costs, Have they actually been a tailwind in Q2?

Speaker 6

And how does that progress in the back half

Speaker 2

of the year? Thank you.

Speaker 3

So I'd say from a price standpoint in the second half, you're not going to see it because of the headwinds associated with the tower demand. So I think when you look at the business that the demand is still strong in, we're holding pricing and we're that's going to Contribute to the second half and partially offset that headwind associated with the towers. But when I think about other impacts To the second half, we also have FX favorability that we saw in the first half. We had some very favorable hedges. Our average hedge rate on European purchased product coming into the U.

Speaker 3

S. From our European manufacturers was less than It was around 1 and the average rate was 108 and we're anticipating that the second half rate is a bit higher. So like I said, you're not necessarily going to see The benefit of pricing in the second half just because of the headwind the other headwinds that we've got.

Speaker 6

And material cost?

Speaker 2

I'd say it's no change. I mean everyone can see that steel prices have come down, but even in the United States, still high, but the problem is we don't buy a lot of that steel. A lot of our steel is very specialized. And all those high strength steels, I mean that's a pretty niche market. So I wouldn't say we've seen any dramatic changes yet.

Speaker 3

Yes, between Q1 and Q2. But compared to last year, we definitely saw price increases Relative to the labor market and how that got factored into prices for some of the products we buy.

Speaker 6

Okay. Thank you. Good luck.

Speaker 2

Thanks, Mig. Thanks.

Operator

Your next question comes from the line of Seth Weber with Wells Fargo Securities. Please go ahead.

Speaker 2

Good morning, Seth.

Speaker 8

Hey, good morning, guys. How are you? Good

Speaker 2

morning, Stuart.

Speaker 8

I guess, Just a clarification first on the $75,000,000 inventory reduction comment, is that from the Q2 or is that from 4Q year end 2022. No,

Speaker 6

go ahead. That's right.

Speaker 8

And can you just Your expectations for free cash flow for this year? Thanks.

Speaker 3

Yes. So the $75,000,000 is from Q2 and really driven by Logistics and supply chain and some of that seasonality as well. We're definitely continuing to look at what demand looks like going into 2024, which We'll adjust our inventory somewhat, but we feel comfortable about the $75,000,000 by the end of the year versus Q2. The what was the other half of that question?

Speaker 8

Just free cash I think free cash flow, previously you talked about Kind of neutral. Is that still the case or

Speaker 2

has that changed with the better understanding?

Speaker 3

No. I think we talked about $20,000,000 to $40,000,000 We're thinking $30,000,000 to $50,000,000 with the increase in the EBITDA, some of that flowing through the cash flow. So $30,000,000 to $50,000,000 is what we're targeting.

Speaker 8

Got it. Thank you. And then just on this the $30,000,000 EBITDA headwind for the second half European towers, is that I'm just trying to I think everybody is trying to understand kind of the composition of the backlog. Is that More tilted 3Q versus 4Q or is it kind of spread evenly and Just trying to think through how whether that leads into next year 2024 at all? Thanks.

Speaker 2

3rd quarter is your normal Q3 because Half the plants, all the plants in Europe were shut down for a month basically. So naturally would wait a little bit more to 4th. But I think what's key there is we're really hand to mouth. I mean, we don't have a whole heck of a lot of backlog. And even when I look at July, just to give you an example, we had Less than $5,000,000 in machine orders.

Speaker 2

So it's tough times in the tire crane business in Europe and We got a lot of big challenges. That being said, we're continuing to invest in NPD. So we are in the process of hiring between 15 20 new engineers between The French engineering team and the China engineering teams in support new product development for pursuing more aggressively some of these jobs in the Middle East as well as the What will eventually come on these big nuclear jobs in France and the UK?

Speaker 8

But was Europe were European towers a big Part of the first half margin strength that you saw this year, I'm just trying to understand like how long this bleed does this Headway continue to bleed into the first half of next year or it's kind of like balance? Yes, I mean The first

Speaker 2

half wasn't crazy. We have essentially no Backlog, so it's hard to say when it will start to turn around, right? So I mean, basically, it's typical. You sort of fall off a cliff. I mean, we had good backlog, and we were shipping, Given all the shortages we had, everything we could in the first half to meet customer demands, now we're at a situation where we don't have any backlog.

Speaker 2

So Hopefully, it turns fast. I mean, there's a lot of things out there that could, I think, stimulate it. But Who knows where Ukraine is going and what the interest rate situation is, but there's still lots of housing shortages in Europe. So if they change some of their policies, maybe it comes back faster. But in terms of the first half, I would say normal the same way it's been contributing for the last however many quarters, 6 quarters.

Speaker 2

I would say it was more or less.

Speaker 3

Yes. I think the first half of twenty twenty three was lower than last year, but Still the first half or second half is that $30,000,000 number that we talked about related to just towers alone.

Speaker 8

Got it. Okay. That's helpful. I appreciate the color guys. Thank you.

Speaker 3

Thanks, Sam.

Operator

Your next question comes from the line of Tami Zakaria with JPMorgan. Please go ahead.

Speaker 2

Good morning, Tami.

Speaker 3

Hi. Hi, Tami.

Speaker 4

Good morning. Hi. This is Kaya on for Tammy. Thank you for taking our questions. We were curious if you could talk a little bit more about which Products are seeing more demand from the infrastructure projects that are coming live?

Speaker 2

Yes. So generally, I would say The infrastructure money hasn't started to flow and it will be broad based given the nature of that project when you look at the United States.

Operator

Okay.

Speaker 2

So like electrification, there's a broad there's huge amount of applications. So I think it will be really good for boom trucks and then of course all the taxi work will come along with it. And then in the terms of semiconductor, typically that's more crawlers in the United States.

Speaker 4

Got it. Thank you. And then for a quick Follow-up, if you could update us on how your market share is trending by region?

Speaker 2

I'm sorry, we don't provide that level of detail.

Operator

Okay. Thank you. Our next question is a follow-up from the line of Mig Dobre with Baird. Please go ahead.

Speaker 6

Thanks for taking the follow-up guys. The first one is on Ukraine, which you just mentioned a moment ago. And I'm kind of curious, when you talk to your dealers And obviously the folks that run your business in Europe, is there a sense for how that conflict has impacted investment And I'm kind of curious, I mean, if we do see a resolution at a point in time, presumably, There's a lot of reconstruction that has to go on over there and I would imagine that the European Union would be quite involved. Do you Get any sense that there is chatter in terms of what that might mean for demand going forward and how you might play into that? Yes.

Speaker 2

I mean, anytime you got war on your doorstep and you got interest rates going up, I think that puts everybody in a pretty uncomfortable position in terms of Europe. So for sure, there's some sort of cloud Overhanging the population. In terms of rebuilding Ukraine, everyone loves to talk about grand ideas, but there's nothing out there that's concrete to suggest What actually is going to happen? So I think it's hard to comment on what is really going to happen.

Speaker 6

So you're not hearing anything at this stage in

Speaker 2

Yes, just wishful thinking, I think. I mean there's been no bills passed. There's no activities. You don't really nobody has a clue what's going to happen in terms of rebounding Ukraine.

Speaker 6

Sure. Do you have specific exposure to that market through dealers?

Speaker 2

No. For us, the bigger issue has been Russia. I mean Ukraine is sort of It's not a huge market. It's more of a used market. So I wouldn't say that we were doing a tremendous amount of business there.

Speaker 2

But Russia was a big hit for us.

Speaker 3

And we stopped selling in Russia and we took a charge actually this quarter that I talked about in my prepared remarks.

Speaker 6

Got it. Yes. And then my last question, Middle East, great to hear that orders are up And obviously, there's a lot going on in Saudi Arabia. Can you talk a little bit about competitive dynamics? I know that's a market that Everyone is vying for the Japanese, the Chinese competitors and others.

Speaker 6

How are you staying competitive relative to those folks and do you get a sense that you'll be able to, for lack of a better term, Capture your fair share of the pie as that demand ramps up. Thanks.

Speaker 2

Yes. So I mean given the fact that the Chinese market is so down, So far down, the Chinese are extremely aggressive in the region. And I think for simpler creams, they'll make some gains. But these projects are so intensive in terms of the risk of what they're actually building that I think it still bodes well for us, especially in Higher tonnage applications, they just can't afford to take the risk when you're looking at the line that's 500 meter tall, 200 meter wide, I mean, that's a humongous structure to take the risk on some of these other cranes, I think, would be Really scary. So I think it will be super competitive.

Speaker 2

It always is in the Middle East. But I feel really good in terms of where we are in the Tower Crane because of our partner there NFT. On the mobile side, it's more challenging as I say because the Chinese are more competitive. Again, we've got a good partner there in Canoo and we're actively chasing everything. So I think it's more about picking the winners.

Speaker 3

And as Aaron mentioned, we're continuing to invest in larger tower cranes and new product development there to be competitive in the region.

Speaker 6

Understood. Appreciate the color.

Speaker 2

Thanks, Ming.

Operator

At this time, I'll turn the call back to Mr. Warner for closing comments.

Speaker 1

Before we conclude today's call, please note that a replay of our Q2 2023 conference call will be available later this morning by accessing the Investor Relations Section of our website at manitowoc.com. Thank you, everyone, for joining us today and for your continuing interest in The Manitowoc Company. We look forward to speaking with you again next quarter.

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Key Takeaways

  • In Q2 the company reported net sales of $603 million and adjusted EBITDA of $60 million (10% margin), with non-new machine sales rising 8% year-over-year.
  • The Cranes Plus 50 strategy accelerated through key acquisitions and local service expansions at NGX and Aspen, enhancing remanufacturing and rental offerings.
  • Under the “Manitowoc Way” lean program, global facilities achieved major cycle-time improvements, digitalized inspections and planning, and commissioned new machining and welding robots in Europe and China.
  • Order intake reached $551 million (+27% YoY) and backlog stayed above $1 billion, driven by strong U.S. demand; Europe tower-crane orders fell nearly 30%, while Middle East orders surged 40% and Asia-Pacific remained mixed.
  • Full-year guidance was raised to $2.1–2.2 billion in net sales and $150–180 million in adjusted EBITDA, though a $30 million H2 headwind from soft European tower-crane demand is expected.
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Earnings Conference Call
Manitowoc Q2 2023
00:00 / 00:00