Manitowoc Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025

There are 6 speakers on the call.

Operator

Good morning, and welcome to the Manitowoc Company First Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Ion Warner. Please go ahead.

Speaker 1

Good morning, everyone, and welcome to our earnings call to review the company's first quarter twenty twenty five financial performance and business update as outlined in last evening's press release. Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer and Brian Regan, our Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation on the Investor Relations section of our website at manitowoc.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 and the material provided for this call.

Speaker 1

During today's call, forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied 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 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 three. I want to begin by thanking the Manitowoc team for successfully managing a difficult quarter. We generated $471,000,000 in revenue and 22,000,000 in adjusted EBITDA, exceeding our expectations. Orders were a strong $610,000,000 and backlog ended the period just short of $800,000,000 Our non new machine sales were $161,000,000 up 11% year over year.

Speaker 2

In April, we participated in the Bama Trade Show in Munich, and I was extremely pleased with the industry sentiment and customer feedback throughout the event. We showcased the only hybrid all terrain crane in the industry that is capable of operating for an entire ship. Additionally, crane operators and owners greatly appreciated the upgraded features on our new all terrain cabs. Customers were thrilled with our new tower cranes as well as a wide range of new aftermarket products and solutions that we exhibited. A big thank you to Ion Warner, Inzaheim and the entire Manitowoc team that made the show a great success.

Speaker 2

I also send a big thank you to all of our customers and partners that showed up in force. In terms of tariffs, based on what we know today, we are modeling $60,000,000 of incremental costs and have mitigation plans to cover 80% to 90. This combined with our strong backlog and growing confidence in the European tower crane business supports our current guidance. Given the fluid nature of the situation and the price elasticity of cranes, we have not factored any major change in demand into our forecast. Brian will provide greater color in terms of exposure.

Speaker 2

Lastly, in reaction to our recent anti dumping claim, the Department of Commerce has initiated investigation into crawler cranes coming from Japan. The first hearing was held on May 1. The bottom line is that we believe in free and fair trade and will strongly defend it. Since I joined Manitowoc nine years ago, we have taken significant actions to improve the competitiveness of our crawler crane product line. We closed our namesake factory and reduced headcount significantly to reduce costs.

Speaker 2

We revamped all of our small and medium sized cranes and upgraded and value engineered our large cranes to improve our value proposition. And lastly, over three years ago, we even started to sell these products directly through MGX. Despite taking all of these actions, our crawler cranes continue to be undersold by Cavoco. The filing was not an easy decision and it wasn't taken lightly. At the end of the day, it's up to the United States government to determine whether or not the Belco's trade practices have been predatory in nature.

Speaker 2

Our data sets suggest that it has been. With that, let's return to our normal programming. We had a couple of breakthroughs with the Manitowoc Way during the first quarter. First, we had our best quarter ever in terms of safety metrics. Although our recordable rate isn't zero yet, it's important to acknowledge the significant progress that we've made.

Speaker 2

Great job to every Manitowoc employee. Second, we integrated AI into our Manitowoc Way improvement process for the first time. Our IS department recently began to use AI to convert several computer programs. In this process, AI automates repetitive tasks normally done by developers. As a result, we can save two thousand man hours and avoid spending $400,000 We are now using AI as another tool in our lean practice.

Speaker 2

Please move to slide four for my market update. In North America, First Quarter orders through our third party dealer channel increased 35% year over year. Overall, Crane rental houses remain busy and we've seen quick success at some of the bigger players to reduce the age of their fleets. This is encouraging for the overall health of the industry and I remain cautiously optimistic about demand in the region. We simply have to wait and see how tariffs will play out.

Speaker 2

In Europe, the outcome of the recent election in Germany followed by the announcement of a €500,000,000,000 infrastructure fund has been welcomed by all. While it will take some time for the money to flow, this news significantly boosted customer outlook and provided some level of certainty to a very uncertain market. Mobile crane machine orders were lower year over year against extremely tough comps. However, orders were up sequentially and the level of customer engagement at VAML was great. First quarter orders significantly outperformed our expectations and it feels like momentum is building.

Speaker 2

Turning to European tower cranes, our machine orders were up nearly 70% year over year. This was the third quarter in a row that we outperformed our year over year comps. This gives me confidence that the market continues to move in the right direction and a recovery is beginning to take shape. In The Middle East, we saw a small year over year decline in first quarter orders. Nevertheless, deal activity remains robust, Saudi continues to be strong and The UAE has a lot of interesting projects in the pipeline, including the massive new Dubai Airport.

Speaker 2

The airport is expected to be five times larger than the current airport and comprises 400 gates and five parallel runways, which will require a lot of cranes. Continuing East, India remains very strong. Unfortunately, there hasn't been any major change in China. As for South Korea and Australia, Two of our bigger markets in the region, we're in a wait and see mode. Korea is on hold until its elections on June 3.

Speaker 2

And in Australia, the exchange rates with Europe turned unfavorable recently. Fundamentally, is there, but customers are waiting for greater clarity before they'll hold a trigger on orders. Looking broadly at dealer inventory, there's been a lot of print in recent quarters regarding high dealer inventory levels for construction equipment companies. This has not been the case for our products. Overall, we've held at a pretty steady and healthy level.

Speaker 2

In fact, our dealer inventory for tower cranes in Europe is at historically low levels and many major crane customers have been aggressively selling their old used cranes, which is helping lead our recovery. And in The U. S, if the tariff negotiations take longer than planned, I expect dealer inventory levels to quickly wind down, which will inevitably lead to a faster rebound. With that, I'll pass it on to Brian to walk you through the financials before I close with our strategy update.

Speaker 3

Thanks, Aaron, and good morning, everyone. Please move to slide five. Overall, our first quarter results exceeded our expectations. During the period, we had orders of $610,000,000 an increase of 10% from a year ago, bringing our March 31 backlog to $798,000,000 Higher order intake was primarily driven by The Americas, but we also saw a 68% year over year increase in new machine orders in the European Tower Crane business. This is now the third quarter in a row that we've seen a year over year increase, signaling what we believe is the beginning of a market recovery.

Speaker 3

Net sales in the quarter were $471,000,000 a decrease of 5% from a year ago. Our non new machine sales were $161,000,000 up 11% year over year. Trailing twelve months non new machine sales were $645,000,000 another record continuing the great progress we've been making on our Cranes plus 50 strategy. SG and A expenses were $83,000,000 or 18% of sales in line with our expectations, which included a portion of the Obama trade show costs. Our adjusted EBITDA for the quarter was $22,000,000 a decrease of 31% year over year.

Speaker 3

The adjusted EBITDA margin was 4.6%. Please turn to Slide six. Net working capital ended the quarter at $489,000,000 which is down $20,000,000 year over year, driven by inventory as we continue to manage our build schedules. Moving to cash flows, operating activities provided $13,000,000 of cash during the quarter. Capital expenditures were $11,000,000 of which $4,000,000 was for our rental fleet.

Speaker 3

In addition, we spent $13,000,000 to acquire certain assets and territories from Ring Power Corporation. Total outstanding borrowings under the ABL increased $4,000,000 during the quarter, leaving $83,000,000 outstanding. Our net leverage ratio was right at our target of three times and total liquidity was $3.00 $7,000,000 as of March 31. In April, we made a $43,000,000 payment to settle the EPA matter. In spite of this payment, we expect our liquidity to remain strong.

Speaker 3

Please turn to Slide seven. Before getting into quantifying the potential impact of tariffs, please note that the figures I present did not assume a change in current forecasted demand and are based on enacted tariffs today. With that in mind, we are maintaining our full year 2025 guidance. We can summarize the impact of tariffs into three buckets. Number one, the import of cranes to The U.

Speaker 3

S. From Europe number two, global sourcing of components for cranes manufactured in The U. S. And number three, demand, which we're simply unable to quantify at this time. Starting with bucket number one, to put things in perspective, our U.

Speaker 3

S. Sales make up approximately 50% of our total sales and of that 70% are new machines. Roughly 25% of the cranes that we sell in The U. S. Are imported from factories in Europe.

Speaker 3

At this time, we calculate the potential incremental cost impact of these tariffs this year to be approximately $15,000,000 Moving to bucket number two, approximately 75% of the new machines sold in The U. S. Are manufactured in Shady Grove. As you would expect to manufacture these machines, we source raw materials and components from a variety of countries around the world. We estimate the incremental tariff costs to be around $45,000,000 this year with the biggest impact coming from imports from China.

Speaker 3

In summary, we expect the current tariffs to impact us by approximately $60,000,000 this year and we have detailed plans to mitigate roughly 80% to 90% of these costs through various actions. Please appreciate that the situation is very dynamic and we expect these figures to evolve as trade deals are negotiated. Moreover, it's simply too early in the process to predict exactly where demand and pricing will go over the next sixty or so days. Based on what we know today, we are maintaining our guidance of net sales of $2,175,000,000 to $2,275,000,000 and adjusted EBITDA of $120,000,000 to $145,000,000 With that, I will now turn the call back to Aaron.

Speaker 2

Thank you, Brian. Please turn to Slide eight. Manitowoc was founded in 1902. Since that time, the company has faced plenty periods of economic upheaval. We managed through two world wars, two global pandemics, the Great Depression and the more recent Great Recession.

Speaker 2

And now we face the great global trade reset. The silver lining of COVID was that it shifted our way of thinking, which eventually led to our Cranes plus 50 strategy. It became clear that the only way to effectively drive our return on invested capital and reduce our cyclicality was to grow our aftermarket, which is less capital intensive, more predictable and much more attractive in terms of margins. It was time for us to transition from a product dominant business to a customer focused company. As a result, we made numerous moves that position us to better navigate difficult economic times.

Speaker 2

In our European tower business, we continue to invest in new products in spite of the market downturn, which puts us in a great spot as the market starts to rebound. In addition, we've built a small rental fleet that allows greater flexibility to serve our customers and participate more aggressively in the aftermarket. I'm extremely proud of the fact that our team was able to maintain our non new machine sales throughout the recent downturn. The team has done a great job of positioning us for the recovery that has taken shape. In The Middle East, we've spent a considerable amount of time in Saudi over the last couple of years listening to construction companies and our partner NFT.

Speaker 2

As a result, beginning two years ago, we fast tracked several new large tower cranes tailored to the region's giga projects. In addition, we upgraded our facilities to provide us the needed capability and capacity to build these cranes cranes in volume. We've already begun to see the benefits. In fact, we won a $10,000,000 order just two weeks ago, which was made possible by these investments. With our all terrain product line in Germany, we transformed our factory, increased new product development and invested in the aftermarket support.

Speaker 2

Since I joined the company, we've done a good job getting the voice of the customer from the crane owners. And I am pleased that over the last couple of years, we've gotten much better at working more closely with depot managers and crane operators as they receive new machines with new technology. 2016, I spent five days at Vama getting hammered by customers over quality. This year was night and day different versus nine years ago. We received lots of compliments and accolades from some of the most respected train rental houses in the world.

Speaker 2

In Latin America, we've learned how to service customers and make money by selling used cranes, rebuilding old machines and providing world class service. In Brazil, we've broadened our service capabilities to cover more of the customers' needs, including Chinese cranes. In The U. S, we've invested roughly $200,000,000 to acquire several dealers and expand our North American service footprint. Today, we cover 16 states and we even have other adjacent construction equipment companies talking to us about servicing their machines.

Speaker 2

In total, we've significantly enhanced our aftermarket presence worldwide and developed numerous revenue opportunities beyond just selling new cranes. Since 2020, we've doubled our number of field service technicians globally to almost 500 and have grown our non new machine sales for the trailing twelve months seventy percent to $645,000,000 The tide goes in and out twice a day, which almost seems as frequent as the crane cycle these days. We can't control the fickle nature of the global economy, but we can service our customers. Over the last twenty years, we've put almost 100,000 pieces of iron into the market. That's a lot of day to day aftermarket business.

Speaker 2

The better we serve our customers, the better our customers will serve us. Like so many times before, we will manage through the global trade reset. When the tide eventually comes in, we'll be rewarded. In the meantime, we will continue to execute our Cranes plus 50 strategy, which is a proven blueprint for driving our ROIC and shareholder value long term through the Crane cycle. With that, we'll open the line for questions.

Operator

We will now begin the question and answer session. Our first question will come from Jerry Revich with Goldman Sachs. You may now go ahead.

Speaker 2

Good morning, Jerry. Yes, hi.

Speaker 4

Good morning, everyone. A nice performance this quarter. I wanted to ask you if we could just unpack the mitigation to the tariff numbers that you shared. What proportion of that is changes in the supply base versus pricing? And just given your relative competitive position in terms of U.

Speaker 4

S. Manufacturing, could this be an opportunity for you folks to actually benefit from price cost because your competitors could be pushing pricing more aggressively given their footprint if tariffs do take hold?

Speaker 2

So in terms of the mitigations, Gerry, there's four big buckets. Of course, there's going to be price increases and surcharges, and we've gotten some alternative sourcing, as well as some of our key vendors have been willing to share in the pain. So that's a good news. I think in general, everyone feels that this is going be a short term situation. And so we're trying to find ways to work through it as we get more clarity on the overall subject.

Speaker 2

That being said, I will say that one of the big challenges we have is with where the yen is and the tariff is only 10%. If you look at where the yen has moved over the last five, six years, it has moved well more than 10%. So it'll be we'll have to wait and see how that plays out in terms of pricing in The United States. So it's not so clear to say that there's big benefits for us. But again, I think that there's a lot that has to play out before we can really answer that.

Speaker 4

Super. And then the biggest variable in terms of percent tariff rate is on the China side. Of the $45,000,000 that you gentlemen spoke about in the prepared remarks, how much of that was China and what level of tariff are you assuming for China just so we can set our models if there is progress on that front?

Speaker 2

Yes, it's not easy to I'm not going to give a clear breakdown because it's not just China, it's also the steel and aluminum two thirty two tariffs. Some of that's mix and match and some of it just depends on what our mix is relative to what machines we make. So it will be a combination

Speaker 3

of the two. And obviously the mitigation factors are play into what tariffs to actually going to get hit with as well. So if the China tariffs comes down, the mitigation factors likely come down as well. Super.

Speaker 4

And lastly, to see the increased demand in Europe with the orders that you folks spoke about. Can you just unpack that in terms of what you see on the ground is driving that acceleration? Is it utilization is back at cycle high levels? Or what's driving the level of inflection that you folks are seeing and how's the current order cadence that you're seeing, obviously up significantly year over year, but how does that compare versus prior cycle highs?

Speaker 2

Yes. To me, this is typical recovery because you have easy comps. And I don't think that there's it's pretty broad based. I would say if you're in France, people are still very nervous because there's still a lot of concerns relative to the overall economy there. Germany, of course, we had lots of good news in the last couple of weeks relative to what their government's doing.

Speaker 2

But it's not as if we've seen a big boom. I mean, dealer inventory was really low, utilization was really low. So when you add all those pieces together, that's what's piecing together the recovery. Thank you. So we're a ways from any peak or anything like that.

Speaker 2

I think the base was just so low, but it is nice to see that we're moving in the right direction finally.

Speaker 4

Appreciate it. Thank you.

Speaker 2

Thank you, Jerry. Thanks,

Operator

Our next question will come from Steven Fisher with UBS. You may now go ahead.

Speaker 2

Good morning, Steve.

Speaker 1

Hi, Steve.

Speaker 5

Morning. Thanks. Just wanted to clarify a couple of things on the tariffs first. In terms of the raw materials such as say steel and aluminum that are within your production within The United States, are you experiencing higher costs there? Is that part of what you've factored into that $45,000,000 of sort of tariff cost impact within Shady Grove?

Speaker 2

Yes, that's a portion of it.

Speaker 5

Okay. That's helpful. And then in terms of the backlog, again, sure kind of what you've factored into those estimates in terms of being able to reprice what you have in the backlog currently? Or is what you've kind of forecasted more just on mitigation efforts on new units going forward?

Speaker 2

Yes, because of the nature of tariffs and that hits as the units are imported, we intend to use surcharges to hit what's in the backlog.

Speaker 5

Okay, got it. Then wondering if could just give a little more color on The U. S. Non residential construction markets, kind of where are you seeing the momentum in terms of kind of crane utilization and order patterns and kind of positive momentum and where maybe it's a little more subdued?

Speaker 2

I think it reflects everything that you see in terms of the data. I mean, data centers are going crazy. I think bigger part for us, especially if you sort of take a step back and look at where we've been over the last six months, mean, there was a lot of excitement just as we saw 2016 around Trump's appointment or his election win. And so there's multiple elements for us that go into it just as important or like utilization, how the crane rental houses feel, what the age of their fleets are, as well as where our dealers sit. So I don't think we necessarily have the clearest view right into every single end market.

Speaker 2

But overall, I mean, utilization has been strong up to this point and there's plenty of big projects out there that keep getting announced every single day.

Speaker 5

Okay. And then just lastly on the non new machine sales, and I see the growth there. Can you just maybe unpack some of the drivers there and the visibility that you have to that kind of continuing for the balance of the year?

Speaker 2

Yes, I'd say it's pretty broad based. I mean, we've seen a little bit of weakness in our parts in The U. S, but nothing dramatic. We've done well in use. We've done great in terms of the European tower crane business quite frankly.

Speaker 2

But as we add new locations and we're constantly adding field service techs and we're pushing really hard on used machines and rebuild machines, I'd say it's pretty well across the board.

Speaker 3

Yeah, and there's a lag in the service tech utilization too just because of training and things like that. So as we continue to grow those service techs, the ones that we hired a year ago start to become more utilized and start to generate more and more revenue for us.

Speaker 5

Perfect. Thanks very much.

Speaker 2

Thanks, Steve.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Ion Warner for any closing remarks.

Speaker 1

Thank you. Please note that a replay of our first quarter twenty twenty five earnings 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 continued interest in The Manitowoc Company. We look forward to speaking with you again next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • First quarter revenue of $471 million, orders of $610 million and a backlog of nearly $800 million drove an adjusted EBITDA of $22 million, all of which exceeded the company’s expectations.
  • Manitowoc is modeling about $60 million in incremental tariff costs for fiscal 2025 but expects to mitigate 80–90% of that impact and is maintaining full-year guidance.
  • Global orders grew 10% year-over-year, led by a 35% increase in North American dealer-channel orders and a 68% jump in European tower crane sales, signaling early signs of market recovery.
  • Aftermarket initiatives remain a strategic focus, with non-new machine sales up 11% to $161 million in Q1 and record trailing-12-month aftermarket revenue of $645 million, supported by AI-driven efficiency gains.
  • The U.S. Department of Commerce has launched an anti-dumping investigation into Japanese crawler cranes, and Manitowoc says it will vigorously defend its position in support of free and fair trade.
A.I. generated. May contain errors.
Earnings Conference Call
Manitowoc Q1 2025
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