Manitowoc(MTW) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter orders totaled $238 million, a decrease of 36% compared to $372 million in the previous year, driven by softer demand in the Americas and EURAF segments [19] - Net sales in Q2 were $328 million, down $176 million or 35% year-over-year, primarily due to lower crane shipments in the Americas [21] - Gross profit decreased by $47 million year-over-year, with gross profit percentage dropping to 15% from 19% in the same period of 2019 [22] - GAAP diluted earnings per share was a loss of $0.37 compared to income of $1.29 in the prior year, while adjusted diluted earnings per share were a loss of $0.47 compared to income of $0.94 [24] - Total liquidity remained strong at $375 million, unchanged from the previous quarter and up $35 million year-over-year [26] Business Line Data and Key Metrics Changes - The decrease in backlog was primarily due to the decline in orders in the Americas and EURAF segments, with a Q2 ending backlog of $431 million, down 23% year-over-year [20] - Engineering, selling, and administrative expenses decreased by approximately $1 million year-over-year, primarily due to lower short-term incentive compensation costs [23] Market Data and Key Metrics Changes - In the Americas, demand remained soft, particularly in the energy and commercial construction markets, with dealer stocking levels elevated and fleet utilization rates down [14] - In EURAF, construction sites are aggressively recovering lost time, but there is less confidence looking into next year's construction season [15] - In MEAP, while there was a pickup in multicrane deals in the Middle East, the fundamentals of the construction business remain weak [16] Company Strategy and Development Direction - The company aims to strengthen its balance sheet and maintain liquidity while preparing for long-term growth through new product investments and potential acquisitions [31] - The focus remains on health and safety, cash management, and positioning for growth, with a commitment to innovation despite current market challenges [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the second half of the year, noting that while they can manage through turbulent times, they do not have a clear picture to reinstate 2020 guidance [17] - The company is confident in its ability to generate cash in the second half of the year despite uncertainties [39] Other Important Information - The company filed a Trade Expansion Act petition to investigate trade dynamics in the domestic crane market, with final comments due on August 10 [28] - Management emphasized the importance of maintaining flexibility in production capacity to respond to eventual demand rebounds [30] Q&A Session Summary Question: How bad could the backlog get in the back half? - Management indicated they are closely monitoring order intake and production cycles, but do not typically provide guidance on anticipated backlog levels [37] Question: Are you still comfortable you can generate cash in the second half? - Management expressed confidence in generating cash in the latter half of the year [39] Question: What are your three most significant priorities over the next year? - The focus remains on health and safety, managing cash and liquidity, and transitioning from cost-cutting to growth mode [45] Question: What is the outlook for the business from here? - Management noted that regular seasonality may not apply this year due to lost production and emphasized concerns about the Americas region [48] Question: Can you comment on used equipment values and utilization rates by region? - Utilization rates in Europe are strong, particularly in the tower crane business, while the Americas face challenges due to the pandemic and oil industry impacts [50] Question: How do you plan to manage costs to stay positive from an EBITDA standpoint? - Management indicated that while significant cost reductions have been made, they will look for surgical opportunities to manage costs further [72]