3 Key Things Manitowoc Company Management Wants You to Know

#1 Regarding crane sales

Manitowoc’s cranes sales slumped 22% year over year in its second quarter.

Image source: Company website

What management said

“While we saw stability in certain product categories within cranes, macroeconomic headwinds and weak oil prices continue to create a level of uncertainty in the rough terrain and boom truck markets that weighed heavily in our cranes results.”

Chairman, President, and CEO Glen E. Tellock

What that means

Lower oil prices = Lower demand for Manitowoc’s off-highway cranes, especially from the oil and gas sector.

Outlook: Double-digit percentage drop in 2015 cranes revenue. Management has ruled out any “material improvement” in the cranes business “until 2016 at best.”

#2 Regarding leverage

Until Q1, Manitowoc targeted a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of below 3x for 2015.

Fast-forward to Q2, and the company has rolled back its guidance to 3.5 times debt-to-EBITDA.

What management said

“[…] the change in the view on the leverage side is driven by the EBITDA erosion that's taken place primarily in the crane side of the business given the back half for the year outlook and results to date.”

CFO and Senior Vice President, Carl J. Laurino

Not a pretty picture

Long-term debt: $1.56 billion as of June 30 versus $1.4 billion as of Dec. 31, 2014. EBITDA: Declining steadily

What that means

Debt-to-EBITDA is widely used by credit rating agencies as part of their lending covenants.

A consistently high ratio could risk Manitowoc’s credit rating and limit its ability to take on more debt going forward.

#3 Regarding separation Manitowoc is in the process

of separating its cranes and foodservice-equipment businesses by early 2016.

Interestingly, the company just hired someone from outside the industry to head foodservice after separation.

Image source: Company website

What management said

“[…] we recently announced the hiring of Hubertus Muehlhaeuser, who brings over 20 years of global business leadership with an industrial focus to his new post as CEO of Manitowoc Foodservice. Most recently, Hubertus served as Senior Vice President and General Manager EMEA for AGCO Corporation.”

Glen E. Tellock

What that means

Tellock didn’t mince words, admitting it was a difficult search as there aren’t many top-level executives in this fragmented industry who’d suddenly want to switch jobs.

Will Muehlhaeuser deliver on the massive responsibility

of converting a business segment into a successful standalone company? Only time will tell.

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