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3 Important Things Manitowoc Company Inc. Management Wants You to Know Source: Manitowoc
#1 Regarding cranes business Worldwide cranes markets have worsened Image source: Company website
What management said “The current global economic environment affecting customer demand is unlike any cycle we've seen in the recent past. Uncertainty among our customers is mounting due to emerging market peers, ongoing question over Chinese growth outlook, persistent depressed oil prices and slowing domestic growth.” Interim Chairman, President, and CEO Kenneth W. Krueger
What’s hurting crane sales Asia: The devaluation of yuan and a slowdown in the Chinese construction market Middle East and North America: Dramatic declines in capital spending by oil and gas companies, which means lower demand for Manitowoc’s off-highway cranes Manitowoc’s crane operating margin in Q3 dropped to 1% from 7.3% a year ago as sales dipped
What lies ahead Depleting backlog a major concern as order rates drop: Manitowoc’s Q3 orders plunged 40% year over year even as backlog declined 12% Outlook: 15%-20% drop in 2015 crane revenue. Management expects “the global macroeconomic backdrop to remain difficult through most of 2016.”
#2 Regarding foodservice Image source: Company website Manitowoc’s foodservice business could be turning around
What management said “In Foodservice, the business appears to be turning the corner. Many of the issues that negatively impacted its performance over the last 12 months have been remedied, which contributed to our solid margin improvement this quarter.” Kenneth W. Krueger
What lies ahead Manitowoc’s Q3 foodservice operating margin jumped to 16.6% from 14.8% a year ago, thanks to rigorous cost control. The company’s ongoing restructuring is expected to save it $100 million over the next three years. Meanwhile, recently-launched products like Convotherm and Merrychef e2s ovens and 25 new launches lined up for next year should boost Manitowoc’s revenues going forward.
#3 Regarding separation On track, despite a worsening cranes business Images from company website
What management said “We have made significant progress towards implementing the spin and we remain on track to complete our business separation in the first quarter of 2016, notwithstanding the recent performance within Cranes.” Kenneth W. Krueger
What lies ahead Growing concerns about the timing of the split as: Cranes sales could drop further in 2016 with end markets deteriorating Restructuring benefits won’t show up until 2017 Management, however, is proceeding with the separation as planned as it already has the split-related tax and legal processes in place. It is yet to appoint a CEO for the cranes business. Given the backdrop, shareholders may not find much value in a standalone cranes company.
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