Hyster-Yale Materials Handling, Inc.

welcome to today's heister yale q3 2022 earnings conference call my name is drew and i'll be coordinating your call today if you would like to ask a question during the presentation you may do so by pressing star one on your telephone keypad if you change your mind please press star followed by two i'm now going to hand over to christina kometko to begin please go ahead thank you good morning everyone and thanks for joining us today

Welcome to our 2022 third quarter earnings call. I am Christina Kometko, and I am responsible for investor relations at Hyster Yale. Yesterday evening, we published our 2022 third quarter results and filed our 10-Q, both of which are available on our website. Today's call is being recorded and webcast. The webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow, including answers to your questions, contain forward-looking statements. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we have described in our earnings release issued last night and in our 10Q and other filings with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Speaking on the call today are Al Rankin, Chairman and Chief Executive Officer, Rajiv Prasad, President, and Scott Minder, our new Senior Vice President, Chief Financial Officer, and Treasurer. In addition, Ken Schilling, our former CFO, now the Special Financial Advisor to the Chairman, is also on the call. As many of you already know, Ken announced in mid-August that he would be retiring at the end of 2022. He has been working closely with Scott to ensure a seamless transition of the CFO role, and we appreciate him joining us to participate in the Q&A session of his final earnings call with the company. formalities out of the way. I'll turn the call over to Rajiv.

Thanks, Christy. And good morning, everyone. You might notice that we've changed the speaker lineup this quarter. I'll start by giving you the operational perspective and would also provide some color commentary on our markets. As you'll hear, we've made progress and we expect this positive trend to continue in the fourth quarter. Scott will provide you with the detailed financial results And I will close the call with strategic perspective and take us into Q&A. While Scott will give you the financial pluses and minuses, it's worth noting that our third quarter results were ahead of last year and despite significant currency headwinds. Additionally, these results exceeded our expectations largely due to ongoing cost discipline and enhanced effective pricing that led to improved adjusted standard margins. Those efforts help to reduce the effect of inflation and supply chain shortages that have constrained our production along with others in the industry. I'll start by providing an update on our production rate and where we stand with ongoing supply chain challenges. First, the positive news. We have seen component shortages moderate and we're experiencing fewer supply chain constraints than in the previous quarters. However, Certain critical components such as microprocessors, hoses, weldments, and stampings are still difficult to source, and our global supply chain remains constrained, particularly those supporting materials from China. As a result, while third quarter 2022 shipments grew over the prior year, component availability prevented us from achieving our planned capacity utilization level in the USA and in Europe. We're working diligently to increase our production rates quickly as the supply issues around critical components are resolved. Looking ahead, we expect our fourth quarter production and shipment volumes to increase over third quarter levels. Building on that momentum, we anticipate full year 2023 production and shipment volumes to increase over 2022 levels. These improvements are largely due to the continued easing of component shortages and resolution of global supply chain bottlenecks. In the third quarter, we continue to experience elevated cost pressures. This was most acute in MEA, in part due to higher energy costs caused by the ongoing Russia-Ukraine conflict. In contrast, the rate of cost increases in the Americas and in JPEG have slowed significantly. Forward economic indicators suggest more moderate 2023 cost inflation trends absent any additional effects from geopolitical events or global supply chain constraints. As we've shared in the past quarters, we've implemented multiple price increases to combat inflationary pressures over the past 18 months. We're gaining ground and we expect price increases to fully offset cost inflation in 2022. Looking ahead, we anticipate this favorable price-to-cost ratio to continue benefiting unit margins across 2023 and into 2024, as the current backlog extends for several more quarters. Now let me share my view on global markets. Demand for lift trucks remains strong but appears to be moderating. Our internal estimates indicate a worldwide market decline in 2022 third quarter versus both the prior year and the second quarter. Looking ahead, we expect the lift truck market to decrease in the fourth quarter of 2022 and for the full year 2023 compared with their prospective prior year periods. Despite these declines, markets should remain above pre-pandemic levels even as the possibility of a global or regional recession rises. Market decline combined with our focus on orders with strong margins resulted in a significant decrease in lift truck bookings in the third quarter from robust prior year levels. Bookings also declined versus 2022 second quarter. We expect lower booking trend to continue in the fourth quarter and for the full year 2023 compared to their prospective prior year period as a result of slowing economic activity worldwide. As bookings have declined, our backlog levels have reduced modestly over the past two quarters. However, our current lead times remain extended. Incoming order selectivity has resulted in higher average unit prices and margins for both our bookings and our backlog. In fact, the average sales price of a booking unit increased by, in fact, the average price of a backlog unit increased by nearly 40 percent year-over-year and by over 8 percent sequentially. Backlog price improvement support future unit margin extension. As we continue to work through our backlog in the fourth quarter and into 2023, these lower margin units priced in prior years should represent a decreasing portion of our overall production. As a result, average unit margins are expected to improve as we evolve further into our extended backlog. It's worth noting, as the likelihood of global recession increases, our current backlog of higher margin trucks extends through 2023 and into 2024. This backlog would act as a shock absorber against any recession-related market downturns helping to sustain our business. I'll summarize my comments by saying we remain laser-focused on mitigating the impacts from supply shortages and other supply chain issues. Our teams continue to work closely with suppliers to obtain the parts needed for production at the time that they're needed. As we increase production and shipment levels, we believe that high unit prices and margins within our backlog should support significant operating profit improvement. Ongoing discipline around booking units with higher margin will support this trend over the longer term. Combine the mix of Anticipated higher shipment levels and the lower booking rates are expected to further reduce our backlog, ultimately bringing lead times back to more normal levels. It's worth repeating, however, that our substantial backlog with higher unit margin would act as a buffer in a recensory environment, helping to maintain company profitability levels. Now I'll turn the call over to Scott to update you on our financial results and provide our financial outlook.