Manitowoc Company, Inc. (The)

Good morning and welcome to the Manitowoc second quarter 2023 earnings call. My name is Regina and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Mr. Ion Warner, Senior Vice President of Marketing and Investor Relations. Please proceed.

Good morning and welcome to the Manitowoc conference call to review the company's second quarter 2023 financial performance and business update as outlined in last evening's press release. Today I'm joined by Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan, Executive Vice President and Chief Financial Officer. Our call includes a slide presentation which can be found in the investor relations section of our website under events and presentations. We will reserve time for questions and answers after our prepared remarks. I would like to ask that you limit your questions to one and a follow up and return to the queue to ensure everyone has an opportunity to ask their questions. Let's move to slide two onto our safe harbor statement and the material provided for this call. 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 the result of new information, future events, or other circumstances. And with that, I will now turn the call over to Aaron.

Thank you, Ion, and good morning, everyone. Please turn to slide three. I'd like to start today's call by thanking the Manitowoc team for their outstanding performance during the quarter. Our second quarter results capped an excellent first half of the year. Net sales were $603 million for the quarter, and our adjusted EBITDA was $60 million, or 10% margin. In addition, non-new machine sales for the quarter increased 8% year over year. Please turn to slide four. Our Cranes Plus 50 strategy is our top priority. During the quarter, I had the opportunity to visit several MGX and Aspen locations, and I was continuously struck by our local team's enthusiasm to service their customers and to grow their businesses. For example, at our new branch in Kansas City, the team recently rented their very first photon self-erecting tower crane. And you won't find a more passionate group of crawler crane folks than our team in Belle Chase, Louisiana. When I visited, the team was rebuilding an MLC 300 crawler crane, an old Manitowoc 4600, and an old barge crane that must have been older than me. Frankly, what's been most impressive is how these acquisitions enable Manitowoc to better serve our customers through a broad range of service and remanufacturing solutions. I'd like to extend my appreciation to Keith Poff, General Manager of MGX, and Mark Coffman, General Manager of Aspen, for their hard work and leadership. It's been a lot of fun to watch these organizations evolve over the last two years. Please turn to slide five. It's amazing how time flies when you're having fun. In the seven years since we launched the Manitowoc Way, we've continued to mature our lean mentality across our businesses. Each time I visit our factories, I'm amazed by how far we've come, and I'm extremely proud of how the organization has embraced the philosophy of continuous improvement, making small improvements step-by-step each day. During the quarter, I visited our tower crane facilities in Europe. In Portugal, we held our annual Global Kaizen for our lean leaders. The Baltar facility is nothing short of world-class, and you won't find a more motivated team. In addition to sharing best practices, the global team identified great opportunities to improve cycle times and the facility's pivot fabrication processes. Well done to Vasco Rocha, our director of operations, and the Voltar team. In Moulin, France, I saw great progress. Our energy Kaizens were born at this location last year, and they are already producing significant savings at this site. Our digitalization efforts are also gaining traction. We've digitalized our visual pre-delivery inspections, and we continue to find ways to optimize our easy planning tool for work sequencing throughout the factory. My next stop was Charieux, France. This was the worst-performing plant among our European facilities when I moved to France in 2017. The aisleways were torn up. There were no signs of 5S or PPM. The paint system was new but totally dysfunctional. We had an electrical department that I wanted to close. They had just installed one used robot, and I think we had one machining center. It was younger than me. Today, you walk into a completely different facility. The team is in the process of integrating a state-of-the-art robot for welding IGO-T masks, and they recently commissioned a brand new horizontal machining center for milling large parts, reducing the cycle time on every major part by at least 50%. In addition, they had a very special surprise for me. For years, we dreamed of remanufacturing mask elements. With the new machining center, the team ran its first trial part. This could be a major breakthrough for our clean facility strategy. Elsewhere in the plant, the electrical department is now a work of art and a 5S haven. As for the paint system, the team was running the sandblaster paint booth and oven on two shifts six months ago. Today, the team completes the same amount of work in one shift thanks to ingenuity, digitization, and sequencing. This will have a significant financial benefit as well as improve our environmental sustainability. A big merci beaucoup to our Director of Operations, Jean-Luc Couvertot, and the entire SHRU team for a job well done. Please move to slide six. Lastly, I visited our China facility a few weeks ago, and I came away astonished with where we've come in the last three and a half years. Led by Zhenghua Shi, our General Manager, the team has completely streamlined the plant layout. I'll let the pictures do the talking. In summary, I'm very proud of how our organization has embraced the Manitowoc way. We've come a long way, and we are still finding new opportunities for improvement. A huge thank you to the organization. Please move to slide seven. Turning to the market, order intake during the quarter was $551 million, which exceeded expectations. Our backlog remained above $1 billion, and our mix continues to shift towards the Americas. Crane demand in the U.S. continues to be strong in spite of inflation and higher interest rates. Crane utilization is strong among major crane houses, and business activity has been good. This quarter, we heard the first hints of the infrastructure bill coming to fruition in the Northeast. While I remain cautious on the U.S. market due to the economic headwinds, it's encouraging to hear that money is starting to flow from this major government investment program. As for dealer inventory, I would describe it as well-balanced at the end of June. Nevertheless, we have a lot of cranes to ship scheduled to our dealers in the second half, which always leaves me a bit cautious. Even the slightest slowdown in retail activity could create a headwind by year end. Although the ride might be a little bumpy in the medium term, we remain very optimistic about the North American market long term as infrastructure and chips bills gain momentum. Unlike the U.S. marketplace, however, the European economy has been impacted by the increase in interest rates. We've seen construction activity slow across the continent for several quarters. Thus far, this has mostly impacted our tower crane business, which saw orders decline in the second quarter by almost 30% year over year. Although we are clearly in a cyclical downturn in the tower crane market, we see some positives building on the horizon. The UK and French governments are pushing hard for large-scale offshore wind farms and nuclear energy projects, and there are still significant housing shortages in every major European country. The European mobile business has the same underlying economic dynamics, but the story is a little different thanks to some self-help in recent years. I would certainly not describe the market as robust. but the large crane rental houses have been modestly refreshing their fleets, while the smaller rental houses have pulled back. Fortunately, with the help of several successful new product launches over the last two years, we've seen our market share tick up, which is helping to offset the market softness. Mobile business levels in Europe remain stable. Moving to the Middle East, during my trip to Riyadh last month, I saw two things. First, how quickly Saudi Vision 2030 is coming to life. and second, the strong presence of our biggest tower crane dealer, NFT, known locally as Arabian Towers. A big thank you to Nabil Zalawi, who has been our partner since 1975. His presence in the kingdom dates back to the 1980s. On my trip, I had the opportunity to visit King Solomon Park, one of the kingdom's megaprojects. When completed, the park will be five times the size of New York City's Central Park and the first major construction project is the Royal Art Complex, where there are 30 POTON tower cranes in operation. I also visited the Avenue Mall project, which will be one of the largest malls in the world, where another 38 POTON cranes are working. In addition to these projects, NFT is heavily engaged in every major project in Saudi. Although the Middle East is one of our smaller regions, it's growing rapidly with orders for the quarter up 40% versus the prior year. Lastly, Asia Pacific remains a mixed bag. The Indian crane market has been very strong this year, although China remains extremely muted. In South Korea, the semiconductor market has slowed as we wait for the next big lab project to begin, although the shipbuilding and petrochem markets are beginning to pick up. And Australia continues to be a good market, although it's become very difficult to get vessels out of Europe. In fact, we recently chartered our own ship to get machines delivered. With that, I'll turn the call over to Brian.