Manitowoc Company, Inc. (The)

Hello and welcome to the Manitowoc Company third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, again press star 1. I'll now turn the conference over to Ion Warner. Please go ahead.

Good morning, everyone, and welcome to the Manitowoc Conference Call to review the company's third quarter 2023 financial performance and business updates, 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 on our safe harbor statement and the material provided for this call. During today's call, forward-looking statements as defined in the Private Security 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 projection due to one or more of the factors among others described in the company's latest SEC file. 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 Eric.

Thank you, Ion, and good morning, everyone. Please turn to slide three. Overall, I was very pleased with our team's execution during the third quarter. It's typically the most challenging period of the year for our operations, and 2023 was no different. Although part shortages and vessel delays continued to plague us, sales for the quarter were $521 million, and our adjusted EBITDA was $33 million, or 6.4% of sales. Non-new machine sales increased 21% year-over-year to $155 million. Please turn to slide four. Manitowoc continues to transition from a product-driven company to a services-oriented business. I'd like to highlight a few wins during the third quarter that demonstrate the changing business model under our Cranes Plus 50 strategy. To start, we recently won an order from Maxim Crane Works, the largest crane rental house in North America, to rebuild 14 Manitowoc 2250 crawler cranes. The first two cranes arrived at our facilities in September. This multi-year project brings real value to this important customer by lengthening the productive life of their assets. The key to winning this work was the close collaboration between our MGX and Manitowoc aftermarket teams to align the cost and pricing of parts and labor for an acceptable end-to-end margin to meet the customer's expectations. This is an excellent example of the synergies we continue to realize from our acquisitions. A big thank you to our teams leading the project and to Maxim for their business. On the back of this win, we recently expanded our MGX footprint with a new branch in South Carolina. In addition to providing more capacity for remanufacturing work, this location will represent our POTON and National Crane boom truck product families. This new facility brings our combined MGX and Aspen footprint to 18 branch locations. Next, in Latin America, we opened a new facility in Lima, Peru. This branch will serve Peru's growing mining industry with local parts warehouse for faster delivery combined with a team of service technicians. Including this new facility, Manitowoc now has five locations throughout Latin America. Moving to the other side of the world, year to date, we've delivered 22 used tower cranes to Turkey, Azerbaijan, and Georgia. Since the humanitarian crisis unfolded in Turkey after the February earthquake, Karina L. Rockby, Regional Sales Manager, has worked hard to support the expedited reconstruction efforts in the region. Karina has set a great example of cross-regional leadership, locating several used cranes from Asia to help meet the short lead time demands in Turkey. As the saying goes, when life hands you lemons, you make lemonade. The crisis in Ukraine forced a complicated exit from our Russian business in 2022. We enjoyed a leading market position there for many years and had some very talented, long-tenured team members. At the time, we took a leap of faith and relocated several of our key team members from Russia to Dubai location. We didn't need the extra staff, but we wanted to retain as many people as possible. Sales Manager Sergei Neznenov was one of those team members. Since his move to Dubai, he has reinvigorated our business activity in several CIS countries in Georgia by executing our Cranes Plus 50 strategy and introducing used tower crane sales. Whether addressing lead time issues or finding the right crane for the project, our team in the Middle East has done a great job of using all of their resources to serve our customers. Well done, Karina and Sergei. Cranes Plus 50 is taking hold in every corner of Manitowoc. After 120 years as a product company, I'm extremely proud of how our team is making the transition to become a services-oriented business. Please turn to slide five. If Cranes for Safety is our engine for growth, the Manitowoc Way is our fuel. As I mentioned in recent quarters, demand for tower cranes is softening in Europe, while overall business in the Middle East is booming. At our Niella Italy factory, we manufacture self-erecting tower cranes and rough-terrain mobile cranes. During the third quarter, we expanded our rough terrain manufacturing footprint in the area to help us serve the growing Middle East market. We used lean techniques throughout this process and redeployed our operations team members to optimize the production of mobile cranes while mitigating the impacts of the tower crane market decline on our local workforce. Led by Diego Maraboto, the transformation was completed in August during the summer shutdown. I'd like to congratulate this group on great teamwork. Last month, during my visit to Willemshaven Germany facility, I had the opportunity to see how the team increased our capacity on the boom paint line by 70%. With a little capital, a little creativity, and some elbow grease, the team separated the return line to make shot blasts and paint two distinct lines. They improved the unloading of parts, renewed the control system, and implemented an ultra-solid paint formula for our gray telesylinders. A year ago, this was our number one bottleneck in the factory. Not anymore. Guten Arbeiten to the Wilhelmshaven team. Please move to slide six. Turning to my market update, the positive trend in the United States continued during the third quarter. A few key dealers placed initial orders for 2024 to guarantee their build slots. Rental rates are holding up and utilization remains high at crane rental houses. Finally, dealer inventories remain at sufficient levels to support the current retail pull through. Similar to last quarter, we remain cautious in the short term about the U.S. market. We still have a lot of cranes delivered to our dealers before year-end, which could lead to excess inventory in the channel if the economy pulls back. Nevertheless, we maintain a positive long-term outlook on the U.S. market. At this point, we're still waiting for the infrastructure and chip spills to come to fruition. Europe, however, remains a different story. As previously discussed, inflation and the subsequent increases in interest rates have significantly curbed activity in the residential construction market, which has negatively impacted tower crane demand. Power crane machine orders for the quarter were down 55% year-over-year. Please move to slide 7. As of August, housing permits were down 37% in France and 34% in Germany year-over-year. I recently visited several French dealers and customers, and their sentiment confirmed the market statistics. Utilization is down, rental rates have dropped, and everyone is waiting for the government to intervene. At the moment, rental math is upside down. It's tough for a rental house to justify growing their rental fleet when rental rates are declining and interest rates and crane prices have risen. The majority of the demand that we see is from customers that are proactively managing their long-term fleet renewal strategy. Many fleets, on average, are over 15 years old, and the owners cannot afford to let the fleets age much longer. I expect this environment to continue into 2024. Please move to slide 8. Fortunately, the European mobile crane business isn't as impacted by the soft residential construction market as tower cranes. Although there are plenty of headwinds in the mobile cranes market, the impact varies throughout Europe. Germany, the single largest all-terrain market in the EU, has slowed, and the Scandinavian countries are being adversely impacted by effects. In addition, France and Menelik showed their first signs of weakness in the quarter. Demand in the UK, Italy, and Iberia continue to hold up. As I stated last quarter, our efforts to improve quality, grow our service, and launch new products have helped grow our business. The upcoming launch of two new 4-axle all-terrain cranes will help us maintain our momentum. In the Middle East, in contrast to Europe, demand continues to grow at a rapid pace. Our orders increased 57% year-over-year during the quarter. Saudi Arabia's sweeping efforts to modernize have lifted the entire region. The Asia Pacific market remained mixed, but slow overall. China remains very soft, and the sentiment is starting to spread outside of the country. Moreover, the purchasing behaviors for cranes in the region are pretty similar to those in Europe. Generally speaking, tower cranes are clearly in a down cycle, while mobile cranes appear to be holding up. On the positive side, the Indian market continues to be strong. In South Korea, there has been some progress, mainly with mobile cranes. And the Samsung's next big project is moving forward, which is good news for the tower crane business. And finally, Australia remains a bright spot. With that, I'll turn the call over to Brian.