Manitowoc Company, Inc. (The)

turn the call to Ian Warner, Senior Vice President, Marketing and Investor Relations. You may begin your conference. Please proceed.

Good morning, everyone, and welcome to the Manitowoc Conference Call to review the company's third quarter 2024 financial performance and business update as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan, Executive Vice President and Chief Financial Officer. Today's webcast 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 request 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. Please turn to slide two. Please note our safe harbor statement in 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 describing the company's latest SEC violence. 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 Erin. Thank you, Ayam, and good morning, everyone. Please move to slide three. A year ago, I stated that 2024 would be predicated on two major factors. Number one, whether European governments would address the escalating housing crisis, and number two, how resilient business activity would be in the face of the U.S. election. Starting with Europe, it was great to see the European Central Bank reduce their interest rates with back-to-back cuts in September and October. However, this is probably not enough, and it will take time to impact our business. The governments in France and Germany remain at a stalemate after the recent elections, and no fiscal action has been taken to address the well-publicized housing shortages. Moving to the U.S. market, although it seems like a lifetime ago, it's only been five months since our Crane Days event where customer sentiment was very positive. Unfortunately, this positive attitude evaporated as we entered the summer months and the presidential election started to heat up. In fact, during the third quarter, we missed our book and ship sales target by more than $40 million. As Shredd poses as American Standard used to say, when it's light, you can't see the dark, and when it's dark, you can't see the light. Given that we are only five days from the U.S. election, there is plenty of uncertainty in our near-term outlook. So as I go through each region, I think it's important to contrast the current discouraging tone to the favorable long-term outlook. Starting with the Americas, even though demand for new cranes has been slow, the overall attitude of the crane industry can best be described as cautiously optimistic. Although utilization slowed a bit during the summer months, it has still been pretty resilient. As a general statement, dealer inventory in total is okay, but it's a little more complicated when I dig into the details. While there are areas where inventory is light, feedback from this channel suggests that high levels of RPO activity is weighing on the balance sheet of many of our dealers. At the core, however, most folks in the U.S. are sitting on the sidelines waiting for further interest rate cuts and to see the outcome of the election. Nevertheless, the infrastructure and CHIPS bills are still in the early innings. In addition, the average age of cranes at most large rental houses is greater than 15 years. Clearly, crane fleets continue to age, and we believe the replacement cycle is inevitable. Turning to Europe, the situation is similar as they also grapple with political uncertainty. The third quarter was seasonably slow, which is typical, but the trend throughout the industry remains quite negative. In the tower crane market, while we did see an uptick in orders during the quarter, none of the major crane rental houses are signaling a near-term rebound. The general tone is that we are bouncing along the bottom, and we will continue to do so until there is some sort of stimulus, whether it be government intervention to address the housing shortages or an end to the conflict in Ukraine. Similarly, the overall view of the mobile crane market is fairly muted, with customers remaining very quiet over the summer months. Orders were down nearly 30% year-over-year in the third quarter. On a more positive note, looking over the long term, there are a lot of crane rental fleets, both mobiles and towers, that are long in the tooth. Additionally, we see more large infrastructure projects on the horizon, like offshore wind and nuclear work that requires newer cranes. And, of course, there's a significant housing shortage in almost every country in Europe. We have started to see interest rates decline, and at some point, all of these trends will provide the tailwind required for a rebound in the tower crane market, as well as a robust mobile crane market. In the Middle East, the market remains very strong. Saudi projects continue to move forward, and Dubai expects to nearly double its population by 2040, which is driving residential construction activity. At the same time, the Chinese competition in the region is intense. In terms of mobile cranes, Chinese competitors are aggressive with inventory and payment terms. In fact, one Chinese manufacturer alone has stocked several hundred cranes in Saudi. Fortunately, in terms of tower cranes, while the competition is tough, we are in a much stronger position. Our engineering teams continue to launch new machines for this market, and our long-term dealer partner, NFT, has the world's biggest fleet of large tower cranes, and they are best in class at the application engineering required for such large projects. Moving to Asia Pacific, the prolonged economic stagnation in China is overshadowing the entire region. Similar to the Middle East, Chinese manufacturers are heavily discounting their machines throughout Asia to keep their factories running. In South Korea, the market has been stalled by Samsung's recent decision to delay its Fab 5 expansion. An overall sentiment has been very cautious. Year-to-date, our machine orders in South Korea are down over 50%. Lastly, Australia seems to be following the same pattern as North America, with demand slowing during the summer months. Here, too, we've started to see interest rates come down, which should help buoy the crane market. Please turn to slide four. We remain focused on what we can control. which means continuous improvement through the Manitowoc Way and the ongoing execution of our Cranes Plus 50 strategy. Starting with the Manitowoc Way, I recently visited our factory in Wilhelmshaven, Germany, where we manufacture our all-terrain cranes. I'm super proud of the team. They just keep getting better and better. On this slide, we have highlighted two exciting improvements. First, on the left, through kitting, we've simplified the fabrication of our booms. By kitting all of our raw material and using what the team calls a Christmas tree, they significantly simplify the material management, thus reducing material flow by 93%, which is equivalent to 70 miles of forklift traffic per year. The color of each Christmas tree relates to a specific crane model. The one shown in the picture is for the GMK 6300. When this is delivered to the boom fabrication line, the operators have everything they need so they don't have to chase parts, and the supervisor can easily tell which booms are in process. Second, on the right, is a picture of Eddie Kale with a test device that he created at home. Eddie is a longtime employee who assembles superstructures. His prior job at a plant was to fit the superstructure on the truck portion of the crane, and during this process, Eddie observed that there was always a lot of troubleshooting to ensure the electrical components between the superstructure and the chassis communicate properly. In his new position, he moved one step earlier in the process and is assembling the superstructure. Eddie designed and programmed this simple test box to confirm all electrical connections during the superstructure assembly rather than punting a problem to the next assembly process. This saves the team a huge amount of time and aggravation. Thank you very much, Eddie. Closing with Crane's Pacificity, our non-new machine sales for the third quarter were $169 million, up 9% year-over-year. A couple of points to highlight. First, I'd like to spotlight our mobile efforts in the U.K., One of our four breakthrough initiatives is to reinvigorate our all-terrain product line to grow our aftermarket business. Since launching several new machines over the past couple of years, the team has fully capitalized on our expanded range with several nice customer wins. To support these cranes in the field, we've added six service technicians in the UK, bringing the total to 15. And we've opened a second service center in Barnsley to better support our customers in Northern England, Scotland, and Wales. Next, I'd like to recognize the progress that we've made at MGX. If you recall, when we acquired the crane business of H&E Equipment, we had a couple of branches that were co-located. We are currently in the process of moving into new standalone locations in Baton Rouge and Phoenix. These new branches are larger and give us more capacity to grow our service work in these markets. A big thank you to the H&E team. They have been great partners throughout this transition. In addition, MGX has embarked on its first major man-flock way journey to improve productivity. Currently, we are conducting a Kaizen to more effectively rebuild Manitowoc crawler cranes. In the old days, we rebuilt cranes more on an ad hoc basis without standard work procedures and by relying on individual skill levels. Moving forward, we are creating detailed work sequences and breaking down the bill of materials to support each work segment. This allows us to create specific material kits delivered on a just-in-time basis for each segment in the workshop. The team understands that the faster and more cost-effective we become at these rebuilds, the more competitive we will be in generating more projects like this. This is a groundbreaking Kaizen for our MGX sites, and I'm looking forward to continued progress on this lean journey. With that, I'll turn it over to Brian.