The Manitowoc Company, Inc. (NYSE:MTW) is a leading global provider of engineered lifting solutions, designing, manufacturing, marketing, and supporting comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks, and tower cranes. Despite facing headwinds in certain markets, the company's diversified product portfolio, strategic initiatives, and strong liquidity position position it well to weather the current environment.
Manitowoc reported annual net income of $39.2 million on annual revenue of $2,227.8 million in its most recent fiscal year. The company generated annual operating cash flow of $63.0 million, though annual free cash flow was negative $14.4 million due to elevated capital expenditures. In the first quarter of 2024, Manitowoc reported net sales of $495.1 million, a 2.6% decrease from the prior year period. Gross profit for the quarter was $92.5 million, with a gross margin of 18.7%. The company recorded net income of $4.5 million, or $0.12 per diluted share, in Q1 2024.
Business Overview
Manitowoc operates through three reportable segments: Americas, EURAF (Europe and Africa), and MEAP (Middle East and Asia Pacific). The Americas segment, which accounted for 57.2% of Q1 2024 revenue, includes North and South America. The EURAF segment (28.9% of Q1 2024 revenue) covers Europe and Africa, excluding the Middle East. The MEAP segment (13.9% of Q1 2024 revenue) includes Asia, Australia, and the Middle East.The company's products are used across a diverse range of end markets, including petrochemical, industrial, commercial construction, power and utilities, infrastructure, and residential construction. Manitowoc's comprehensive aftermarket support operations, including parts, services, and remanufacturing, provide a consistent stream of recurring revenue and help offset cyclicality in new equipment sales.
Navigating Market Conditions
Manitowoc's first quarter 2024 results were impacted by continued softness in the European tower crane market, which the company expects to persist through the remainder of the year. Orders in the EURAF segment decreased 19.8% year-over-year, driven by lower demand for the company's tower crane products. This was partially offset by stronger order activity in the Americas and MEAP segments.The European tower crane market is currently operating at 2009 levels, according to the company. Manitowoc attributes this weakness to high interest rates and a lack of confidence among customers, which has delayed capital expenditures. However, the company believes the market could stabilize in the second half of 2024 as interest rates moderate and residential construction activity improves in key European markets like Germany and France.
In contrast, the company is seeing robust demand in other regions. Orders in the Americas segment increased 7.1% year-over-year, driven by higher new machine sales and favorable pricing. The MEAP segment also reported a 4.9% increase in orders, benefiting from strong quoting activity in the Middle East related to investments in Saudi Vision 2030 and Qatar's North Field expansion project.
Strategic Initiatives
To navigate the current market environment, Manitowoc is focused on several key strategic priorities. First, the company is leveraging The Manitowoc Way, its lean manufacturing and continuous improvement program, to optimize inventory levels and generate cash. Second, Manitowoc is executing on its CRANES+50 strategy to expand its aftermarket parts, service, and remanufacturing business, which has proven more resilient than new equipment sales in the European tower crane market.The company is also continuing to invest in new product development, having launched 29 new or refreshed crane models since 2021. These include innovations such as GROVE CONNECT and POTAIN CONNECT telematics solutions, new truck-mounted and boom truck models for the U.S. market, and updated tower crane designs for the European and Belt and Road regions.
Liquidity and Financial Position
Manitowoc ended the first quarter of 2024 with $31.5 million in cash and cash equivalents. The company had total liquidity of $232.7 million, including $275.0 million in revolver borrowing capacity and $44.1 million in other debt availability, offset by $74.0 million in revolver borrowings and $40.5 million in other debt outstanding.Manitowoc's net leverage ratio was 2.4x as of March 31, 2024, well below the company's target of 3.0x. The company used $30.6 million in cash for operating activities during the quarter, primarily due to an increase in working capital, particularly inventory. Capital expenditures totaled $12.2 million, of which $6.0 million was for the company's rental fleet.
Outlook
While Manitowoc faces near-term headwinds in the European tower crane market, the company remains optimistic about its long-term prospects. Management expects the tower crane market to stabilize in the second half of 2024 as interest rates moderate and residential construction activity improves. Additionally, the company sees strong demand in other regions, particularly the Americas and Middle East, which should help offset the European weakness.Manitowoc is not providing specific financial guidance at this time, citing the uncertainty around the timing of the European tower crane market recovery. However, the company remains focused on executing its strategic initiatives, controlling costs, and managing its liquidity position to navigate the current environment.