Business Overview

Headquartered in Milwaukee, Wisconsin, Manitowoc has evolved significantly since its inception. In its early years, the company diversified beyond crane manufacturing, producing a range of products including refrigeration equipment, food service equipment, and construction machinery. However, in the 1990s, Manitowoc made a strategic decision to refocus on its core crane business, divesting non-core operations.

A pivotal moment in Manitowoc's history came in 1999 with the acquisition of Potain, a leading tower crane manufacturer. This move significantly bolstered the company's global presence and expanded its product portfolio. Manitowoc continued its growth strategy with the acquisition of Grove Worldwide in 2002, further strengthening its position in the all-terrain and rough-terrain crane markets.

The company demonstrated its resilience during the global financial crisis of the late 2000s by implementing cost-saving measures and streamlining operations. This period of challenge led to a renewed focus on innovation, quality, and customer service, which has continued to drive the company's strategy in recent years.

In response to increasing competition from Chinese manufacturers, particularly in the tower crane market, Manitowoc has doubled down on new product development and enhanced its aftermarket service offerings. This approach aligns with the company's "Cranes Plus 50" strategy, which aims to diversify revenue streams and reduce reliance on the cyclical new crane market.

In July 2017, Manitowoc received an information request from the EPA related to the company's participation in the Transition Program for Equipment Manufacturers, which allowed for delays in installing Tier 4 final emission standard engines. Manitowoc is in discussions with the EPA and DOJ regarding this matter and has recorded a $44 million estimated liability as of Q4 2024. The company believes it has strong legal and factual defenses.

Financial Snapshot

In the fourth quarter of 2024, Manitowoc reported net sales of $596.0 million, which remained flat year-over-year. The company's full-year 2024 net sales stood at $2.178 billion, a 2% decrease compared to the previous year. This performance was impacted by a mix of factors, including the ongoing European tower crane market challenges and the economic uncertainty in certain regions.

However, Manitowoc's non-new machine sales, a key focus area of its Cranes Plus 50 strategy, reached a record high of $629.1 million in 2024, representing a year-over-year increase of $16.5 million or 2.7%. This growth in the less-cyclical, higher-margin aftermarket business underscores the company's efforts to diversify its revenue streams and strengthen its overall financial resilience.

For the full year 2024, Manitowoc reported net income of $55.8 million, operating cash flow of $49 million, and free cash flow of $4 million. The fourth quarter of 2024 saw a significant improvement in cash flow generation, with operating cash flow of $110.8 million and free cash flow of $99.5 million, driven by improved working capital management.

Balanced Approach to Profitability

Despite the top-line pressures, Manitowoc maintained a balanced approach to profitability. In the fourth quarter, the company reported adjusted EBITDA of $34.9 million, a decrease of 4% year-over-year. For the full year 2024, adjusted EBITDA stood at $128.4 million, a 27% decrease compared to the previous year. This decline was primarily attributable to unfavorable product mix and lower absorbed costs due to lower manufacturing volume, particularly in the EURAF segment.

Manitowoc's emphasis on cost management and operational efficiency is reflected in its SG&A expenses, which remained relatively flat at $77 million in the fourth quarter, including a $1 million charge related to a legal matter. Excluding this one-time item, SG&A expenses as a percentage of sales were 13%, in line with the prior-year period.

Liquidity and Financial Flexibility

Manitowoc's focus on cash flow generation and balance sheet optimization has been a key priority. In the fourth quarter, the company reported net cash provided by operating activities of $110.8 million and free cash flows of $99.5 million. For the full year 2024, Manitowoc generated $49 million in cash flows from operations and $4 million in free cash flows.

The company's efforts to manage its working capital effectively are reflected in its net working capital as a percentage of sales, which remained flat at 21% compared to the prior year. Additionally, Manitowoc successfully refinanced its debt during the year, which, combined with the incremental availability under its ABL facility, resulted in a healthy liquidity position of $321 million at the end of 2024.

Manitowoc's debt-to-equity ratio was 0.683 as of the end of 2024. The company had $48 million in cash and $275 million available under its revolving credit facility as of the end of 2024, providing $321 million in total liquidity. Manitowoc's current ratio was 2.02 and quick ratio was 0.74, indicating a solid short-term liquidity position.

Executing the Cranes Plus 50 Strategy

Manitowoc's strategic transformation, known as the Cranes Plus 50 initiative, has been a key driver of the company's evolution. This multifaceted approach aims to strengthen the company's position in the crane industry by focusing on non-new machine sales, expanding its aftermarket services, and diversifying its revenue streams.

The progress made under the Cranes Plus 50 strategy is evident in several key metrics. Non-new machine sales, which include parts, used crane sales, rental revenue, and service, grew to $629.1 million in 2024, a 67% increase compared to 2020. The company's field service technician population also increased by over 100% since 2020, reaching 467 techs in 2024. Additionally, Manitowoc has expanded its U.S. service locations from just one in 2020 to 16 in 2024, with the recent acquisition of certain crane assets and territories in the southeastern United States.

This strategic focus on non-new machine sales and aftermarket services has yielded positive results, with gross profits from these activities increasing by 64% since 2020. The company's goal is to consistently generate stable and substantial returns on its capital, regardless of the crane market cycle, and the Cranes Plus 50 strategy provides a clear roadmap to achieve this objective.

Geographic Performance and Segment Analysis

Manitowoc operates globally, with sales in the Americas, EURAF (Europe and Africa), and MEAP (Middle East and Asia Pacific) regions. In 2024, the Americas region accounted for 39.8% of total revenue, EURAF 20.5%, and MEAP 12.3%.

The Americas segment, which includes North and South America, saw a 3.7% increase in net sales to $287.1 million for the three months ended September 30, 2024, compared to the same period in 2023. This growth was primarily driven by higher new crane shipments. For the nine months ended September 30, 2024, the segment's net sales increased slightly by 0.7% to $867.0 million.

The EURAF segment faced more significant challenges, with net sales decreasing 15.8% to $126.8 million for the three months ended September 30, 2024. This decline was primarily due to lower new crane shipments, particularly in the tower crane product offering. For the nine months ended September 30, 2024, the segment's net sales decreased 13.3% to $446.0 million.

The MEAP segment showed strong performance, with net sales increasing 18.6% to $110.9 million for the three months ended September 30, 2024. This growth was driven by higher non-new machine sales, including increased used crane shipments. For the nine months ended September 30, 2024, the segment's net sales increased 4.8% to $269.0 million.

Navigating Challenges and Positioning for the Future

The crane industry has faced its share of challenges in recent years, including supply chain disruptions, global economic uncertainties, and intensifying competition from Chinese manufacturers. Manitowoc has not been immune to these headwinds, as evidenced by the performance of its European tower crane business, which was a significant drag on the company's adjusted EBITDA in 2024.

However, Manitowoc's management team has demonstrated its ability to proactively address these challenges and position the company for long-term success. The company's guidance for 2025 reflects a marginally better year, with net sales expected to range between $2.175 billion and $2.275 billion and adjusted EBITDA projected to be between $120 million and $145 million.

While the first quarter of 2025 is expected to be particularly light, contributing approximately half the typical 20-25% of full-year adjusted EBITDA due to build schedule reductions made in 2024, the company anticipates generating between $55 million and $85 million in operational free cash flows for the full year, excluding the potential impact of any settlement related to the ongoing EPA matter.

Manitowoc's resilience and adaptability have been further tested by the global pandemic and the ongoing geopolitical tensions, which have impacted various aspects of its operations. However, the company has shown its ability to navigate these challenges, with a focus on maintaining financial discipline, optimizing its supply chain, and delivering value to its customers.

Conclusion

The Manitowoc Company, Inc. has a long and storied history in the crane industry, marked by its commitment to innovation, customer service, and strategic growth. Despite the headwinds faced by the industry, Manitowoc has remained steadfast in its pursuit of diversifying its revenue streams and enhancing its financial resilience through the execution of its Cranes Plus 50 strategy.

The company's ability to generate stable and substantial returns on its capital, regardless of the crane market cycle, is a testament to its adaptability and the effectiveness of its strategic initiatives. As Manitowoc continues to navigate the evolving industry landscape, investors can take comfort in the company's proven track record of weathering challenging conditions and positioning itself for long-term success.

With a solid liquidity position, a growing non-new machine sales segment, and a clear strategic vision, Manitowoc is well-positioned to capitalize on future opportunities in the global crane market. The company's focus on operational efficiency, geographic diversification, and aftermarket services provides a strong foundation for sustainable growth and value creation in the years to come.