Manitowoc Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 3, 2023

There are 12 speakers on the call.

Operator

Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Manitowoc Company First Quarter 2023 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer Thank you. Ion Warner, you may begin your conference.

Speaker 1

Good morning, everyone, and welcome to The Manitowoc Conference Call to review the company's Q1 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 1 and a follow-up and return to the queue to ensure everyone has an opportunity to ask their questions.

Speaker 1

Please move to Slide 2. 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 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 as a result of new information, future events or other circumstances. And with that, I will now turn the call over to Aaron.

Speaker 2

Thank you, Ian, and good morning, everyone. Please turn to Slide 3. Manitowoc ended 2022 on a strong note and this momentum carried into the Q1 of 2020 For the quarter, we generated sales of $508,000,000 and adjusted EBITDA of $45,000,000 Adjusted EBITDA margin was 8.9%, a 2 I would like to recognize our team's Herculean efforts to expedite parts, complete cranes and get them all shipped, all in the face of continuing supply chain, labor and logistics challenges. Thank you to everyone in the Manitowoc organization for delivering the strong performance. In addition, non new machine sales for the quarter increased 17% year over year.

Speaker 2

I'm pleased how our team is embracing the Cranes Plus 50 strategy And achieving organic growth both in our traditional aftermarket business as well as in the acquired businesses. With these efforts, we continue to build momentum to grow our higher margin, Less cyclical revenue streams. Please turn to Slide 4. The mission of Manitowoc is to build the physical communities of tomorrow. We often talk about this mission in the context of famous construction sites, new cranes, lean activities and our sustainability efforts.

Speaker 2

Today, I would like to highlight Manitowoc's relationship with Brooks House, a partnership that is strengthening our role in the communities of Central Pennsylvania and Maryland. Founded in 2019, Brooks House provides a community based, safe, stable and emotionally supportive living environment for adult women in the early stages of substance abuse recovery. The center was founded by Kevin Simmers shortly after his daughter Brooke sadly succumbed to drug addiction. Manitowoc's relationship with Brooks House started with simple monetary donations. But as time progressed, Kevin and Dave Hall, our General Manager of North Realized that Manitowoc could have an even greater impact.

Speaker 2

Their idea was for Manitowoc to provide job training and employment opportunities To women who have graduated from the in treatment portion of Brooks House program. Today, 9 of these graduates are employed in our welding and assembly operations at our Next month, we will host 15 additional participants in the program with aspirations to have them join the team. I urge you to check out the video link in our presentation as words cannot do the program justice. I cannot tell you How proud I am of Dave Hall and his team at Shady Grove for their efforts to partner with Brooks House. I'd like to give a shout out to our new team members from the Brooks House.

Speaker 2

Keep up the good work. And a big thank you to Kevin for his incredible dedication and commitment to a noble cause. Please turn to Slide 5. Before moving on from the topic of Shady Grove, I'd like to recognize our crawler team. Manitowoc has been making Lattice Boom sections since 1925.

Speaker 2

Even so, the team continues to improve how we make these parts. When I recently toured the facility, they were in the process of reconfiguring how we weld the boom butts and tops. This is the large part of the lattice that physically attaches to the main structure of the crane. We've been welding these parts the same way for over 10 years, The team is taking a new approach to improve safety, quality and productivity by moving certain elements offline and treating the process almost like a sub assembly. This process involves some of the most complicated welding that I've seen in my career and the skill of our welders is second to none.

Speaker 2

I'd like to thank Ron Wolford and his team for their dedication to continuous improvement using the Manitowoc Way. Please move to Slide 6. Turning our attention to the crane market, our orders for the Q1 totaled $525,000,000 saving our backlog still well above $1,000,000,000 Although order intake was better than expected for the Q1, market dynamics vary widely around the globe and current signals from the markets are mixed. Geographically, our backlog is skewed toward the Americas reflecting this dichotomy. Starting with the U.

Speaker 2

S, we heard a spectrum of feedback from customers at Connex Bench. Although we haven't seen significant money allocated to the infrastructure and semiconductor programs yet, there's still plenty of crane work around the U. S. With that said, the chickens are coming home to roost with respect to financing. Higher interest rates are weighing heavily on the minds of our customers and the recent banking crisis Certainly caught the attention of our market.

Speaker 2

Order intake remains good, but our internal sentiment is cautious. While we still have a good backlog, the crane market can change overnight and the U. S. Presidential election cycle typically seems to slow customer demand. As a final comment, dealer inventory levels are okay to load depending on the product category.

Speaker 2

But when this is combined with the orders that we have on hand, We can foresee a potential buildup of inventory coming if retail activity shows any signs of a slowdown. Turning to Europe, The environment remains very challenging as interest rates continue to rise and the Ukraine crisis drags on. As we previously indicated, the tower crane business is This slowdown was definitely reflected in the Q1 machine orders, which were down approximately 20% versus the same period 1 year ago. I expect the overall tower crane business in Europe to be very challenging for the remainder of the year. The mobile business is more of a paradox.

Speaker 2

Frames are busy and rental rates have inched up, but customers have entered a wait and see mode. Keep in mind that our build schedule for these products is relatively sold out for 2023 And we're mostly quoting units for 2024. Considering the current geopolitical and banking dynamics in Europe, I believe the purchasing behaviors are not Pricing for long lead time items. Generally, I feel more positive on the European mobile crane business versus the tower crane business Due to the recent new product launches or significant improvement in our quality over the last couple of years and our Cranes plus 50 strategy which is driving us Moving to the Middle East, Saudi Vision 2,030 continues to drive the entire region And I remain very optimistic about the long term potential. At the moment, these projects are primarily involved in earthmoving activities And road building projects as they continue to evaluate the best engineering solutions for vertical construction.

Speaker 2

With respect to Neom, our local dealer Partner has recently won their first project using proton tower cranes for the construction of the island resort, Sendala. I'll be in Saudi Arabia in July to get a better feeling for how we can expect this boom in construction to materialize. Outside of Saudi, we've also seen a significant spike in tower crane in Turkey as the country reveals from the terrible earthquake that hit it in February. Although the Middle East is one of our smaller regions, our orders for the quarter We're up 40% versus the prior year. And last but not least, I would say it's more of the same in Asia Pacific.

Speaker 2

China still hasn't rebounded, although key markets such as South Korea, Hong Kong and Australia have been strong. Although we've had some meaningful tower crane orders for Singapore, Southeast Asia is still very quiet. With that, I'll pass it over to Brian for a financial update.

Speaker 3

Thanks, Aaron, and good morning, everyone. Please move to Slide 7. Beginning with orders, we exceeded our expectations during the quarter with orders of $525,000,000 an increase of 9% from a year ago. The year over year increase was primarily driven by higher orders in our Americas segment. Orders in our UROP segment were lower as a result of the near term uncertainty mentioned by Aaron.

Speaker 3

Foreign currency unfavorably impacted orders by $9,000,000 Our March 31 backlog was relatively flat sequentially at $1,076,000,000 and increased 4% year over year. The majority of our backlog is in the Americas region and in Europe backlog has been declining. Foreign currency favorably impacted backlog by $4,000,000 from the prior quarter and unfavorably $8,000,000 year over year. Net sales in the Q1 were $508,000,000 and increased 11% from a year ago. The year over year increase was driven by pricing And higher volume due to the stronger shippable backlog entering the quarter primarily in the Americas and higher non new machine sales, which increased 17% to $151,000,000 Net sales were unfavorably impacted $11,000,000 Some changes in foreign currency exchange rates.

Speaker 3

SG and A expenses were $9,000,000 higher year over year at $75,000,000 In the prior year, SG and A expenses included a non recurring $5,000,000 benefit associated with the partial recovery of a note receivable balance in China. Adjusting for this benefit, SG and A expenses were slightly higher year over year due to inflation. SG and A expenses as a percentage of sales were 15%, a decrease of 70 basis points on an adjusted basis year over year. Our adjusted EBITDA for the quarter was $45,000,000 an increase of $14,000,000 or 45% year over year. Adjusted EBITDA margin was 8.9%, an increase of 2 10 basis points over the prior year.

Speaker 3

Flow through on the year over year incremental sales Was 28%, slightly higher than our normalized flow through of 20% to 25%, impacted by better than expected price realization and mix. 1st quarter depreciation and amortization of $15,000,000 decreased $2,000,000 compared to the prior year. Our provision for income taxes in the quarter was $4,000,000 or 20 percent of our pre tax income. As a reminder, we have tax valuation allowances established for certain countries and therefore losses in those countries are not available to offset income tax expense in profitable jurisdictions. Our adjusted diluted net income per share in the quarter was $0.46 an increase of $0.43 from the prior year.

Speaker 3

Our net operating working capital increased year over year $33,000,000 or $43,000,000 on a currency neutral basis. This increase is primarily in inventory and driven by inflation, supply chain and logistics constraints and stronger demand in the Americas. As a percentage of trailing 12 month sales, net operating capital was 30%, an improvement of 2 50 basis points year over year. On a sequential basis, net operating working capital as a percentage of trailing 12 month sales was flat. Sequentially, Foreign currency unfavorably impacted net operating working capital by $3,000,000 Moving to cash flows.

Speaker 3

We generated $15,000,000 of cash from operating activities in the quarter. Capital expenditures were $10,000,000 of which $3,000,000 was for the rental fleet. As a result, our free cash flows in the quarter were $5,000,000 We ended the quarter with a cash balance of $56,000,000 which was a decrease of $8,000,000 sequentially. Total outstanding borrowings under our ABL decreased $10,000,000 during the quarter, leaving $70,000,000 outstanding. Additionally, during the quarter, we repurchased $4,000,000 of our common stock.

Speaker 3

Total liquidity remained flat sequentially at $296,000,000 Due to the strong adjusted EBITDA, Our net leverage ratio was 2 times at the end of the quarter, well under the targeted 3 times. With that, I will now turn the call back to Aaron.

Speaker 2

Thank you, Brian. Please turn to Slide 8. To summarize, our team put up a great Q1, which is a nice start to a long year. We've got a solid backlog And based on our Q1 results, the pricing actions that we took last year are coming through a little faster than anticipated. Even so, we continue to face a number of part shortages, Labor constraints and supply chain issues and we are at the start of a downturn in the European Tower Crane Business.

Speaker 2

Given these factors, we are maintaining our previously published At this time, it's extremely difficult to predict how the next 12 to 24 months will unfold as the global economy normalizes to the recent shock treatment of higher interest rates, geopolitical tensions and of course the U. S. Presidential election which is beginning to heat up. Nevertheless, the underlying theme in the crane industry remains the same. Crane fleets have unquestionably become aged and continue to grow older And there's plenty of infrastructure spending around the globe to bolster the construction market over the next decade.

Speaker 2

As we prepare for the eventual Crane Renaissance, The Manitowoc team remains focused on controlling what we can control. Operationally, the Manitowoc Way is at the core of everything we do. It's our compass and the fuel that drives continuous improvement in how we run our factories, design new products, service cranes and support our customers. Strategically, we are committed to Cranes plus 50 and it's imperative that we continue to find ways to increase our non new machine sales in order to weather the storms of the crane cycle. This transformation of our business has only just begun.

Speaker 2

With that, operator, open the line for questions, please.

Operator

Thank you. Q and A roster. We'll take our first question from Jamie Cook with Credit Suisse. Your line is open.

Speaker 4

Hi. Good morning,

Speaker 5

Jamie. Hi, Jamie.

Speaker 6

Good morning and congrats on a nice quarter. I mean you talked to price and mix as being favorable in the Q1. Can you Help us understand how much pricing was in the Q1 and sort of how do we think about the cadence of that as we progress throughout the year? And then the last two quarters in terms of like your EBITDA performance have been fairly impressive In the $45,000,000 to $50,000,000 range. So why shouldn't we think of that as a good bench for Quarterly EBITDA going forward or what are the headwinds to EBITDA relative to the past two quarters as we think about the rest of the year?

Speaker 6

Thank you.

Speaker 3

Jamie, so I'll start with the mix question. So when we look at sort of how the quarter And what we're expecting, I think there's 2 components of the mix. 1 was within the mobile business, We had some favorable mix relative to both customers and product. And when we look out to the rest of the year and the mix Difference towers is where we're concerned about. So there's going to be a mix shift away from towers likely in the second half, which is going to impact our margin.

Speaker 3

So I think we're very sensitive around that and some of the pricing benefit we saw In Q1 and we believe we'll continue to see in Q2 through Q4, we'll be partially offset by the tower crane mix difference.

Speaker 2

Yes. And I'll take the question around the EBITDA of $45,000,000 So I think there's a couple of things Jamie. First, I'd say is with all the lean work that we've done at Willemshaven, we're running A little bit differently and smooth out the production a lot better than we have in the past and we saw some good gains there sort of from the Q4 to the first. It really showed in our revenue. That's why our revenue was up over $500,000,000 for the first time, I think, at least as long as I've been with the company.

Speaker 2

So I think that's Part of it, right. So we've smooth some out with some of the things we're doing operationally. And then the big question marks that are really around the second half. So we've got our normal seasonality in the Q3. And then just this number ending question of European Tower Crane Business is slowing down.

Speaker 2

How much We'll slow down. We'll be in a book and bill scenario starting in the Q3 and power frames is one of our typically our higher margin products. So I do worry about that mix as we get into the second half of next year. Sorry,

Speaker 6

I don't think you talked to mix, but you didn't Speak to pricing unless you don't want to?

Speaker 3

No. So when I look at the flow through for the quarter, it was about 28%. We expect between 20% 25%. So pricing, I would say, would be that about 3%, but there's also a mix component in there. I'd say look at it between 3% 5%.

Speaker 6

Okay. And sorry, one last if I could. The non machine sales, obviously, they were up nicely in the quarter and probably contributed to profitability as well. What is your expectation for non machine sales Within your guidance of the $2,000,000,000 to $2,100,000,000

Speaker 2

I don't think we've shared it at that level.

Speaker 7

No, we've not.

Speaker 2

I can tell you that I mean, we operationally we drive the business. We're trying to grow it sequentially every month, every quarter. That's not so easy to do. But, yes, I think that we've had some nice gains recently, not just The acquisitions, but the growth in the acquisitions since we've owned them. So

Speaker 3

Yes, we've done some good investments in Denver and Missouri to grow Organically, the acquisitions, so when we look at what the target is for the cranes plus 50, By 2026, we're expecting to be at about 675. So it's a trend.

Speaker 2

I think it will end up being lumpy too, especially because we've gotten More aggressive on the used side of the house.

Speaker 6

All right. I appreciate the color. Thanks.

Speaker 2

Thanks, Jamie.

Operator

Okay. Next we'll go to Tammy Zakaria with JPMorgan. Your line is open.

Speaker 2

Good morning Tammy. Hi

Speaker 6

Tammy. Hi.

Speaker 4

Great quarter. Congrats. So in terms of I'm sorry if I missed this, but did you Disclose how much was price cost impact in the quarter and what's the outlook for the rest of the year?

Speaker 3

So And answering Fami's question, I mentioned that of the flow through, the 28% flow through, you can model that the price was about 3% to 5%

Speaker 4

Got it. Okay. And you also said there is some mix in there. So mix and price included was 2 to 5?

Speaker 3

Approximately, I'd say, the 3% to 5%. We look at Flow through at around 20% to 25%, we were at 28%. So between volume mix And

Speaker 2

I think the reality is you can't say it's price, it's more mix because and it's cleaning out the backlog. It's not as it's a go forward

Speaker 4

Right. Got it. So, speaking of back, based on the supply chain visibility that You currently have. Where do you see your current backlog sort of settling end of this year?

Speaker 2

Yes. So I think

Speaker 1

at this point it's difficult

Speaker 2

to say because it's going to be highly dependent upon the order rates. So a couple of sort of points here in April, our orders were good. They were close $200,000,000 so that's good news. The other side of this though is we have not seen an improvement in shortages. And again to give you a little color, In Shady Grove, our line item shortages were up to 4,000 at the end of April and we ended the year around 2,500.

Speaker 2

So it's not improving and it will be a big challenge for us for the rest of the year. So with those two variables moving in opposite directions, it's really tough to guess what the That's what we'll be.

Speaker 4

Got it. That's fair enough. Thank you.

Operator

Okay, next we'll go to Mig Dobre with Baird. Your line is open.

Speaker 5

Good morning, Mig. Hey,

Speaker 8

good morning, guys. It's actually Joe Grabowski on for Mig this morning.

Speaker 2

Oh, hey, Joe. Hey,

Speaker 8

good morning. Hey, I think you just touched upon it, but I was hoping you could maybe give a little more color on the supply chain during the quarter. How much has it improved since the worst levels and maybe any regional differences?

Speaker 2

Yes, I mean even in the powertrain business where we've started to slow down, we're still battling lots of parts shortages. And of course, it continues to get even more difficult as we ramp up on the mobile side. So I'd say it's more by factory and what the demand at each of those factories is. But It clearly has not improved based on some of the data that we're looking at.

Speaker 8

Okay. Still hasn't improved. Okay. And then I guess my follow-up question, you mentioned European tower crane machine orders were down 20%. You mentioned that the Backlog in Europe is declining.

Speaker 8

Maybe talk about any levers you could pull there If demand does continue to soften, how you think about production rates and just anything along those lines?

Speaker 2

Yes. So I mean it's really a balancing act of trying to get a good forecast where we'll be in the 3rd Q4 In terms of production levels and then of course in Europe there's a variety of levers to pull. Given that we have 2 major factories in France, We've got to be really strategic how we would manage that. So there's always the use of short time work and some other things, but That will go up sort of a monthly or quarterly, one at a time. I don't expect any structural changes.

Speaker 2

It means that business will bounce back. There's still huge housing shortages in Germany and throughout Europe. And then whenever the Ukraine situation starts to subside, I think you'll start to see a pickup in the business. So I don't see a structural change in the business and plus of course we're making machines for our own dealer fleet. So We want to make sure that we maintain our core competency because anytime you have these big cutbacks as we saw in COVID, it's hard to get back on your feet as things come back.

Speaker 8

Got it. Okay. Thanks for taking my questions.

Speaker 2

Thanks, John.

Operator

Thank you. Next, we'll go to Steve Volkmann with Jefferies. Your line is open.

Speaker 5

Good morning, Steve. Hi, Steve.

Speaker 9

Good morning, guys. Can I go back to the non new machine sales? What exactly is driving those higher? Is it the re rent? Is it more parts?

Speaker 9

Is it equipment sales? I guess not if it's not new machine sales. Anyway, Any more color on what's driving that higher?

Speaker 5

And also how does that

Speaker 9

sorry, how does that impact the margin mix?

Speaker 2

Yes. So our margins are always more favorable in the non new machine sales segment than it would be on any of the machine segments. And I mean, I think When I look at how we grow non new machine sales, what's most critical is that we continuously grow our field service. I think at this point we're looking at over 50 ads for the rest of the year that we're recruiting. That's sort of the cornerstone of it and making sure we have those folks to support it and then That work obviously will drive service and it will drive parts.

Speaker 2

Now the bigger other things that are bigger opportunities to swing the number really sitting you, so it's just the math issue because you're selling A full crane and that's been pretty decent for us. I think the fact that the market's been tightened, folks are having a hard time getting machines, That's been pretty successful for us. So I mean some of it is where we're doing all the work doesn't always necessarily bring the biggest dollar items like rental for instance Just due to the nature of the math, I mean rentals never going to be huge part of the growth, but I think that it layers in those so the best profitability when we do it. Okay.

Speaker 3

And obviously that service drives parts as well. Yes.

Speaker 9

Understood. And just to follow-up there, I think If my math is right, that business is up something like 20% over the last year, and I think you've given yourself 2.5 years to get the next 20%. Is there a Chance that this comes in kind of ahead of that?

Speaker 2

I think it just depends on the timing of acquisitions.

Speaker 5

Got it. Thank you. Thanks, Steve. Thanks, Steve.

Operator

Okay. Next, we'll go to Steven Fisher with UBS. Your line is now open.

Speaker 2

Thanks. Good morning. Good morning, Steve. Good morning, Steve.

Speaker 10

Good morning, Steve. Good. It sounded like the orders were better than you And it was mostly North America. What part of the end market and product line drove the upside and how sustainable do you think that is?

Speaker 2

Yes, I mean, I'd say it's mobiles across the board and of course the Middle East piece of it. I mean within the United States, it's really hard to put your finger on What's driving and we got a lot of dealers that confidence because their inventories have gone on the low end and they're trying to make sure that they're on the The order board as much as anything to service their customers. So when I look at end markets, I can't say at this point that there's anything super specific. Of course, everyone's watching commercial real estate, to see where it goes in the next couple of years. But I think it's more of an issue of making sure that the channel has what it needs to run their businesses and And market demand.

Speaker 2

Got it. And then I think there

Speaker 10

was a reference to utilization. Do you have any sense of what utilization Is running at in say North America? And then how do you think about existing fleet being utilized as a A lot of these infrastructure and bigger programs and mega projects move forward versus in just kind of specking in totally brand new cranes.

Speaker 2

I mean, I think that's always the balance. So we don't have a number, but everyone I talk to says that they've got their I don't want to say all time highs, they're at the highest levels of utilization. They feel really good. But again, in terms of how their cranes get used, it's I would say it's very rare that that's what's driving the orders. I mean a big part of this is how they're managing their fleets and we know that many of the fleets out there are age, they're going to have to refresh So this is why I always go back to they have to have really the confidence and the financing element has become a bigger issue with where interest rates are to really drive The replenishment of their fleets and of course it starts with good utilization.

Speaker 2

It's not Typical unless there's lots of orders that someone says, Oh, I got a project for a stadium and I need 6 cranes. I mean, it may help Justify an addition of a crane or 2 into their fleet, but we're talking about folks who've got fleets of 2,000 cranes.

Speaker 10

And just on that last point, have you had any orders put on hold because of Changes in financing and credit conditions in the last month or so?

Speaker 2

Yes, we had 1 or 2 cancellations, but we were able to

Speaker 8

Turn it around.

Speaker 2

Yes, turn it around pretty quickly because there's a lot of folks that need cranes too.

Speaker 1

Great. Thank you very much.

Speaker 5

Thanks, Steve. Thanks, Steve. Okay.

Operator

Next, we'll go to Seth Weber with Wells Fargo Securities. Your line is open.

Speaker 2

Good morning, Seth.

Speaker 7

Hey guys, good morning. I wanted to follow-up on the interest rate discussion and just to make sure I'm understanding what you're saying. Are you starting to hear anything from your Customers about projects getting canceled or delayed due to interest rates or it's more just the customer Crane financing.

Speaker 2

Yes, I mean in Europe it's a project issue, but in the United States, no, it's just everyone's super sensitive just as we are to the Jump in interest rates. And given the fact that the machines are multimillion dollar machines, it has a big effect from a dollar standpoint.

Speaker 3

Yes, especially when you add the inflation and our price increases that we've affected when you add that to the interest, It's a big number that they've got to absorb.

Speaker 7

Okay. But you're not hearing about North American projects getting Canceled or pushed around.

Speaker 2

No, I've not heard of any projects in the United Kingdom. I mean, there's a lot of chatter around where is Commercial real estate going to go in the next couple of years, but in terms of big projects and the infrastructure, I think everyone's confident it's coming.

Speaker 7

Yes. Okay. And then just given your comments about the European tower market, are Rethinking your rental European Power Rental business plan and CapEx Spending there for this year?

Speaker 2

No. So I mean we have very small fleet and in fact I'd say our angle is probably the opposite. I mean that's You have a rental fleet so you can build cranes and feature fleet when times are tough to fill your factories. So, we'll hold to what we've been doing and We're looking my hope is that this creates some buying opportunities on the acquisition side of the business.

Speaker 3

And we talked last year about Growing into the UK and that market is pretty good. So as Aaron said, we're going to continue to move forward on the strategy.

Speaker 7

Okay. If I could squeeze in one last one, just your expectations for steel prices for the year, how that's factored into your outlook?

Speaker 3

Yes. So in the U. S, and I'll use that as the example, we definitely we buy forward. So we're pretty much comfortable with where we're at relative to steel even if it moves for the rest of the year. So we're comfortable that steel is not going to have a big impact for us on the go forward as it looks like it's likely to increase.

Speaker 7

Okay. Thank you, guys. I appreciate it.

Speaker 5

Thanks, Todd. Thanks.

Operator

Thank you. Next, we'll go to Jerry Revich with Goldman Sachs. Your line is open.

Speaker 5

Good morning, Jerry. Hi, Jerry.

Speaker 11

Hey, this is Clay on for Jerry. Just a quick question here. I see Typically, margins in 2nd quarter are up 200 basis points from 1Q to 2Q sequentially. Anything we need to watch out here Moving into the Q2 or to drive it?

Speaker 2

No, I mean, I don't think it's as simple as comparing the history because for sure The way we ran the AT business, we shipped more ATs in the 1st week, normally would have historically. Brian, you want to add more color to that?

Speaker 3

Yes. I think some of the mix that we saw even at the end of the quarter, we had a we definitely had a better mix in Q1 than we would expect in Q2.

Speaker 11

Yes, we had a lot of

Speaker 3

crawlers pushed Yes. So I'd expect margin wise Q1 to be a little bit better than Q2 And really driven by that mix.

Speaker 11

Yes. And then one follow-up here on dealer inventories. Can you frame how much they've risen since the Trough over the last 12 months or so, in a month of supply basis, however you prefer to look at, and I imagine there's some variance there by region.

Speaker 2

Yes. So the dealers mostly we talk about in the U. S. Their inventories I would say have not risen. Just If you look at what our shipping rates have been, I mean, they want the cranes.

Speaker 2

So my bigger concern on dealer inventory is not where we sit today. It's Where are we 6 months from now? We can see that our dealers have a lot of orders on hand. So as we start to ship all those and they start to receive them, And they retail them at the same rate. And that's always what I look for and keeps me nervous and keeps me on my toes relative to the dealer channel.

Speaker 11

Thanks. I'll pass it on.

Speaker 2

Thanks, sir. Okay.

Operator

And I show we have no further questions at this time. I'll now turn the call back over to Ion Warner for any additional or closing remarks.

Speaker 1

Thank you. Before we conclude today's call, please note that a replay of our 1st quarter 2023 conference call will be available later this morning by accessing the Investor Relations section of our website at www.manitowoc.com. Thank you everyone for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again next quarter.

Operator

This concludes today's conference call. You may now disconnect.

Remove Ads
Powered by Quartr
Earnings Conference Call
Manitowoc Q1 2023
00:00 / 00:00
Remove Ads