3 Important Things Manitowoc Company Inc. Management

Wants You to Know

Source: Manitowoc

#1 Regarding cranes business

Worldwide cranes markets have worsened

Image source: Company website

What management said

“The current global economic environment affecting customer demand is unlike any cycle we've seen in the recent past. Uncertainty among our customers is mounting due to emerging market peers, ongoing question over Chinese growth outlook, persistent depressed oil prices and slowing domestic growth.”

Interim Chairman, President, and CEO Kenneth W. Krueger

What’s hurting crane salesAsia: The devaluation of yuan and a slowdown in the

Chinese construction market

Middle East and North America: Dramatic declines in capital spending by oil and gas companies, which means lower demand for Manitowoc’s off-highway cranes

Manitowoc’s crane operating margin in Q3 dropped to 1% from 7.3% a year ago as sales dipped

What lies ahead

Depleting backlog a major concern as order rates drop: Manitowoc’s Q3 orders plunged 40% year over year even as backlog declined 12%

Outlook: 15%-20% drop in 2015 crane revenue. Management expects “the global macroeconomic backdrop to remain difficult through most of 2016.”

#2 Regarding foodservice

Image source: Company website

Manitowoc’s foodservice business could be turning around

What management said

“In Foodservice, the business appears to be turning the corner. Many of the issues that negatively impacted its performance over the last 12 months have been remedied, which contributed to our solid margin improvement this quarter.”

Kenneth W. Krueger

What lies aheadManitowoc’s Q3 foodservice operating margin jumped to

16.6% from 14.8% a year ago, thanks to rigorous cost control.

The company’s ongoing restructuring is expected to save it $100 million over the next three years.

Meanwhile, recently-launched products like Convotherm and Merrychef e2s ovens and 25 new launches lined up for next year should boost Manitowoc’s revenues going forward.

#3 Regarding separation

On track, despite a worsening cranes business

Images from company website

What management said

“We have made significant progress towards implementing the spin and we remain on track to complete our business separation in the first quarter of 2016, notwithstanding the recent performance within Cranes.”

Kenneth W. Krueger

What lies ahead Growing concerns about the timing of the split as:

Cranes sales could drop further in 2016 with end markets deterioratingRestructuring benefits won’t show up until 2017

Management, however, is proceeding with the separation as planned as it already has the split-related tax and legal processes in place. It is yet to appoint a CEO for the cranes business.

Given the backdrop, shareholders may not find much value in a standalone cranes company.

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