Industrial and port crane manufacturer Demag Cranes is forecasting further cost cutting measures following its 2008/2009 second quarter results.
The group's order intake fell 43.2% in the second quarter compared to the same period in the 2007/2008 financial year, and by 25.7% in the first half year. Operating earnings before interest and taxes (EBIT) shrunk by 43.3% in the second quarter and by 22.2% in the first six months. Overall, the "environment remains critical," said the company.
The industrial cranes segment order intake decreased by €98.5 million (US$137.4 million) in the first half year, compared to the same period 2007/2008. The second quarter figure was down €102.7 million ($143.2 million). This was partly explained by the above-average orders for process cranes in the second quarter of 2007/2008, said the company.
Half year operating EBIT remained constant at €22.7 million ($31.7 million), while the second quarter results showed a drop of €13.2 million ($18.4 million) on the previous year to €9.4 million ($13.1 million).
"Process cranes ordered in the past year and currently being fabricated and delivered on a continuous basis have significantly narrower margins than the mass-market rope and chain hoists," explained the company. Additionally, production has been cut in some areas, leading to a lower level of capacity utilisation.
Half year revenue in the port technology segment amounted to €110.8 million ($154.5 million), 19.4% weaker than in the same 2007/2008 period. "As the economic environment for international ports remains as negative as before - if anything, it has tended to worsen further still - port and terminal operators continue to postpone capital spending," said the company.
As a result, order intake was down by €65.5 million ($91.3 million) in the first half and by €36.8 million ($51.3 million) in the second quarter. The order book shrank by €41.8 million ($58.3 million) compared with 31 March 2008.
Operating EBIT fell sharply year-on-year. The €10.1 million ($14 million) drop in earnings in the half-year and the €8.8 million ($12.3 million) decrease, compared with the second quarter of 2007/2008 were mainly due to lower revenues and cuts in production.
Further temporary employees were shed at the beginning of March and a short week was introduced. "The marked drop in the order intake in the industrial cranes and port technology segments in the second quarter of 2008/2009 now necessitates capacity adjustments that cannot be effected through a short work-week alone."