IC July 2009 Business news: flat market

By Euan Youdale22 July 2009

International Cranes and Specialized Transport's business news originally appeared in the July 2009 issue of the magazine.

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Crane share prices stayed flat in June. Despite all the ups and downs of 2009 to date they reached the year's mid-point about level with where they were in January. Chris Sleight reports

After good gains in March, April and May, share prices for crane manufacturers flattened-out in June. Between weeks 22 and 26, IC's share index rose just 1.06% to finish the first half of the year at 233.65 points.

The mainstream stock market indicators saw similarly limited movements over the same period. The biggest gain was seen in Japan, where the Nikkei 225 moved up a modest 2.74%. In the US meanwhile, the Dow was almost flat with a 0.41% rise, while the UK's FTSE 100 took a 4.01% hit.

It is also worth noting that as we reach the year's mid-point, the IC Share Index has come back to almost exactly where it was at the start of 2009 - 234.16 points. To put it another way, the IC Share Index finished June just 0.22% lower than it was at the start of the year. But as regular readers of this column will appreciate it has been a real roller coaster of a half-year.

At the low point in mid-March, the IC Share Index had lost almost a third of its value compared to the start of 2009. The year's high to date meanwhile came in mid-June, when it was up almost 10% on the same start point.

As the movements of individual companies' share prices indicate, the markets remain volatile, with some big price swings. The Japanese manufacturers had a more subdued month where, for example, Kobe Steel and Hitachi benefited from the general upward swing of the Nikkei.

However, there were steep losses for Terex and Manitowoc in the US and less significant falls for the Europeans in the shape of Palfinger and Konecranes.

Valuations

In many cases share prices still look surprisingly low. Take Manitowoc as an example. Shareholders reacted badly to its plans to acquire Enodis for its Foodservice division last year. Quarterly profits have suffered badly as a result of the cost of the buy, and the share price has remained in the doldrums.

At current levels, Manitowoc's stock market capitalisation (valuation) is about US$ 700 million. Accounts for the first quarter of 2009, however, showed it with assets worth many times that - US$ 5.16 billion. Its cash and accounts receivable alone came to US$ 680 million and it had inventories of more than US$ 900 million.

The situation is similar at Terex, which is valued by the stock markets at US$ 1.1 billion, but which has assets of almost US$ 5 billion and a backlog of US$ 2 billion.

That should mean that if companies in the sector can return to profitability, their share prices should bounce back to levels consistent with fairer valuations.

But with such low share prices, crane manufacturers without a strong ownership structure are vulnerable to takeovers. The fact that market valuations are so much lower than the value of physical assets also raises the possibility of 1980s-style corporate raids, where companies were bought, broken up and their assets sold off at a profit.

July IC Share Index

Stock Currency Price at start Price at end Change % Change 12 months ago 12 month % change

IC Share Index* 231.20 233.65 2.45 1.06 496.79 -52.97

Dow Jones Industrial Average 8404 8438 35 0.41 11453 -26.32

FTSE 100 4427 4249 -178 -4.01 5518 -23.00

Nikkei 225 9523 9783 261 2.74 13544 -27.77

Hitachi Construction Machinery YEN 1575 1585 10 0.63 3030 -47.69

Konecranes € 17.20 16.60 -0.60 -3.49 25.29 -34.36

Kobe Steel YEN 165 174 9 5.45 295 -41.02

Manitowoc US$ 6.26 5.29 -0.97 -15.50 34.16 -84.51

Palfinger € 11.00 10.54 -0.46 -4.18 21.16 -0.38

Tadano YEN 496 459 -37 -7.46 1158 -60.36

Terex US$ 13.62 12.40 -1.22 -8.96 53.64 -76.88

*IC Share Index, end April 2002 (week 17) = 100

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