IC September 2008 business news

05 March 2009

Shares in crane manufacturers fell again in August at a time when the mainstream markets stabilised. Between weeks 29 and 334 IC's Share index lost another 10.46% of its value to finish the period at 407.9 points. This was the lowest the Index has been since September 2006, and at that time of course it was on its way up, not down.

But while crane shares were falling in August, the world's main share price indicators held their ground. The FTSE 100 managed a 0.93% rise, while the Dow lost just 0.58% and the Nikkei 225 was down -1.08%.

So what was happening in the crane industry but not the wider markets? There are a few answers to this question, none of which are particularly to do with cranes specifically.

First, is Manitowoc, which fell 11.56% over the five week period. Not the biggest drop, but odd considering its half-year results were solid, and the other US company in the IC Index rose 1.82% in the same period.

Manitowoc's fall seems to stem from the news in early August that it had accepted a US$ 120 million cash offer for its shipbuilding business from Italy's Fincantieri. Although this will give the company a one-off lift this year and help to finance its US$ 2.1 billion acquisition of UK kitchen equipment maker Enodis, the feeling on the markets seemed to be that the divestment would lower the company's earnings.

The Japanese manufacturers saw some of the heaviest losses in July and August, with Hitachi losing 16.45% of its value between weeks 29 and 34 and Tadano falling 14.71%.

One key reason was news a statement from the Japanese Construction Equipment Manufacturers Association (CEMA) saying it saw a slowdown coming in the next six months for its member's products. CEMA said it saw demand falling from recent breakneck rates in Russia and India as the effects of the global credit crunch spread out from the US and parts of Europe. This combined with weak sales at home meant it cut its forecast for the fiscal year to march 2009 to 1.9% growth from the previous estimate of 8.5%.

Although CEMA statistics show strong growth in crane exports in the year to date, these only account for about 15% of the total. Other more mainstream products like excavators look weak, and Japanese sales of construction equipment components - obviously a leading-edge indicator of finished equipment sales - also look weak.

Currencies

Another reason for the fall in shares of export-oriented companies like Japan's was the strengthening of the US Dollar. Although its relationship with the Yen was fairly benign in August, the Dollar gained a massive 6.59% against the Euro and 6.54% against the Pound.

These rises seemed to be linked to the continued slide in oil and other commodity prices from the record highs seen earlier in the summer. It is a volatile relationship however, and as the northern hemisphere winter approaches oil prices could rise again, pushing the Dollar back down.

September IC Share Index

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

IC Share Index* 455.55 409.10 -46.45 -10.20 719.75 -43.16

Dow Jones Industrial Average 11497 11430 -66 -0.58 13851 -17.48

FTSE 100 5342 5391 50 0.93 6600 -18.32

Nikkei 225 12804 12666 -138 -1.08 17964 -29.49

Hitachi Construction Machinery YEN 3040 2540 -500 -16.45 4980 -49.00

Konecranes € 24.40 22.60 -1.80 -7.38 31.75 -28.82

Kobe Steel YEN 280 258 -22 -7.86 501 -48.50

Manitowoc US$ 27.51 24.33 -3.18 -11.56 82.00 -40.66

Palfinger € 16.47 14.66 -1.81 -10.99 38.70 -24.24

Tadano YEN 979 835 -144 -14.71 1936 -56.87

Terex US$ 47.32 48.18 0.86 1.82 90.96 -47.03

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

Exchange rates - value of US$

Currency Value at start Value at end Change % Change Value 12 months ago 12 month % change

YEN 106.75 108.35 1.60 1.50 120.97 -10.43

0.6307 0.6723 0.0416 6.59 0.7230 -7.02

UK£ 0.5004 0.5331 0.0327 6.54 0.4859 9.71

Period: Week 29 - 34

Manitowoc 2 for 1 stock split in week 37 2007

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