Manitowoc Cranes to cut fifth of workforce

Crane sales were up 20% at Manitowoc in 2008 but it will reduce its workforce by about 22% in 2009. The report came from company executives during a fourth quarter earnings call to investors.

In 2008 crane segment sales were US$3.9 billion, a 20% increase from $3.2 billion in 2007. Operating earnings were $556 million, up 18% from $471 million in 2007. The segment's operating margin was 14.3%, down slightly from 14.5% in 2007.

"2008 was our best year ever in the crane segment with very strong demand in the first half of the year, followed by an accelerated decline in demand during the second half. The worst markets are in Western and Southern Europe, where cancellations have directly impacted our lines of self-erecting and top slewing tower cranes and, more recently, our mobile hydraulic product line, but to a much lesser extent," said Eric Etchart, Manitowoc Cranes president.

In Europe crane backlog declined by almost 80% compared to the same period in 2007, added Etchart. The company is now taking action to adjust cost structures in all regions. This includes workforce reductions in France, Portugal, China, India, and its US-based Shady Grove facility, in Pennsylvania.

"Customers have consciously shortened their purchasing decisions to take advantage of the available industry capacity. As a result, they are now timing the placement of their orders much closer to the actual time this equipment is needed on the project site. This is not a new phenomenon as we have seen similar order patterns in other downturns where the backlog represents a shorter revenue period," Etchart commented.

On a positive note, he added that crane sales were still good in the wind energy sector as was the demand for large capacity all terrains, rough terrains and crawler cranes. In China the market is slowing and the government's stimulus package will take time to have a positive impact on the crane industry, Etchart added. "That said, China and other countries in Asia are still showing positive growth leading to continuing long-term opportunities for us in the region."

The after sales Crane Care segment of the business is forecast to provide a competitive advantage, explained Etchart. "Especially in an economic downturn when there is an intensified focus on minimizing total cost of ownership."

"We are currently estimating a 20% revenue decline in 2009, we will emerge from the downturn in a stronger competitive position by the actions that are underway across the Crane segment," Etchart added.

The conference call transcript was supplied by Seeking Alpha www.SeekingAlpha.com