Tanfield halts aggressive expansion after "marked slowdown" in June
By Murray Pollok01 July 2008
A "marked slowing" in demand and the rescheduling and cancellation of orders by major powered access customers has prompted Tanfield Group to postpone its aggressive expansion plans and adopt a more "prudent and conservative" approach.
In a trading statement issued today, Tanfield said there had been a marked slowdown in its markets in June, primarily in its powered access business, and that in the light of the "deteriorating wider macro economic outlook" it was going to immediately implement changes including reduced expansion activity, reduced raw material inventories and "headcount reductions".
There has been a major reduction in demand for so-called commodity products, such as electric scissors, said Tanfield. Markers in the Middle East, Russia and Eastern Europe "remain buoyant", said Tanfield, but these markets are still tiny in comparison to western Europe and North America.
Tanfield would not comment on where the job losses would be, but Access International understands that there are likely to be lay-offs globally. Tanfield's US subsidiary, Snorkel, has added around 100 employees in the past six months.
The company has reversed an earlier decision to move production of its Smith Electric Vehicles from the main Vigo production facility - where the UpRight machines are made - to a new, dedicated site, and it said plans to start manufacturing the zero-emission trucks in the US would now be undertaken through a joint venture partner with existing production facilities.
The announcement by Tanfield follows the recent warning from JLG's owner, Oshkosh Corp, that sales at JLG this year would be lower than anticipated.
Tanfield pointed out that the company would still grow its revenues in 2008, but at a "significantly lower" rate than previously forecast. Powered access will account for around 75-80% of its revenues this year.
Trading analyst St Helens Capital downgraded its revenue forecast for 2008 from £265 million to £191 million, and next year from £325 million to £214 million.
The trading statement comes after Tanfield received several warning signs from its dealers and end user customers, including a fall off in demand, reduction in access to credit, and postponement in fleet replacement plans.
"In June we experienced our first customer rescheduling of orders, pushing some orders into 2009, both in Europe and the US", said the company, "Additionally we have recently received our first order cancellations valued at US$3 million."
Tanfield said a number of major rental companies had reported that they would reduce capital investment by 30-50% and had cancelled orders with other manufacturers; "In our view this will result in substantially higher levels of finished good stock within the industry. The board believes this will lead to significant price competition in the second half of the year which will, in turn, affect our ability to maintain margins going forward."
This latest warning of worsening conditions in the powered access market confirms that the slowdown in the US is now being mirrored in western Europe, where rental companies, after several years of heavy investment, are now being far more cautious in their spending plans.