JLG owner Oshkosh announced its first-half results with higher revenues, combined with a sharp decline in profits.
Looking at the six months to the end of June:
Total revenue were nearly 12% higher at $1.86 billion, this was broken down as follows:
Sale of lifting platforms of $891.2, up 10% over the same period last year.
Sales of telehandlers rose 32% to $539.5 million and finally
Other income – primarily parts services and used equipment sales – fell 3% to $429.3 million.
Operating result for the period was 76.9 million, about 60% lower than last year, due, according to the company, to higher input costs which then caused manufacturing inefficiencies.
Moving on the second trimester:
Total revenue were 6% higher at $977 million, broken down as follows:
Sale of lifting platforms of $451.5 million, less than one percent more than last year.
Sales of telehandlers increased 33% to $309.8 million and
Other income – decreased 10% to $215.7 million
Operating result fell 39% to $69.4 million, for the same reasons already mentioned, partially offset by higher prices.
The Order book/order book end of June was more than two and a quarter times higher than a year ago, at nearly $4 billion ($3.97 billion).
Oshkosh as a whole reported total revenue of $4.01 billion slightly lower than the same period last year. Pre-tax profits, however, were only a fifth of last year at $61.2 million, due almost entirely to declining margins at the operating level.
Oshkosh Chief Executive John Pfeifer said: “While we are encouraged by strong demand for our products and our ability to gauge inflation, our second quarter results fell short of our expectations due to three main factors: first, supply chain disruptions reduced sales volume and caused labor inefficiencies, second, Defense recognized adverse cumulative catch-up adjustments related to inflationary pressures, and third, we experienced an unfavorable non-cash adjustment to the market on an equity investment. We continue to believe that supply chain and inflationary challenges will subside over time, and we remain positive in our outlook for the coming years given our solid order books and the key indicators of the markets we serve.
“The second quarter performance was highlighted by sequential growth in sales and operating income driven by significantly improved pricing and cost momentum compared to the first quarter of fiscal 2022, particularly at Access Equipment In Fire & Emergency, we announced the acquisition of Canadian fire truck manufacturer Maximmetal, known for its strong culture and customer focus.
“Due to second quarter performance, as well as ongoing supply chain challenges and inflationary pressures, we are lowering our outlook for fiscal year 2022, with our results dependent on supply chain and inflationary conditions for the rest of the year.”
This isn’t a great set of results from JLG, although it’s not at all unexpected, and we’ll likely see similar issues from Terex/Genie next week. Supply chain issues have a dual effect on manufacturers as shortages result in production runs being started/stopped or partially built machines being put in storage until the missing parts arrive. Both can lead to lower initial reliability, which increases warranty costs. Add to that the inevitable increases in component prices that come with supply chain challenges, and it’s easy to see how much profitability suffers.
On top of all this, JLG reported slowing sales in Europe and China, offset by higher North American demand where telehandler sales are a higher percentage of the total but tend to achieve lower margins than those of lifting platforms.
Increases in production costs will eventually be passed on to customers, but this in turn could lead to lower volumes, which poses new challenges.
Although we’ve all been here before, this time it feels a little scarier, given the global political situation, economic uncertainty, and the inevitable eastward shift of the global economy.
Interesting times for sure.