Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hyster Yale Inc (HY, Financial) reported exceptionally strong quarterly results, exceeding expectations for revenue growth and significantly increasing profits.
- Consolidated operating profit and margins reached higher levels than ever before, with a 63% year-over-year increase in operating profit.
- The company saw an 8% increase in truck revenues due to higher average selling prices and favorable product mix.
- Hyster Yale Inc (HY) is transitioning to a solutions-based company, focusing on complex value-adding technology solutions.
- The company has a strong global backlog, which is expected to act as a shock absorber, keeping global shipments generally in line with 2024 production expectations.
Negative Points
- The global lift truck market was below prior levels in Q2 2024, driven by a significant decrease in the Americas and a moderate reduction in EMEA.
- North America factory bookings decreased by 56% year-over-year, with a steeper and earlier decline than anticipated.
- Order cancellations by customers, shorter lead times, and requests to delay shipments contributed to a substantial decline in factory bookings.
- Nuvera's revenues decreased due to slower customer adoption of hydrogen fuel cells and ongoing hydrogen supply constraints.
- The company's effective tax rate increased to 29% in Q2 2024 from 24% in the prior year, impacting net income growth.
Q & A Highlights
Q: Can you elaborate on the potential moderation of global production levels in 2025 and the normalization of bookings growth?
A: Rajiv Prasad, President and CEO, explained that the North American market has been volatile, with a significant spike in order volume starting mid-2021, followed by a sharp decline. The market is stabilizing, and the company expects North America to normalize by early 2025. The backlog will help absorb the trough, and the company is working to fill open production slots for 2024 and 2025. Alfred Rankin, Executive Chairman, added that the focus should be on shipments, as they drive revenue and operating profit.
Q: What are the risks of order cancellations, and have you seen any increase in cancellations?
A: Rajiv Prasad noted that while the industry has seen some cancellations, Hyster-Yale experienced normalized levels until about four months ago. Recent cancellations were mainly from third-party rental companies and sectors like retail and light manufacturing. The company expects this to normalize within the next couple of months.
Q: Can you expand on the manufacturing and supply chain optimization plans and their impact on free cash flow generation?
A: Rajiv Prasad highlighted a significant reduction in suppliers for the 1 to 3.5 ton trucks, from 750 to around 150, which will streamline production and improve working capital. Scott Minder, CFO, added that the company is focusing on inventory reduction to improve free cash flow, with progress expected to accelerate in Q3.
Q: Can you provide more details on the interest in Nuvera's new generator products and their market potential?
A: Rajiv Prasad mentioned that the new hydrogen-powered zero-emission mobile generator received strong interest at a recent trade show. The product addresses needs for clean energy solutions in various segments, including vehicle recharging and mobile power in emission-controlled and noise-sensitive areas. The company plans to launch the product early next year, with full production expected in 2025.
Q: How are you managing the impact of higher inflation and operating expenses on your financial outlook for the second half of 2024?
A: Scott Minder stated that while higher inflation and operating expenses are expected to reduce operating profit modestly, the company anticipates continued year-over-year revenue growth driven by shipments of higher-priced, higher-margin backlog units. The focus remains on maintaining competitively priced products and improving cost efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
