Yahoo Finance Hyster-Yale Materials Handling Inc (HY) (Q1 2024) Earnings Call Transcript Highlights: Soaring ...
Consolidated Revenue: Rose to $1.1 billion, up from just under $1 billion in Q1 2023.
Operating Profit: Increased to almost $84 million, compared to $41 million in Q1 2023.
Operating Profit Margin: Improved to 7.9% from 4.3% one year ago.
Earnings Per Share (EPS): Increased by nearly 90% to $2.93.
Lift Truck Revenue: Grew 6% year-over-year due to higher average sales prices and a favorable sales mix.
Lift Truck Operating Profit: $89 million, up 87% year-over-year.
Operating Margins for Lift Trucks: Improved by 390 basis points to 8.9%.
Backlog: $3.1 billion, equivalent to approximately nine months of production.
Effective Income Tax Rate: Increased to 33% from 24% in the prior-year quarter.
Debt to Total Capital Ratio: Improved by 200 basis points to 53%.
Free Cash Flow: Significant increase expected in 2024 compared to the previous year.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Hyster-Yale Materials Handling Inc (NYSE:HY) reported revenues of more than $1 billion for the fourth consecutive quarter, with a significant increase in consolidated operating profit to almost $84 million compared to $41 million in Q1 2023.
Operating profit margin improved to 7.9% from 4.3% in the previous year, reflecting efficient management and strong market performance.
The lift truck business saw a 6% growth in revenues due to higher average sales prices and a favorable sales mix, despite a decline in shipment volume.
Hyster-Yale Materials Handling Inc (NYSE:HY) achieved a record high in quarterly operating profit and profit margins, with an operating profit margin above 7% for the first time.
The company's strategic initiatives, such as the launch of modular scalable lift truck products and advancements in electric powertrains, are progressing well, enhancing competitiveness and market position.
Negative Points
Average booking prices in Q1 2024 decreased compared to the fourth quarter of 2023 and the previous year, primarily due to a shift towards lower-priced warehouse products predominantly in EMEA.
The global lift truck bookings moderated in Q1 2024 compared to the relatively strong prior-year level, indicating potential market volatility.
Hyster-Yale Materials Handling Inc (NYSE:HY) faces increased competitive dynamics in the market, especially for products with shorter lead times.
The company experienced a significant increase in operating expenses, mainly due to higher employee-related costs including incentive compensation.
Challenges in production and shipment rates due to complex truck designs in the backlog, which could affect throughput and operational efficiency.
Q & A Highlights
Q: Hey, everybody. Thanks for taking the question. Congrats on the strong quarter. I wanted to ask first, last quarter, I think we talked about maybe some larger accounts had maybe over-ordered and deferred some of their orders. Can you just give us an update there? Have you continued to see that at all? Has that normalized or how are those trends? A: Yeah, Chip. This is Rajiv. I think those have generally normalized. We haven't seen any out of the ordinary cancellations during last quarter. So thing those have gone back. I think it was one or two key customers that had delays and so either deferred or canceled?
Q: Got it. Thanks, Rajiv. And then on the margin side, you talked about it in the prepared remarks, strong margin trends continuing for the balance of the year? And I think it was -- maybe just expand on that, help us think about near-term mix impacts. Obviously, this quarter, skewing where it's larger trucks. It sounds like maybe next quarter as well. Just something about that and lead times as well. A: Yeah. So as we have worked through our backlog, the dynamic that we've experienced is that the -- so typically our dealers ordered these, let's say, simple configuration trucks. And we've been able to build those much more easily because they use more standard components. So those were built and shipped in 2022, 2023 as we -- and now as we deplete our backlog, what's left are these high priced complex trucks, which have a lot of special engineering in them. And those are more difficult to build up. To give you an idea, let's say if -- typically you'd have for each of our manufacturing stations, you'd have a certain tag time but, let's say, 20 minutes per station. These trucks maybe are taking 50% more time to get through some of the stations, and that's reducing the amount of volume throughput we can get. But at the same time, the value is much higher. So that's where you've seen the dynamic this quarter where although, the number of units was lower, the actual revenue was pretty good. And that's why that's happened. Now these trucks also have good margin. As we get into the second half of the year, we plan to build these mostly in the early first half of the year and second half, we'll get back to more normal mix.
Q: Great. And sorry, if I could, one last one, maybe for you, Scott, on the balance sheet, the inventory position. I think you called out, just the larger finished goods position. It sounds like maybe that unwinds fairly near term, but just how to think about the inventories? And obviously working capital is key to free cash flow there. Just thoughts on how that plays out this year. Thanks. A: Sure, Chip. Yeah, I think what we saw was a slower unwind of the inventory in Q1, largely in finished goods. Raw materials did come down as expected. So we expect to pick up the pace on the inventory reductions and make good progress on our long-term goal of 15% working capital as a percent of sales across 2024 and into 2025. So I think it's a good positive yet to come for the business, and that will translate into increased free cash flows.
Q: Thanks. Congrats on the quarter. Days like this make me sad that sell-side analysts aren't allowed to own their own coverage anymore. A: Thanks, Tedd.
Q: I have a few questions on. I think some of them have been touched on actually in the last dialogue, but let's get into. So I'm talking about production issues. It sounds like most of the production issues were -- I mean, am I correct, there were around the modular stuff and that is now fading out. When do we see these production issues fully resolved? I think I'll stop at that right now. A: Yeah, Ted. So I think I want to -- I think generally, the [ANM], the new platform was okay. The majority of the issues we had were around 4-to-7 ton truck and also some big trucks. And the issue, as I said, the chip was really around the throughput we can achieve because of the complexity of the design that's in the backlog now that we're building. These are major account trucks with quite a lot of additional content. And so that's restricting the throughput we can achieve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
