Hyster-Yale Materials Handling, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Hyster-Yale designs, manufactures, sells and services lift trucks and related products, including attachments through Bolzoni and hydrogen fuel-cell products through Nuvera. Amounts are in millions of dollars except per-share data.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $999.3 | $827.6 |
| Gross profit | $174.4 | $101.2 |
| Gross margin | 17.5% | 12.2% |
| Operating profit (loss) | $42.6 | $(18.3) |
| Net income (loss) attributable to stockholders | $26.6 | $(25.0) |
| Diluted earnings (loss) per share | $1.55 | $(1.48) |
| Net cash provided by operating activities | $9.0 | $59.1 |
| Capital expenditures | $3.3 | $9.7 |
- Revenue grew 20.7%, mainly from improved pricing and higher unit and parts volumes, especially in the Americas and EMEA; unfavorable foreign currency partly offset growth. Lift-truck revenue was $948.7, Bolzoni $98.6 and Nuvera $1.6, before eliminations.
- Operating profit improved by $60.9. Management attributed the improvement chiefly to higher pricing, favorable sales mix, parts sales and manufacturing efficiencies, partially offset by material-cost inflation, higher employee-related and other SG&A costs, and currency effects. Interest expense rose to $10.2 from $5.1.
- Operating cash flow fell to $9.0 from $59.1, primarily because working-capital cash benefits were much lower than in the prior-year quarter. Inventory use of cash was $48.1; accounts receivable use was $12.7.
Balance sheet and liquidity
- At March 31, cash was $64.6, total assets $2,099.3 and total liabilities $1,827.0. Inventory was $854.7, up from $799.5 at year-end 2022.
- Total debt was $560.6, compared with $552.9 at December 31, 2022; debt to total capitalization was 67%, down from 71%. The company reported $165.3 of availability under its $300 million revolving facility and another $20.2 of availability under other non-U.S. revolvers. It was in compliance with debt covenants.
- Management believes cash on hand, available credit and operating cash flows will be sufficient for operating needs and commitments over the next 12 months and through the revolving facility’s June 2026 expiration.
Business trends, outlook and risks
- Lift-truck shipments increased 5.4% to 25,200 units, while bookings were 22,300 units versus 35,900 a year earlier. Backlog ended the quarter at 99,200 units, down from 114,100 a year earlier; its estimated sales value was $3.69 billion. Substantially all backlog was expected to ship within 12 months.
- Management expects the global lift-truck market to decline in 2023, but anticipates higher full-year production and shipments than in 2022 as supply improves and backlog is reduced. The company expects significant revenue growth, substantial operating profit and net income for 2023, with a positive price-to-cost relationship and higher average unit margins. Second-quarter Lift Truck operating profit is expected to decline from Q1 but remain significantly above Q4 2022; second-half operating profit is expected to be comparable to the first half.
- Management expects Bolzoni’s 2023 operating profit to be significantly higher than 2022. Nuvera is expected to generate a loss comparable to 2022, while increasing demonstrations and customer activity. Planned 2023 capital expenditures are approximately $66.2, weighted toward the second half. Management expects a significant increase in full-year cash flow before financing activities compared with 2022.
- Key uncertainties include global demand and economic slowdown, supply-chain and production constraints, materials and labor costs, tariffs, pricing acceptance, interest and exchange-rate movements, access to credit, geopolitical developments, product liability and warranty claims, and successful commercialization of Nuvera technology. Management stated that inventory remains elevated and working capital is a focus.
- Customer and dealer financing recourse or repurchase obligations totaled $136.4; anticipated losses were not significant. The company also had a contractual guarantee of $237.4 related to HYGFS debt; management said the incremental obligation, after specified receivables, was $216.7 and was secured by HYGFS assets. Management reported no significant expected default risk. Legal proceedings were described as ordinary-course matters, with no material excess costs expected beyond recorded accruals.
Important facts for investors to verify
- Whether pricing, product mix and easing cost inflation sustain the reported margin recovery as backlog converts to shipments.
- Whether bookings, backlog and production trends support management’s 2023 revenue, profit and cash-flow outlook.
- Whether elevated inventory declines and operating cash flow improves, given Q1 operating cash generation of $9.0.
- Debt, borrowing availability, covenant compliance and the potential effects of interest rates on financing costs.
- Exposure and collateral coverage for HYGFS guarantees and customer/dealer recourse obligations, and any changes in expected losses.