Business context and reporting period
Hyster-Yale Materials Handling, Inc. designs, manufactures, sells and services lift trucks and related parts, attachments and fuel-cell products, primarily under the Hyster and Yale brands. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2023; amounts are in U.S. dollars unless stated otherwise.
Financial results and position
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $1,090.6M | $895.4M | $2,089.9M | $1,723.0M |
| Gross profit / margin | $197.9M / 18.1% | $99.1M / 11.1% | $372.3M / 17.8% | $200.3M / 11.6% |
| Operating profit (loss) / margin | $58.8M / 5.4% | $(15.7)M / (1.8)% | $101.4M / 4.9% | $(34.0)M / (2.0)% |
| Net income (loss) attributable to stockholders | $38.3M | $(19.4)M | $64.9M | $(44.4)M |
| Diluted EPS | $2.21 | $(1.15) | $3.76 | $(2.63) |
Revenue rose 21.8% in Q2 and 21.3% in the first half. Management attributed the improvement mainly to higher pricing, product mix and unit and parts volumes, particularly in the Americas; the JAPIC region contracted. Americas, EMEA and Bolzoni reported higher operating profit, while Nuvera remained loss-making and JAPIC continued to post an operating loss.
For the six months, operating cash flow was $44.8M, versus $0.2M in 2022; investing cash outflow was $11.9M and financing cash outflow was $28.9M. Cash increased $6.7M to $65.7M. Capital expenditures were $10.6M. Cash generation benefited from the return to profitability, partly offset by working-capital movements, including receivables and inventory.
At June 30, cash was $65.7M, total debt was $542.3M and net debt was approximately $476.6M. Debt to total capitalization was 64%, down from 71% at year-end 2022. Current assets were $1,552.3M and current liabilities $1,371.3M. Reported revolving-facility availability was $189.6M, with a further $25.9M available under other non-U.S. lines. The company reported compliance with its facility and term-loan covenants and believes available liquidity and operating cash flows will meet needs over the next 12 months.
Material changes versus the prior comparable period
- Q2 moved from an operating loss of $15.7M and stockholder net loss of $19.4M to operating profit of $58.8M and stockholder net income of $38.3M. First-half results similarly turned profitable.
- Q2 lift-truck revenue increased on higher Americas volume and pricing; EMEA and JAPIC unit shipments declined year over year. First-half lift-truck bookings were 43,600 units, versus 59,100; ending backlog was 92,800 units, down from 112,000 a year earlier.
- Interest expense increased to $8.4M in Q2 from $6.1M and to $18.6M in the first half from $11.2M, reflecting higher financing costs. The May 2023 revolving-facility amendment introduced a $25M FILO tranche and shifted U.S.-dollar benchmark borrowings from LIBOR to Term SOFR.
- First-half cash dividends paid were $12.4M, compared with $11.1M in 2022. Total debt declined from $552.9M at December 31, 2022.
Outlook, commentary and risks
- Management expects full-year 2023 lift-truck market volumes to decline in all regions versus 2022, with the decline accelerating in the second half. It expects full-year bookings to decrease, while second-half bookings are projected to be comparable year over year. Substantially all of the 92,800-unit backlog is expected to ship within 12 months.
- Management forecasts significantly higher second-half 2023 operating profit and net income than in the prior-year period, and expects full-year margin expansion. Q3 operating profit is expected to fall from Q2 because of seasonality, EMEA production challenges and sales mix; Q4 is expected to improve meaningfully from Q3. These forecasts depend on production capability, supply-chain conditions, costs and demand.
- Management expects continued price-to-cost improvement and higher average unit margins, but identifies inflation, labor constraints, manufacturing inefficiencies and periodic supply constraints. Inventory remains elevated relative to pre-pandemic levels, though management expects it to decrease. Planned 2023 capital expenditures are approximately $65.1M, with most remaining spending in the second half.
- Bolzoni expects a modest second-half revenue decline and lower operating profit than in the first half, but higher profit than in the prior-year second half. Nuvera expects a lower second-half loss, supported by higher shipments but partly offset by development and other costs. Nuvera reported a first-half operating loss of $19.0M.
- Key risks include a deeper global market downturn, pricing acceptance, supply and production disruptions, inflation and labor availability, interest and foreign-exchange volatility, tariffs and geopolitical developments, dealer/customer credit access, litigation and warranty claims, and successful commercialization of Nuvera technology.
- Customer/dealer recourse and repurchase obligations totaled $141.5M, including $129.8M related to HYGFS transactions; anticipated losses were described as not significant. The company also disclosed an incremental $221.2M potential obligation under its guarantee of HYGFS debt, secured by specified HYGFS receivables and other assets. Management reported no known circumstances expected to cause HYGFS to default. Legal claims are ordinary-course matters; management said material costs above recorded accruals were remote.
- Q2 tax expense included a $2.3M discrete tax benefit, mainly from expiration of the statute of limitations on acquired uncertain tax positions, substantially offset by a $2.1M pre-tax release of an indemnity receivable. No material changes to previously disclosed risk factors or market-risk exposures were reported.
Important facts for investors to verify
- Whether higher pricing and product mix can sustain margins as market bookings and lift-truck demand weaken, particularly in the second half.
- Whether planned production increases, EMEA recovery and inventory reduction are achieved without renewed supply, labor or manufacturing disruptions.
- Whether operating cash flow improves as management expects, given elevated inventory, receivables, planned capital spending and debt service.
- The sensitivity of borrowing costs and liquidity to floating rates, covenant availability thresholds and the May 2023 FILO tranche’s scheduled amortization.
- The scale and collateral coverage of HYGFS-related guarantees and recourse obligations, and any change in their credit risk.
- Whether Nuvera’s demonstrations and development programs translate into commercial orders and reduced operating losses.