Forklift Industry – 2014 Q2 Report

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Forklift Industry Report

  • Forklift sales volume is up year over year.
  • US GDP is up in 2nd quarter after the winter weather slow down in the first quarter.
  • Forklift sales outlook remains positive.

Overall performance from some of the larger forklift manufacturers was generally positive in the second quarter and the outlook for the remainder of 2014 expects modest growth. While the second quarter wasn’t a knockout, it was solid with decent growth in North America.

And it seems like the general sentiment from forklift dealers is that business has been steady and growing this year. A sentiment that matches economic data and industry performance.

A New Addition to the Forklift Industry Report 

Partnering With Longbow Research

Longbow reasearchWe are excited to have Longbow Research giving us a hand with the Forklift Industry Report. Longbow Research is a Cleveland-based equity research company and we have teamed up with Neil Frohnapple, Longbow’s analyst for Capital Equipment, Transportation, and Logistics.  Neil covers companies like Ritchie Bros. Auctioneers, United Rentals, and H&E Equipment Services.  You’ll see his additions later on in the report.  You can reach Neal by email if you would like more information about a topic he or Longbow covers: Nfrohnapple@longbowresearch.com

Forklift Manufacturer and Related Company Highlights

While not all forklift manufacturers are publically traded, and therefore share information about their performance and make comments on the industry, several of the largest manufacturers are publically traded and do publish useful information.  And other companies like Ritchie Bros. Auctioneers and United Rentals have a lot to do with the industrial equipment industry, so it’s helpful to look at their quarterly financial reports as well.

Hyster-Yale Materials Handling[1]

  • Hyster-Yale reported increased revenues in the second quarter 2014 compared to the second quarter of 2013.
  • The  improvement is attributed to an increase in unit volumes mainly in North America and Europe.
  • Worldwide new unit shipments in the second quarter 2014 increased to 21,700 units compared to 20,900 units in the second quarter of 2013.
  • Hyster-Yale expects the global forklift market to grow through 2014 and expects the growth to come mainly from developed western markets and China.
  • Hyster-Yale is planning to build several machines that are more application-specific than what they currently offer. For instance, HY began production of a heavy duty walkie pallet jack and has plans for a 10,000lb capacity warehouse rider truck with a cab for trailer loading/unloading and cross-docking.
  • Keep an eye out for HY’s latest group of premium Big Truck models coming out in the third quarter of 2014.

Jungheinrich[2]

While not as well known in the US, Jungheinrich is one of the world’s largest forklift manufacturers. Through an agreement between Mitsubishi Caterpillar Forklifts and Jungheinrich a few years ago, all Cat forklift distributors became Jungheinrich distributors as well.  Some Jungheinrich machines are now being built in Houston, TX, where Mitsubishi Caterpillar Forklifts is headquartered.

  • The world material handling market grew by 10% in the first half of 2014, representing 556,800 forklift trucks.
  • North America’s new forklift truck orders increased from 97,800 in the first half of 2013 to 105,600 in the first half of 2014
  • Jungheinrich reported increased demand for battery-powered lift trucks.
  • Jungheinrich’s incoming orders grew by 16% in the first half of 2014 compared to the same period last year.
  • Jungheinrich produced 12% more machines in the second quarter of 2014 than it did in the first quarter of 2013.

KION Group[3]

KION Group is Europe’s largest forklift manufacturer, the second largest forklift manufacturer in the world, and distributes the Linde brand in North America.

  • Part of KION’s long term strategy is growth in the US, and there are expectations that KION will introduce the STILL line in the US for a lower price-target offering.
  • North American global lift truck market grew by 2.3% in the second quarter 2014 compared with the same period last year.
  • The value of new orders increased 7.7% over the second quarter 2013.
  • KION Group’s revenues in the Americas fell 12% to 61.7 million euros compared to the second quarter 2013.

Ritchie Bros. Auctioneers – Comments Courtesy of Longbow Reasearch

Ritchie Bros. is the largest industrial equipment auctioneer in the world and operates through 44 permanent and regional auction sites worldwide. The company holds 4-5 auctions per year on average at each of its permanent auction sites and its auctions are all unreserved which mean that each item sells for the highest bid with no minimum price reserves.

  • The company’s gross auction proceeds (GAP) increased 15% in the second quarter 2014 compared to the same period in the prior year, which exceeded our initial estimate.
  • Ritchie Bros. also reported that the third quarter started off strong as GAP increased 33% in the month of July on a year-over-year basis.
  • There were a total of 12,700 consignors (sellers) of equipment at Ritchie Bros.’ auctions during the second quarter compared to 12,300 in the same period last year.
  • The company had 30,950 unique buyers who purchased equipment through a Ritchie Bros. auction in the second quarter, which is over a 4% increase compared to 2Q13.
  • Ritchie Bros. has increased the number of its territory managers (a key driver of equipment  volumes) by 7.3% since the beginning of 2014.

United Rentals – Comments Courtesy of Longbow Research

United Rentals is the largest equipment rental company in the world and has 883 locations across North America. The company generated 55% of its total sales from industrial/non-construction markets, 41% from non-residential construction, and 4% from residential.

  • United Rentals reported that its rental revenue increased 16.8% year-over-year in the second quarter, which was driven by strong volume growth and a 4.9% rental rate improvement.
  • The company increased rental rates sequentially every month in 2Q14 and posted a 0.9% increase versus 1Q14.
  • United Rentals achieved time utilization of 68.1% in 2Q14 compared to 67.9% in 2Q13.
  • The company raised its 2014 total revenue guidance to a range of $5.55 billion to $5.65 billion from its prior outlook of $5.45 billion to $5.65 billion.
  • Rental fleet time utilization for the full year is expected to be 68.5%, which is slightly above the company’s record 68.2% time utilization reported in 2013.
  • The size of the company’s rental fleet was $8.4 billion (based on original equipment cost) at the end of second quarter 2014 compared to $7.7 billion at the end of 2Q13.

US GDP

US GDP Pic

The forklift industry is highly cyclical and is sensitive to movements in the US economy, capital investment, and manufacturing.  Looking at data points in these areas helps us to understand what has happened in the forklift industry and where it’s going.

US GDP fell 2.1% in the first quarter and rose 4% from that slump in the second quarter. The Bureau of Economic Analysis states that the improvement is mainly due to exports, private nonfarm inventory investment, and an increase in consumer spending for durable goods.[4]

US Industrial Output[5]

US Industrial Output Pic

US Industrial output grew by 1.22% in the second quarter 2014 from the first quarter 2014. This increase comes out to a 5.5% annual rate for the second quarter. Manufacturing output increased at annual rate of 6.7%, mining output increased at annual rate of 18.8% because of the oil and gas industry, and utilities output fell at an annual rate of 21.4%.

Industry News

JH Ryder, one of Canada’s largest material handling dealers, was bought in July by Crown Equipment Corporation, one of the world’s largest forklift manufacturers.  JH Ryder will now do business as a Crown-owned entity under the name Ryder Material Handling.[6]

Hyster-Yale Material Handling’s Vice Chairman and CEO, Michael Brogan, announced his retirement on June 30,2014. Mr. Brogan has been with HY for 31 years.  Colin Wilson, HY’s current President of the Americas, will take over as CEO effective August 30, 2014.[7]

Ritchie Bros. named Ravi Saligram as its new CEO, effective July 7, 2014. Ravi’s 35-year professional career includes 3 years as CEO of OfficeMax and also more than 20 years at ARAMARK within general management. Mr. Saligram replaced Peter Blake, who served as CEO of Ritchie Bros. since 2004.

United Rentals announced on June 3rd that is was named to the 2014 Fortune 500 list of largest U.S. companies for the first time.

United Rentals completed the acquisition of National Pump on April 1st, which was the second largest specialty pump rental company in North America with approximately 15% market share, for $780M.

 

[1] http://ir.hyster-yale.com/mobile.view?c=251375&v=203&d=1&id=1953294

[2] http://www.jungheinrich.com/fileadmin/Redaktion/Investor_Relations/2014/PDF/Jungheinrich_Interim_Report_Q2_2014.pdf

[3] http://www.kiongroup.com/media/en/main/investor_relations/reports_presentations/2014_reports_presentations/2014_reports/kion_group_2014_q2.pdf

[4] http://www.bea.gov/newsreleases/national/gdp/2014/pdf/gdp2q14_adv_fax.pdf

[5] http://www.federalreserve.gov/RELEASES/G17/current/default.htm

[6] http://www.jhryder.com/articles/exciting-news-crown-equipment-corporation%E2%80%A6

[7] http://ir.hyster-yale.com/phoenix.zhtml?c=251375&p=irol-newsArticle&ID=1943619&highlight=

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