First Quarter 2016 – Forklift Industry Report

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First Quarter 2016 Forklift Industry Report
Although the SP500 declined 10% in January this year (the worst start to a calendar year ever), the index ended the quarter up 1.49%. And the Bureau of Economic Analysis put real GDP up 1.4% in the fourth quarter.

It seems as oil went so did stocks. The chart below shows a very similar path to what US stocks did in the first quarter.

Q1-2016-Crude-Oil-Chart
As far as material handling is concerned, incoming equipment orders were up strongly in Europe and China with 12% growth and 7% growth each over the first quarter of 2015. But North America had a 0.9% decline in incoming orders compared with the first quarter of 2015.

The KION Group mentioned in their latest quarterly report that the economic outlook for industrialized countries, including the United States, has become less rosy over the last few months.

And Hyster-Yale noted that the global market for lift trucks is expected to decline in 2016.

As we like to say in the forklift industry, “what goes up must come down!”

In the absence of hard data in the US and Canada about exact new and used lift truck orders, rental rates and usage, and trends, the best information is gleaned from the industry’s largest companies’ quarterly reports. Several of the largest manufacturers of lift trucks are private companies and don’t post financial results, but there is enough significant information in the reports that are published to get an idea of what the lift truck market is doing in North America.

Following are highlights from several company’s first quarter of 2016 financial results.

Kion Group – the world’s second largest producer of lift trucks. Based in Germany with a major market presence in Europe. Kion’s Linde brand is known in the US.

  • Order intake grew by 3.9% and revenue was up 4.8% over the first quarter of 2015.
  • Net income was down 21%
  • Acquired Retrotech Inc., a systems integrator of automated warehouse and distribution solutions headquartered in Rochester, NY. Retrotech will be part of KION’s Egemin Automation and will help the company offer automation services in North America.

Hyster-Yale – one of the world’s largest forklift manufacturers. Sells primarily the Hyster and Yale brands through privately owned dealerships. Also owns Bolzoni, an Italian maker of lift truck attachments.

  • Revenues dropped from $622.3 million in the first quarter last year to $604.2 million in the first quarter of 2016 – a 2.9% drop.
  • In the lift truck segment net income dropped to $13.7 million from $17.5 million.
  • Consolidated worldwide new unit shipments grew by 3% in first quarter to 20,500 units.
  • Hy reported strong unit shipments in North America, with an approximate 800 unit increase in the Americas segment.
  • HY expects an overall modest market decline and a movement to lower-priced lift trucks for the Americas segment in 2016.
  • Hyster’s fuel cell company, Nuvera, is still working on its technology and selling it to early adopters. Hyster continues to believe there is a large market potential for fuel cell technology.

Jungheinrich – the world’s third largest manufacturer of lift trucks. Based in Germany with a major presence in Europe and a growing presence in North America through Cat lift truck dealerships.

  • Incoming orders grew by 12.2% compared with the first quarter of 2015 and net sales were up 7.6% thanks to strong growth in the European market.
  • Jungheinrich expects the North American market to be stable but a slight decrease is not out of the question.

Ritchie Bros. Auctioneers – Courtesy of Longbow Research

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 core auction sales 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 6.8% in the first quarter 2016 compared to the same period in the prior year (+9% on a constant currency basis). Gross auction proceeds in 1Q16 were $1.02 billion, which marks the highest first quarter total in company history.
    • Ritchie Bros. sold 93,000 lots during the quarter compared to 72,500 lots in the prior year period, which represents 28% volume growth. The increase was driven in part by a 47% increase in transportation lots and a 16% rise in construction assets sold.
    • The company noted that the overall age of equipment coming to market is improving and is generating more transactions in the marketplace. In particular, the company stated that late-model (3-5 yrs old) accounted for 29.6% of its GAP year-to-date through April versus 24.2% in the same time period during 2015.
    • There were a total of 11,300 consignors (sellers) of equipment at Ritchie Bros.’ auctions during the first quarter, which was 27% higher than the same period last year.
    • The company had 31,750 unique buyers who purchased equipment through a Ritchie Bros. auction in the first quarter, which is a 26% increase compared to 1Q15.

United Rentals – Courtesty of Longbow Research

United Rentals is the largest equipment rental company in the world and has 897 locations across North America. The company generates 55% of its total sales from industrial/non-construction markets, 41% from non-residential construction, and 4% from residential.

      • United Rentals reported that its overall rental revenue decreased 0.7% year-over-year in the first quarter. Notably, the company’s rental rates decreased 2.8% versus the prior year and declined 1.6% sequentially versus 4Q15.
      • The company achieved time utilization of 64.1% in 1Q16 compared to 64.2% in 1Q15. On the positive side, time utilization was up 130 bps through the first three weeks of April compared to the same time period in 2015.
      • The size of the company’s rental fleet was $8.56 billion (based on original equipment cost) at the end of first quarter 2016 compared to $8.73 billion at the end of 2015. The age of the rental fleet was 44.4 months on an OEC-weighted basis at March 31st, 2016.
      • United Rentals also reduced its 2016 financial guidance (lowered total revenue and EBITDA outlook) to reflect its outlook for a rental rate decline of 3-4% for the full year compared to its previous expectation of a 1-2% decrease.

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