Third Quarter 2016 – Forklift Industry Report

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forklift industry quarterly reportEconomic Snapshot and Forklift Industry Summary

Third quarter headlines were all about the election, but since Mr. Trump doesn’t take office for a few months, we can happily dodge any discussion about the impact his administration will have on the economy.

During the third quarter of President Obama’s last full year in office, US real GDP increased at an annual rate of 2.9% according to the Bureau of Economic Analysis. Increases in personal consumption, exports, private inventory investment, federal government spending, and and non-residential fixed investment helped GDP in the third quarter.

And happily all of our 401k’s got a bump in the third quarter with the New York Stock Exchange Composite Index rising 2.16%. Oil, which has been a big story for the last 18-24 months, but didn’t make much of a stir in the third quarter.

The International Monetary Fund predicts global growth of 3.1% for 2016 as a whole. Fallout from problems in Russia and Brazil haven’t been as bad as previously expected and China has stabilized. In the US the IMF predicts growth will be lower than predicted at the beginning of the year. Reasons are a weak energy sector and decreased inventories.

For a brief and readable article about the state of the US economy, check out this summary from Fidelity Investments.

Forklifts worldwide are having a good year with the number of industrial trucks sold globally up 6% year to date. The third quarter saw a jump of 13.2% in industrial truck sales versus the same period last year. Strong demand in Europe and sharp increases in China and North America helped the quarter.  Industrial truck demand in North America is up 3.1% year to date and 11.8% in the quarter.

Global demand for battery-powered counterbalanced trucks expanded 8% and demand for IC engine-powered trucks dropped 2%. North American demand for IC trucks dropped 7%.

Quarterly Report Summaries

KION Group – world’s second largest producer of industrial trucks – major brand in the US is Linde.

  • Order intake was up 5.8% over the same quarter last year and up 6.1% year to date.
  • Acquired Dematic, a leading specialist for automation and supply chain optimization. This is KION’s effort to make a big push in automation and supply chain solutions.  This is Industry 4.0 in action.
  • KION had strongest segment growth in electric trucks, followed by warehouse trucks. Orders for internal combustion trucks fell moderately and is in line with the general market trend for IC trucks.
  • KION saw revenue in the Americas rise by 18.8%.

Hyster-Yale – fifth largest producer of industrial trucks.

  • Third quarter revenue was down $22.8 million or 3.5% to $629.3 million. Year to date revenue is the same at $1.9 billion but net income is down to $30.6 million from $57.5 million at this point last year.
  • Worldwide new unit shipments decreased to 20,300 units from 22,400 units in the 3rd quarter of 2015.
  • Revenues declined in all Americas markets but predominantly in North America and Brazil, due to lower shipments.
  • Hyster Yale expects 4th quarter performance in the Americas to be the same as 2015.
  • HY expects Americas market to moderate in 2017 compared with 2016 as a result of a slightly weaker North America market, partially offset by recovery from very low levels in Brazil.
  • HY reports they are making progress with Nuvera hydrogen fuel cells unit. Revenue is up to $1.4 million in the quarter versus $0.5 million in the same period last year.

Jungheinrich – 3rd largest producer of industrial trucks

  • Net sales up 13.4% versus the third quarter of 2015. Incoming orders also increased by 8.5% in the quarter and are up 15.2% year to date.
  • Unit volume production rose from 22,900 in the third quarter of 2015 to 27,400 this last quarter. Year to date unit volume production for Jungheinrich is up 13.5%.
  • Net income fell in the quarter by 1.2% but is up 13.5% year to date.
  • Jungheinrich continues to anticipate that the volume of the world material handling equipment market will rise in 2016.
  • Due to the positive trend in the third quarter, North America now appears to be in a position to post growth for the year as a whole for Jungheinrich.

Toyota Material Handling – world’s largest producer of industrial trucks

  • Net sales of the Materials Handling Equipment Segment amounted to 478.0 billion yen, a decrease of 34.5 billion yen, or 7%. The decrease was attributable mainly to the impact of exchange rate fluctuations although unit sales of lift trucks increased primarily in Europe.

Ritchie Bros. Auctioneers – courtesy of Neil Frohnapple at Longbow Research

Ritchie Bros. is the largest industrial equipment auctioneer in the world and operates through 45 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 12% in the third quarter 2016 compared to the same period in the prior year. Specifically, Ritchie Bros. noted that core industrial auction volumes were up 6% in the quarter and GAP per lot sold increased 4%.
  • Ritchie Bros. sold 90,500 lots during the quarter compared to 85,000 lots in the prior year period, which represents 6% volume growth. The increase was driven in part by a 25% increase in light construction lots and a 99% rise in agriculture assets sold.
  • There were a total of 12,900 consignors (sellers) of equipment at Ritchie Bros.’ auctions during the third quarter, which was 18% higher than the same period last year.
  • The company had 30,850 unique buyers who purchased equipment through a Ritchie Bros. auction in the third quarter, which is a 16% increase compared to 3Q15.
  • Ritchie Bros. cited consistent equipment pricing throughout Q3 and into October following a dip late in Q2. Notably, construction assets met or exceeded the company’s pricing expectations during the quarter.

United Rentals – courtesy of Neil Frohnapple at Longbow Research

United Rentals is the largest equipment rental company in the world and has 890 locations across North America. The company generates 50% of its total sales from industrial/non-construction markets, 46% from non-residential construction, and 4% from residential.

  • United Rentals reported that its overall rental revenue decreased 0.3% year-over-year in the third quarter as higher volume of equipment on rent was offset by lower rental rates (-1.7% versus the prior year).
  • The company achieved time utilization of 70.3% in 3Q16 compared to 70.0% in 3Q15. Additionally, United Rentals reported that its time utilization was up 80 bps through the first three weeks of October compared to the same time period in 2015.
  • The size of the company’s rental fleet was $9.17 billion (based on original equipment cost) at the end of third quarter 2016 compared to $8.73 billion at the end of 2015. The age of the rental fleet was 43.7 months on an OEC-weighted basis at September 30th, 2016.
  • United Rentals raised the midpoint of its full year adjusted EBITDA guidance by $25M based on a revised range of $2.70B to $2.75B ($2.65B-$2.75B prior). Notably, the company narrowed its rental rate outlook range to a decline of 2.1% to 2.3% for 2016 compared to its previous forecast of a 2-3% decrease.