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Relational Investors calls for a Manitowoc spinoff

Part 2
Relational Investors calls for a Manitowoc spinoff (Part 2 of 8)

Overviewing Manitowoc’s businesses ahead of a possible spinoff

Taking a closer look at Manitowoc

In the first part of this series, you saw that Relational Investors has acquired an activist position in Manitowoc. The fund wants the company to spin off its Foodservice business.

In this part of the series, you’ll go through a brief overview of Manitowoc’s businesses to help you assess a potential spinoff.

MTW businessEnlarge Graph

Manitowoc said in its annual filing that international sales, including sales from outside the U.S., were approximately 51% of its total sales for 2013. The largest percentage, 23%, of these sales was to European countries. The company added that growing international sales are part of its growth strategy.

The company’s based in Manitowoc, Wisconsin. It has two main business segments:

  1. Cranes and Related Products
  2. Foodservice Equipment

Crane product demand is cyclical

The Cranes segment accounted for 62% of the company’s net sales in 2013. The segment provides engineered lifting equipment for the global construction industry. These products include lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks.

Manitowoc mainly markets its Crane products under the Manitowoc, Grove, Potain, National, Shuttlelift, and Crane Care brand names. These products find use in a wide variety of applications. These include:

  • Energy and utilities
  • Petrochemical and industrial projects
  • Infrastructure applications like road, bridge, and airport construction
  • Commercial and residential construction

The company believes the primary near-term growth driver for this segment is the relatively strong energy, infrastructure, construction, and petrochemical end markets.

The Crane segment saw net sales increase 3.3% to $2.5 billion in 2013 compared to 2012. This rise was mainly due to higher demand in the Americas region and in some emerging markets. Demand is driven by energy and infrastructure projects as well as steady growth in the product aftermarket support business.

The demand for Crane products is cyclical. It depends on macroeconomic conditions and factors that influence construction activity internationally, nationally, or regionally. Macroeconomic improvements will benefit Manitowoc and its construction equipment peers Terex (TEX), Columbus McKinnon (CMCO), and Caterpillar (CAT). Globally, the company’s competitors include Liebherr Group, Cargotec Oy (CYJBF), XCMG Group, Zoomlion Heavy Industry (ZLIOY), Sany Heavy Industry, Hitachi Sumitomo Heavy Industries Construction Crane Co, Fuwa Heavy Industry Machinery Co, and Konecranes Oyj.

New markets and product innovations to drive Foodservice equipment sales

Manitowoc’s Foodservice segment accounted for 38% of the company’s net sales in 2013.

The segment innovates and manufactures commercial foodservice equipment. It serves the ice, beverage, refrigeration, food-preparation, holding, and cooking needs of restaurants, convenience stores, hotels, healthcare providers, and institutional applications.

The company markets its Foodservice products, services, and solutions under the Manitowoc, Garland, U.S. Range, Convotherm, Cleveland, Lincoln, Merrychef, Frymaster, Delfield, Kolpak, Kysor Panel, Servend, Multiplex, KitchenCare, Inducs, Koolaire, and Manitowoc Beverage System brand names.

According to reports, the company’s customers include food chains like Starbucks (SBUX), KFC, McDonald’s (MCD), and Subway.

Foodservice sales rose 3.7% year-over-year to $1.54 billion in 2013. This rise was driven by increased sales in the Americas as well as Europe, the Middle East, and Africa (the EMEA region) the prior year. These higher sales were due to volume increases that were primarily driven by new product rollouts.

Manitowoc’s 3Q 2013 fact sheet noted that Foodservice equipment sales relate to restaurant revenues. An improvement in same-store sales and traffic for restaurant operators would boost the prospects of Foodservice equipment companies like Manitowoc and its peers Illinois Tool Works (ITW) and The Middleby Corp. (MIDD).

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