Manitowoc announced late on Thursday, January 29th that it plans to separate their construction crane and food equipment businesses into two independent, publicly traded companies. A press release noted the firm anticipates finalizing the tax-free spin-offs in early 2016 to create industry-leading firms with focused enterprise strategies.
The firm came up with a strategy to pair its cyclical crane business with a commercial kitchen business for stability back in 2008, when Manitowoc bought U.K.-based food equipment maker Enodis PLC for $2.7 billion.
Statement from Manitowoc
“The timing is right now so each of them can pursue individual strategies and they can attract capital in different environments,” Chairman and CEO Glen Tellock said in an interview Thursday with The Wall Street Journal. “We see it as an opportune time to make this split in 2016,” continued Tellock, who has helmed the firm since 2007.
More on the Manitowoc split
Both of Manitowoc’s businesses had a tough 2014, and the firm offered a weak forecast for 2015, especially for the crane division. Manitowoc guided crane revenues would drop by 5% in 2015, this after 2014 sales were off 8% from 2013 to $2.3 billion.
Moreover, operating income from cranes was down 25% to $163.9 million. The demand for big cranes remains low, given weak commercial construction activity both domestically and overseas. The firm also noted a slowdown in oil drilling from lower oil prices as another headwind for crane demand in the near future.
The food-equipment business weakened in the last quarter of 2014 after a strong start. Sales were still up 2.6% from 2013 to $1.6 billion, but operating income was down 6.5% to $234 million. Management projected that food equipment business sales would increase close to 5% in 2015 even though demand for commercial kitchen equipment has been tepid with relatively little restaurant-chain expansion ongoing or planned.
Analysts also note that Manitowoc remains burdened with significant debt from the acquisition of Enodis. They also highlight that the anemic profits and debt associated with both firms are likely to lead to relatively low stock values for the separate companies.