Snorkel Reports Steady Progress in First Half of 2012
Darren Kell, CEO of Snorkel's parent Tanfield, said that the company has made steady prograss in the first of 2012 as the global demand for aerial work platforms continues to recover.
"Since the injection of working capital in March, the business has witnessed monthly output improvements, with the major step-change impact from our supply chain investment occurring late in the third quarter after the end of the half year," he said. "Margins have improved, losses have narrowed, and the company predicts having its first post-recession break-even month in October. The outlook for 2013 looks positive, with the company remaining on track for full year profitability."
Revenue of $38.9 million (£24.1m) was achieved through growth in the second quarter of the first half of 2012. Although demand for products was strong, revenue declined until the second quarter due to lack of component availability that was a result of supply chain issues and working capital constraints.
The sales constraints continued until March 2012 when Tanfield raised approximately $17.7 million (£11m), net of expenses, by way of a placing of new equity. Tanfield invested the net proceeds from this placing in the supply chain, with cognisance of a six-month lead time on many key components. "In spite of these lead times, we achieved month-on-month output growth during the second quarter from all of our manufacturing sites, particularly our Chinese facility," Kell said. "Since the period end, we have witnessed a significant increase in component availability, resulting in accelerated production growth in the third quarter. We therefore expect to deliver a first post-recession break-even month in October 2012."
$4.4 million (£2.75m) cash at June 30 reflects the level of investment in the supply chain in advance of the additional receipts from incremental sales. In the second half, as increased revenues flow through, this reduction in cash over the period will stabilize at that level.
Global demand for the Snorkel product range remains strong, according to the company, and pricing has improved and margins have increased. Customers remain engaged in fleet replacement programs after aging their fleets during the economic downturn. "We continue to increase our distribution channels in key markets, including both Latin America and North America," Kell said. "Scandinavia and Japan remained particularly buoyant markets."
In spite of close management, we have encountered some unavoidable supply chain delays, some of which are volume related and others of which relate to supplied product quality and consistency. This has imbalanced our output, leading to some rescheduling delivery dates on certain machines. We fully expect to resolve these issues by further developing the supply chain. Minimizing the impact of supply chain bottlenecks will allow us to balance product availability against customer requirements and improve order take up.
Recovery continues to be driven by fleet replacement, rather than fleet expansion. The company expects market growth to return once demand increases within the non-residential construction and facilities maintenance markets. This will drive the utilization of powered access equipment to the point that rental companies have to invest in additional machines in order to support their end-user customers.
During the period, Snorkel appointed a distributor in Brazil, which is experiencing a construction and infrastructure boom. Distribution channels in Germany and the sales team in North America also was strengthened.