Hamilton Beach 2008 Annual Report Download - page 10

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Actions Being Taken to Move Forward in 2009
Given these market prospects, NMHG’s team of
experienced professionals is overseeing a focused agenda
that addresses the challenges of cost reduction and revenue
generation in a severely depressed market with the objective of
returning the company to profitability in 2009. In particular,
NMHG is committed to taking all actions necessary to ensure
the company’s cost structure is appropriate for prevailing
market conditions.
NMHG has aggressively taken a number of steps to
respond to current market prospects. Capital expenditure
constraints and administrative cost control measures,
including planned plant downtime, suspension of incentive
compensation and profit-sharing programs, reductions-
in-force, reductions in salaries and benefits, wage freezes
and restrictions on spending and travel have all been
implemented. NMHG is also actively working to ensure
timely implementation of reduced procurement costs in light
of moderating material costs, specifically steel, and fuel and
freight costs, in late 2008 and early 2009. The company’s goal
is to return margins in the near term at least to the levels that
preceded the sharp increase in costs in early 2008, while still
maintaining market positions. A significant reduction in
working capital is also expected as a result of decreased
receivables and marketing and manufacturing inventories.
NMHG is fortunate that some key profit improvement
programs previously undertaken are either completed or are
expected to be completed in the near future. For example, the
manufacturing restructuring program, which includes the
transfer of the 2.0 to 3.5 ton internal combustion engine
pneumatic lift truck to the Berea, Kentucky plant, the closure
of the plant in Irvine, Scotland and a plant consolidation in
Greenville, North Carolina are expected to be largely completed
in early 2009. In addition, NMHG plans to introduce its next
generation of electric lift trucks throughout 2009. Also, specific
actions previously implemented to improve manufacturing
efficiencies, enhance quality and strengthen global purchasing,
marketing and pricing operations are expected to deliver
additional benefits in 2009.
Overall, NMHG Wholesale expects earnings in the first
half of 2009 to be well below the first half of 2008, with an
especially difficult first quarter. Modest market improvements
expected in the second half of 2009, along with the impact of
new product introductions and restructuring and reductions-
in-force actions, are expected to lead to about break-even
results, assuming markets do not deteriorate further.
Significantly improved cash flow before financing activities
for 2009 compared with 2008, primarily as a result of the cost
containment actions, plant restructurings and a reduction
in working capital, is also expected.
NMHG Retail will continue to work to achieve improved
results in 2009, particularly in Australia. These actions and
other improvement programs are expected to have a favorable
effect on 2009 results and cash flow before financing activities,
and to assist the company in meeting its strategic objective
of achieving at least break-even results while building
market position.
Longer-Term Perspective
NMHG’s improvement programs, including longer-term
initiatives maturing in the next two to three years, are expected
to help the company become even more competitive globally.
These projects include a continuous stream of new product
introductions and innovations, new basic truck and option
package configurations and a related pricing strategy, better
alignment of pricing with currency and commodity cost
changes and strengthened dealer networks across the globe.
Overall, NMHG believes its programs in product, supply,
manufacturing, quality, pricing and distribution together will
position the company not only to be competitive in the global
lift truck marketplace, but also, as demand for lift trucks in
key markets worldwide eventually improves, to achieve its
long-term minimum financial objectives.
Hamilton Beach Brands
2008 Results
Hamilton Beach Brands (“HBB”) and other small
kitchen appliance companies were affected by a significant
softening of retail markets during the year. The fourth quarter
of 2008 was particularly challenging as consumers spent
significantly less than in prior years and most retailers
experienced a disappointing holiday season. Fortunately,
HBB is well positioned at mass merchants that tend to serve
price-conscious consumers and therefore performed relatively
better than higher-end retailers. Nevertheless, the company’s
sales of small kitchen appliances still fell well below expectations
and financial results were disappointing. From 2007 to 2008,
HBB’s revenues declined 2.2 percent. However, as a result of
significant increases in product and freight costs over the
course of 2008, which were not fully recovered by price
increases, and reduced unit sales volumes, particularly in the
latter half of the year, HBB’s 2008 adjusted income declined
compared with 2007.
Market Outlook for 2009
The global recession and other consumer financial
concerns are among factors creating an extremely challenging
retail environment as consumer confidence continues to
decline. Under these circumstances, it is very difficult to