Hyster-Yale outlines further backlog reduction and operational discipline amid persistent tariff headwinds

Earnings Call Insights: Hyster-Yale, Inc. (HY) Q3 2025

MANAGEMENT VIEW

* CEO Rajiv Prasad stated that "throughout the first half of 2025, we maintained a cautiously optimistic outlook, predicting an improvement in market demand in the second half of the year. However, since our last update in August, that optimism has faded largely due to the impact of tariffs on the market demand and on our costs." Prasad highlighted that despite an overall decline in lift truck market demand, "Hyster-Yale's booking activity ticked higher compared to both the prior year and the previous quarter," with bookings rising to $380 million in Q3, up from $330 million in Q2, led by the EMEA and APAC regions. He also pointed out strong October bookings in the Americas for Class 5 trucks and a solid performance in Class 1 trucks.
* Prasad emphasized ongoing strategic initiatives, including the expansion into modular and scalable lift truck models and advanced warehouse technologies. He noted, "We're strengthening our connections with dealers and end customers by offering comprehensive support throughout the buying cycle" and pointed to increased competitive pressure from low-cost foreign competitors, particularly in South America and Europe, which is most pronounced in the Class 5 market.
* Prasad said the company's backlog stood at $1.35 billion at the end of Q3, down from $1.65 billion in Q2, with shipments outpacing new bookings.
* CFO Scott Minder reported, "Lift Trucks Q3 revenues were $929 million, reflecting a 4% decline compared to the prior year." Minder detailed a $27 million year-over-year operating profit decline, attributing it to lower truck volumes and higher tariff costs, offset in part by strategic pricing actions. Bolzoni Q3 revenues were $87 million, down 11% year-over-year, with Q3 operating profit at $2.1 million, compared to $6.2 million last year. Minder added, "Q3 operating cash flow of $37 million improved by nearly 25% from Q2's level."
* Minder noted direct tariff costs of $40 million in Q3, with less than half offset by pricing actions, and said, "Q3 working capital stood at 20% of sales, down from Q2 levels, but above our long-term target."
* Executive Chairman Alfred Rankin called the current period "a period of extraordinary transition, facing both significant challenges and new opportunities" and reiterated the company's focus on transformation and sustainable growth.

OUTLOOK

* Minder projected Q4 revenue to decline compared to Q3 due to lower production rates and persistent tariff headwinds. The company expects a moderate operating loss in Q4 and anticipates elevated tariff levels and softer market demand to remain negative factors into early 2026. Minder said, "Our outlook assumes positive impacts from cost control and prior pricing actions to service partial offsets."
* Minder outlined the expectation for further backlog degradation in the near term, with production rates moderated to preserve manufacturing efficiency and optimize inventory. He stated, "We anticipate further backlog degradation in the near term."
* Planned capital expenditures for 2025 are between $50 million and $60 million, focusing on new products, manufacturing, and IT infrastructure.

FINANCIAL RESULTS

* Q3 Lift Trucks revenues were $929 million, a 4% year-over-year decline, with lower volumes across all product lines. The Americas saw a significant drop in higher-value Class 4 and 5 trucks. EMEA revenues increased year-over-year, primarily due to higher truck sales and favorable currency movements.
* Bolzoni revenues declined to $87 million, down 11% year-over-year. Q3 operating profit for Bolzoni was $2.1 million, compared to $6.2 million last year.
* Operating cash flow improved to $37 million, nearly 25% higher than Q2. Net debt stood at $397 million.
* Q3's financial leverage, as measured by net debt to adjusted EBITDA, increased to 2.9x due to lower earnings.

Q&A

* Alfred Moore, ROTH Capital Partners: Asked about the duration of demand deferrals and the current cycle. Prasad replied that "the market is still pretty active... What is slow is decision-making" due to the volatile environment, with expectations for gradual recovery over the next 2 to 3 months as customers finish digesting previously ordered trucks.
* Moore followed up on potential actions if macro conditions worsen. Prasad stated, "We're pretty much looking at everything right now. All of our cost structures, how we're utilizing our plants... We are going to take a bit of a conservative posture for the next quarter or two."
* Ted Jackson, Northland: Queried about verticals facing headwinds and pricing pressure. Prasad noted heavy manufacturing is most affected and said, "pricing pressure is everywhere" but the new modular products are designed to address this. Jackson asked about efforts to increase closure rates. Prasad explained the company is working closely with customers to analyze fleet positions and tailor solutions, aiming for a more focused approach to customer needs.
* Unknown Analyst, Imperial Capital: Asked about automation trends. Prasad said, "the interest in automation is enormous," with implementation slower than expected but anticipated to accelerate, while Rankin added that automation brings higher prices and margins.
* Jack Fitzsimmons, Prudential: Inquired about cancellations and tariff cost mitigation. Prasad said, "the majority of our cancellations are behind us" and "the $40 million was the gross tariff cost, and we were able to offset less than half of that with the price in the quarter."
* Eric Ballantine, CVC: Asked about backlog profitability and risk of negative EBITDA. Prasad projected the backlog would be nearly fully profitable by January or February, with unprofitable units primarily impacted by tariffs. On EBITDA, Prasad said, "it's really difficult to tell at the moment... we're pretty close to breakeven this quarter."

SENTIMENT ANALYSIS

* Analysts showed a slightly negative to cautious tone, with repeated probing on demand uncertainty, backlog profitability, and tariff impacts. Questions were persistent about potential downturn actions, margin resilience, and market stabilization.
* Management's sentiment was cautious but pragmatic, with Prasad and Minder openly addressing risks and mitigation strategies. Prasad frequently referenced the need for vigilance and readiness, and Minder emphasized cost control and cash management. Compared to last quarter, tone shifted from "cautiously optimistic" to more openly concerned about near-term softness and tariff challenges.
* Management's prepared remarks were more confident, while Q&A exchanges reflected greater caution and acknowledgment of uncertainty.

QUARTER-OVER-QUARTER COMPARISON

* Management's outlook shifted from expecting market improvement in the second half of 2025 to anticipating continued softness, with explicit recognition that optimism had "faded" due to tariffs and macro volatility.
* Backlog declined from $1.7 billion at the end of Q2 to $1.35 billion in Q3, with shipments outpacing bookings. Bookings increased sequentially from $330 million in Q2 to $380 million in Q3, but this was attributed to higher prices rather than volume strength.
* Tariff headwinds escalated from $10 million in Q2 to $40 million in Q3, with less ability to offset through pricing.
* Cost control and inventory management remain a focus, but the company now expects further backlog degradation and has lowered production expectations for Q4, compared to plans for increased production in the prior quarter.
* Analysts in both quarters focused heavily on tariffs, demand visibility, competitive pressures, and margins, but in Q3 expressed more skepticism about profitability and recovery timing.

RISKS AND CONCERNS

* Ongoing tariff headwinds, with $40 million in direct costs in Q3 and expectations for continued negative impact.
* Market demand remains volatile and below expectations, leading to lower production rates and backlog declines.
* Competitive pressure from low-cost foreign manufacturers, especially in the Class 5 segment in South America and Europe.
* Management cited the risk that if shipments continue to outpace bookings, further cost structure actions may be required.
* Uncertainty around future tariff policy and its impact on sourcing, pricing, and customer demand.

FINAL TAKEAWAY

Management emphasized an environment marked by extraordinary transition and persistent headwinds, particularly from tariffs and softening market demand. The company is responding with operational discipline, targeted cost management, and accelerated product innovation, while signaling an expectation for continued backlog reduction and production moderation in the near term. Strategic investments and a flexible manufacturing approach are intended to position Hyster-Yale for profitability and growth when market conditions stabilize, but immediate results are expected to remain under pressure as tariff costs and demand uncertainties persist.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hy/earnings/transcripts]

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