Manitou BF SA (MTU) Earnings Call Transcript & Summary

Good morning, good afternoon and good evening, and welcome to the third edition of On The Way Up, our event and CSR that has now become a traditional mixture at Manitou Groups calendar. As a reminder, we are here today to present how CSR impacts are evolving in a constantly changing ecosystem. To discuss that we'll have a lot of testimonials from our colleagues who are present here and also from all of our stakeholders. And as you are about to discover, the pace is getting quicker every year. To give you a global overview, we have decided to present this third issue following 3 major stakes which are transformation, human resources and beyond the climate, and we'll do it here live from our Aerial Work Platform factory in Candé where we also produce electric machines. And for you who are watching us today, don't hesitate to send your questions on the following address. Be sure that we'll answer you. Before starting with this forecast, I leave the stage to Michel Denis, President and CEO of Manitou Group. Hello, Michel.

Hello, Franck.

Michel, we are here in a place that makes sense, especially today. Don't you think so?

Yes. Sure. Absolutely. Here, the real proof that energy transition at Manitou Group is on track.

And what about the highlights of last year.

Yes, many highlights. Hello to everyone. Good afternoon. Thank you for watching, and thank you for staying tuned into our event. Last year, yes, many, many achievements. We are in the right direction, in the right pace. It's a long road, but we're in a good pace. And I want to highlight some achievements. First, we launched 7 brand-new machines, 100% electric at Bauma in Germany demonstrating our advance, our innovation, putting our image in the front, even the 1 press headline was Manitou electrifies Bauma. Second, we have launched, and this is a world's first, the real life testing of telehandler with hydrogen fuel cell.

Thank you for this great news, Michel. Have you also some achievements to mention in terms of professional equality?

Yes. And that's my third point. We are making progress, reinforcing equality within the group with a gender equality index, which covers already 80% of the people, the employees at Manitou Group. This will help to measure improvements in various criteria and various areas such as gender diversity, equal pay, promotion, equal treatment with a view to achieve a greater equality within the whole group. Finally, we have launched the new code of ethics with the training for all the people within the company.

All right. But beyond this project, do you sense any deeper changes?

Yes, deep changes. Yes, of course, with the transformation underway within the corporate sustainability reporting directive, the European taxonomy. And all the indicators that will be put in place that would change -- it's on the way to change deeply the way we assess a company, the way we assess the future, the way we assess the perspective of the company and people are assessing companies differently. In fact, it's an expectation of the market. It's a deep and real key strategic pillar for Manitou Group. And even for some fund managers, they are already excluding some companies of their portfolio. Yes, it's key in a way [ versus ] company for the future and its company's future, it's at stake.

Thank you, Michel. I'm turning to you right now, Aude, hello?

Hello, Franck.

So Aude, you are VP CSR for Manitou Group. What would you add about the main highlights of the past year?

I would like to add a few things. This time last year, we learned that a low carbon trajectory has been validated by the SBTi. This is an important recognition that our reduction targets are credible. So a low carbon pathway is a first important step in reducing our impact. And today, we are well equipped to steer this low-carbon trajectory and it involves almost the world campaign.

And you have also recently signed a new loan, isn't it?

Yes. We signed at the end of 2022, a loan agreement worth EUR 375 million, and this loan is linked to 3 of our CSR annual targets. First, the accident frequency rate; second, the CSR performance of our suppliers; and third, the carbon impact of our products. So these indicators will have positive or negative impact on the financing margin. Concretely, it means that the company has financial obligation to achieving its targets, which ties with Michel points that now economic performance and CSR performance are linked.

You want maybe add a word on the last acquisition?

Yes. At the end of 2022, we had the acquisition of easyLi which specializes in designing and making lithium high-end batteries, which give us specific skills in view of the energy transition.

Thank you very much, Aude. So let's go now into more detail with the first stake of our show, I mean, transformation. Hello, Gwenael Chedaleux, and thank you for being with us.

Hello, Franck. Hello, everyone.

It's my pleasure. Let me remind you that you are audit partner at KPMG, and I guess that you have a very interesting look about the transformations that affects all the companies. What picture would you paint of this?

Frank, in fact, faced with environmental and social challenges, we need to rethink our development models throughout the system that combines economic performance and positive impact. Companies must show imagination for the production of services and products that preserve resources and human health. They must also invent activities that combine environmental footprint and technological progress.

Okay? And what are the leverages of these companies?

Thanks to the capacity for innovation, their talent and the diversity of means of their disposal. Companies are driving this transformation, this revolution. After the digital acceleration observed over the last few years, it is not the time for decarbonization process that is no strategic issue. Global CEOs sees the importance of ESG initiative in their business. One question about ESG impact on improving financial performance, driving growth and meeting stakeholder expectations. KPMG outlook that we published in March 2023 shows a marked jump in demand from stakeholders such as customers, but also investors for increased transparency.

Okay. Thank you. And do you have some concrete figures to give us?

Yes, CEO increasingly agree that ESG programs improved financial performance, sitting at 45% compared to 37% 1 year ago. They understand that business embracing ESG are best able to seek your talent, stronger employee value, attract loyal customer and raise capital. 79% is stakeholder demand for increased reporting and transparency on ESG issue. And also 70% of CEO believes that stakeholder scrutiny on ESG will continue to increase.

Maybe a last key figure.

The last figure that 17% of CEO indicates that stakeholder skepticism around greenwashing is increasing. Finally, ESG has gone from a nice to have to must have for long-term financial success.

Thank you very much for this explanation, Gwenael. It was very interesting. Let's now take a closer look at the importance of this issue with you, Hervé Rochet.

Hello, Franck.

So Hervé, you are Corporate Secretary and CFO at Manitou Group. Can you let us know why is this transformation important? And why we are tackling this challenge?

Yes, Franck, we are entering in a new phase of this transformation of our business. We've been announcing them for years. But now the pace is accelerating and the announcements are transforming in reality. And if we compare with 3 years in a row, we are an exponential transformation, which is ongoing.

Okay. And how would you define this evolution?

This evolution is going through a tremendous acceleration of awareness, also some actions for changes and both from ourselves, our stakeholders and also for the regulation at different level. The debate has also shifted from the pure carbon and global warming to a more environmental global thinking. And now we are looking more at wider challenges such as which are impacting our business model, and we are talking about ecosystem evolutions about pollution, about CO2, about water constraint, about biodiversity.

And in Europe, there are also 2 major regulatory developments or revolutions underway taxonomy and CSRD.

Yes, Michel mentioned that, there is a really new changes on evolution, which are going. In Europe, we've got -- the European Union's Green Deal that is reporting on 2 pillars. The first 1 is the green taxonomy and the second 1 is CSRD. All those actions are targeting to shift the business to a sustainable business. And for companies that means that if you do not build and have a CSR roadmap, you won't get money in the future. All this in order to achieve a neutral carbon by 2050.

Okay. When you mentioned CSRD, can you go maybe deeper in detail?

Yes, this is a regulation which is implemented starting 2024. And the ambition is to harmonize all the CSR standards, to make them more reliable and also more comparable. So if I want to say that all companies which are above 250 employees in Europe will have to set up indicators in terms of environmental and also social matters. So that in order for those companies, once they've got that to define targets of improvement also to report what they are doing regarding these targets.

And what will this change concretely?

I change dramatically the way we are looking at the business because for the company, we are looking at how the company is impacting the environment. We are looking also how the environment will impact our company. And we are looking also at what are the independencies between these 2 dynamics. So it helps us to become much more aware of challenges. The result is for everybody to have a much wider view, an enriched vision of the company and not looking solely on financial performance, but to look at the social, environmental and financial performance.

Okay. Very clear. And is this creation of a new reference system unique to Europe?

No, it's not unique to Europe. The United States are starting this some kind of approach. And we are seeing also this kind of a dynamic in Asia also.

Okay. And how is Manitou positioned in this reference framework?

And the reference world working well, both building reference or also achieving results. So when we talk about achieving results, we are midterm from our 2025 road map. We are making huge progress with an important bunch of new electric machine and [ trans electric transition ], which are coming on. And also we are making huge progress on the 50 other targets that we have deployed within the company.

Okay. Well, Hervé, I think you convinced all of us about the importance of this transformation. Thank you very much for that. Let me turn to you, Pascale Guiffant. Hello, Pascale.

Hello, Franck. Hello, everyone.

So you are the Co-Founder and Managing Director of Open Lande. You are working for a company that support others that lead projects with a positive impact. So I'm pretty sure that the subject of transformation talks to you. Can you give us maybe your feedback about that?

Yes. Thank you. I think -- I'm a long-time observer and actor of CSR strategies within companies. And I can say that since COVID, we are really looking at the radical shift in the way biodiversity, climate, resources issues are taking into account within company strategies. And I think there is 2 points that are very important in this. The first 1 is that there is a wide mobilization of actors. The employees, they, like CEO, wants to be agent of change within the organization in order to tackle these issues. Young professionals are looking very deeply in the way companies are tackling those issues as well. And this is fuel as well because they are a lot more of eco-anxiety that we used to. 60% of young people are feeling this eco-anxiety regarding a Lancet study, 10,000 people in the world. The third point is the mobilization of politicians. And we've seen it with the European, Fit for 55 agreement, which is not just about transparency for companies, but also tackling issues in different sectors and regulating sectors to include those. And lastly, I think we are looking in territories of large mobilization of local collectivities, NGOs, associations and private actors not just to look at the health -- social health of the territory, but also the ecological health of the territory. You've seen that in Amsterdam, which use a Doughnut economy of Kate Raworth to look at that in Melbourne with Region Melbourne.

And I guess that new challenges are also affected companies.

So -- yes, so companies are expected to listen and mobilize their workforce in order to implement their strategies. They are -- we wait for transformation plan that include training plans with biodiversity competencies, climate competencies, circular economic competencies, but also enhanced dialogue with stakeholders on all the value chain.

Okay. And can you tell us what's the second point about this evolution?

The second point is, I think, a move from just looking at reducing carbon offsets to looking also at adaptation issues. It means that we have to fight the cause of climate change, but we also have to prepare for the consequences. So companies need to reduce their impact and then in the same way, look at vulnerabilities, risk on their value change. It demands to look at how the buildings are built, how the process are implemented, how the economic model is accelerating or decelerating this effect. So how do I manage water resources in a context where there is less water. How do I manage working conditions where there is a lot of heat waves. And most importantly, how do I impact the carbon sinks that are so important for carbon neutrality? Do I preserve it? Do I restore it? How do I live with it?

Okay. And from your point of view, what topics companies should focus on?

I think companies, we are no more in a situation where we are looking at why should we do it? But in a situation of how should we do it? And how should we do it fast and with the maximum impact. And this is really important because it means that we need to do this transformation, not on a crisis mode, but on a prepared mode. So I think companies need to work not just on the strategic and technological roadmap but on their culture. How those issues are including in the culture of the organization.

Okay. Thank you very much, Pascale, for this precious testimony. We'll come back to you soon. We'll keep going with this transformation chapter. Welcome to our new guest on stage. Let's start with you, Maurizio Achilli.

Hello. Hi, Franck, hi to all.

So Maurizio, you are purchasing VP for Manitou Group. So these changes in perspective that we're talking about are also reflected in practice with the relationship with the suppliers. Can you tell me more?

Yes, of course, we expect those changes leading to a major transformation on our supplier base. Also consider that Manitou has ambition that goes beyond just the application -- the exists regulation. So this is related into an overall increase of expectation toward the suppliers. And the combined effect of the regulation and the additional expectation may lead to a change of our suppliers based composition with the entry of new suppliers and maybe some consolidation in some area of the existing supplier base.

Okay. And how do you decide on these changes?

In fact, it's not only a question of decision. We have from 1 side, the technological shift. We are talking about commodities that are necessary to cover the needs related to the energy transition and to the low carbon trajectory. And when we talk about this, we are talking about power converter, electric motors, lithium batteries and all the technology related to the hydrogen. On the other side, but even more important is that we have a new qualification, selection and performance measurement criteria in order to make sure that our supplier base is actually in the condition to address the CSR topic and the risk associated. We have as well in parallel updated our supply rate in a system with the help of an independent specialized company. And so that we are going to put to reevaluate our supplier base concerning the CSR risk, and in parallel, we are launching a campaign to put 100% of the supplier potentially and theoretically expose the CSR risk under control. And when I talk about theoretical at risk, I think about the implication between a specific commodity and the country of production of the products. In this case, the idea is that we will have 100% of those supplier under control. And in parallel, we are also auditing them. So we have already started to audit them in order to make sure that actually the situation is correct.

So finally, are there many suppliers at risk?

Not at all. Out of more than 2,000 suppliers that we have audited only [indiscernible] who are potentially and theoretically exposed at CSR risk, but as I said, we have already audited part of them, and they already confirmed the CSR risk or naturally not subsisting. By the way, in this way, we also confirmed that our qualification process is quite sound, and that it grants that our supplier base composition share the same of Manitou's CSR values.

And what about the perspective of suppliers' audit?

Basically, we will extend the CSR risk assignment to the whole supply chain, so not only the risky supplier. But in parallel, we are also conducted audit of supplier with thanks to our sourcing team in order and with the aim to have by the end of 2023, 55% of the rated supplier qualified and 75% by the end of 2025. This objective is also included in our annual report. In order to do that and to support this campaign, we have specifically trained our sourcing team in order to secure audit regarding our purchasing governance, the responsible purchasing charter. And of course, the process audit and the CSR risk management.

Okay. And you are, therefore, transforming so your relationship with suppliers. But you also need to prepare the future of the sourcing.

Yes, of course. For instance, we have the ambition to cover by 2030, 90% of the energy needs of the company with green energy. So we are currently negotiating the supply of electric energy and green gas. And as well, we are significantly investing -- directly investing in the auto generation on electric energy. And in parallel, we are discussing with suppliers, long-term investment in this area. For the steel, this is another very important topic to us. We are as well discussing with the major players of EU region in the world in order to set up a supply chain that will permit us, again, in 2030 to have 64% of our needs covered with a green or recycled steel that is as well a major objective on our side.

Thank you very much, Maurizio, Very ambitious and very exciting challenge. We have seen how our upstream changing is evolving now. Let's see, with you, Arnaud, the downstream, namely products and market. Hello?

Hello, Franck.

I would like to remind, Arnaud, that you are Marketing and Product Development VP for Manitou Group. So on the downstream side, are we talking about the transformation or rupture?

Franck, what we are calling rupture are really spread over time from a customer point of view. I think it's more a transformation that changes working methods and habits. If we take the example of CO2 emissions, we cannot move from 100% internal combustion engine to 100% zero emission. Because, in fact, it would mean that we have to replace 10 years of production in only 1 year, and that's not possible. That's why I would suggest we use the word transformation.

Okay. Very clear. And what are the main customers needs today?

There are 2 main axes. The first one, our customers are still looking for products which are generating value for them on their everyday job. That's key. Obviously, they are still looking for productivity as they were in the past. That's obvious. But not only, now safety, prevention of accidents are becoming extremely important for them and as well as cost of ownership. And we can see this first expectation everywhere around the globe, nearly everywhere. And what we can say is that our products are answering those needs pretty well, pretty well. Secondly, there is a green transition around new energies. And here, this is a different picture. What we can say is that Europe is clearly leading the way.

And what may be the future issues for our customers.

Our customers generally want to go to zero emission. But they have, I would say, some real question about it around performance autonomy and battery duration over time. To answer those questions, we are working with our design department to define the best solutions which will allow our customers to get the same performance or very close to the current machines they are using at the moment.

Okay. And all how these questions specific to Europe? Or is it true everywhere in the world?

Here, what we can see is a real global harmonization around emissions, control of emissions from machines. And it's not anymore, I would say, subject around from, I would say, so-called developed countries or developing country. If we take the example of India. India in 2024, is moving to the same standard as we have in Europe at the moment. If we take the example of China, as they moved in December 2022 to the same level as North America. So this is the first aspect. Secondly, there is a strong demand about electrical products around the globe. And if we take the example of our compact electric telehandler, we can see that 50% of our sales are from Europe, but 25% from North America and 25% around -- for the rest of the world. And this is comforting us in 2 aspects. First, the good one is that our product is meeting customer needs, which is always a good thing. And that everywhere in the world, the transition has started around energy.

Thank you very much for this worldwide view, Arnaud. Thank you for coming to talk us about this development. Let me turn back to you, Aude. You're going to tell us about all the concrete things we've done in the group.

Yes. Thanks, Franck. We have a range of action focusing on knowledge sharing and training. As Hervé and Michel explained, we are facing structural changes and major challenges that's required to share collectively inside Manitou, a common language on this transformation.

And how do you involve and sensibilize Manitou Group's employees?

We started by getting the group's 100 top managers involved in Climate Fresk workshop and the aim is to train all the group employees by 2025. And for the teams, we organized what we call 2 tonnes workshops to help them understand the levers that will enable them to go from an average of 10 tonnes of CO2 today to 2 tonnes in 2050.

All right. And what about the CSR team?

We have more people today in the CSR team and new CSR functions have also been created in finance, in R&D, in purchasing. So this goes to show that CSR is more and more integrated and deeply embedded into business.

Thank you, Aude. And I understand that in our work disciplines and functions, there have also been skill development happening.

Yes, that's right. And to illustrate that, our buyers are trained in sustainable purchasing, our departments in engineering are trained in eco design. And we are deploying energy management training on production sites. And there's still a lot to be done in other areas and in other countries.

And how have things changed in how you supervise and steer the [indiscernible]?

The finance team and the CSR team work closely together. We have set up a project team whose aim is to strengthen the current and the future CSR ambition. And this involves working on CSR data which might become at the same quality as finance data, but also working on transformation to embark the team to embrace enlarge stakes on enlarged scopes on the value chain. So this project will take us to at least 2025 and will involve the world campaigning.

Thank you for all this explanation. And to conclude this part, I would like to give the floor to Christian Guellerin, Industrial Design University Manager of Nantes. I think he has a challenging question to our speakers.

The industrial paradigm for 1 century is the following: how to do better and better what I know how to do. The paradigm of innovation from now on is how I can do other things otherwise with what I know how to do. So the question is what are you going to do tomorrow?

Very interesting question, I guess, Arnaud, maybe you want to start?

Yes. Please. I think he is completely right. And we can see it from our customers. Our customers are not only now focusing on productivity, but they are always considering environmental aspects when they make their decision and their actions. And just 1 thing he is saying what are we doing to do tomorrow I would say we are not waiting for tomorrow. We're already doing it now with the transition we are doing through our products. And what we want to do tomorrow, obviously, is to exceed our customer expectations.

Thank you, Arnaud. Anyone else maybe?

Yes, I can have that. I think that we cannot change the rules of the games in 2 days. So I think the first thing to do is to share on these new rules of the games to make people understand, employees understand what is a world with plus 3 degree, what's the world with limited resources. And we started that in Manitou through conferences with external experts to explain as a situation -- current situation on the planet boundaries.

Okay. Thank you. Maybe someone...

Yes, yes, yes. What I could add, you mentioned that, but you mentioned also regarding the cultural aspect. When the people are trained, when they are becoming aware of the challenges on what's ahead of you, they are really suddenly transforming themselves and they are really starting to be strongly involved and strongly embedded in the transformation of the group, and that's absolutely something that we need to enhance all over the rules.

Thank you, everyone, for this great discussion. It was a pleasure. We have seen how transformation is necessary for all companies. Now let's move on to the second part of our show with the importance of Human Resources to support the CSR approach. To start with the second stake Human Resources, let's watch different testimonials from Gaia schools manager in order to better understand their vision of CSR.

Gaia is school from Audencia Group. So it's entirely dedicated to social and ecological transition, and we have about 300 students that are daily here. And we have also some executive education. The specificity of Gaia is to bundle management on one hand and ecological and social aspects on the other hand. And that's very important because most of the time, we have managers, we have engineers, we have specialists in the environment, but we have to embrace the global issues we are facing today and to integrate it in managing transitions. If we think about Gaia, it's pretty new. And after 2 years, I see a lot of companies who try to target us or to talk to us because they are lost. They don't know exactly how to tackle climate change, how to integrate those environmental issues, for example, tap water, they don't have running water and they need it for their materials, raw materials. So we have a lot of companies who don't know how to deal with the future, and we try to help them with students who have the knowledge for that.

ICAM is a generalist and multi-disciplinary engineering school found in 1898 in Lille. We have now 7 campuses in France and 7 campuses in the rest of the world. At ICAM, we have built special school named [ École de production ]. We try with these schools to find for young dropouts place in the society by learning an industrial job through practice. And this school allow us to melting young people from [ École de production ] and young people from the engineering school. For several years, we have planned to work on the integral ecology. Integral ecology, proposing an approach for -- to have a development that is fragile and help to reduce inequalities.

There are 2 types of design school. One is school of creators. One is school of professional creation. We have the second one. We prepare students to become professional in companies for tomorrow. And what will be their job is to represent the world of tomorrow to have the companies to fix their strategies. To assume the big shifts in the society, the consideration and we need to be more sober and we need to save the resources. We have decided 10 years ago to shift totally the organization of the Master's program. We have decided to orientate this Master's program on complex social matters, care, city, food design, digital design and media design. We have many companies to pass, for example, from products to services because we need to set the resources and tomorrow many companies won't be able to sell any more products but to pass to services to generate added value.

As we just saw, our partner schools and universities are making changes to their courses and their student profiles and changing what they expect from companies. Let's take a step back with you, Christine Prat, hello.

Hello, Franck.