| Small & Micro cap project
Manitowoc: Interesting insight from Tarkio Fund
Manitowoc Company Inc (NYSE: MTW)
M.Cap: $437 million
Tarkio Fund’s 2nd quarter 2019 shareholder letter explains their rationale behind buying Manitowoc. The core argument revolves around the CEO (appointed in December 2015) who is transforming the company through lean strategies.
We checked the company’s recent quarterly performance – Quarter ended June 2019 – despite a meagre 1.9% growth in revenue, gross profit increased by 5.2% and operating income increased by 73.9%.
Not long after, Barry Pennypacker was hired as Manitowoc’s new CEO. Pennypacker had begun his lean journey with our own Danaher, then took his learned expertise in “Lean” to transform companies on two subsequent occasions, one being the publicly traded Gardner Denver company. When Barry was hired at Manitowoc, he brought key members of his transformational team from his previous experiences with him. The band was back together for one more gig.
……On May 10, 2019, Manitowoc reported its first quarter earnings, and there was incremental but clear evidence of their progress in the numbers reported. But we got a glimpse of their real progress in January, as Dominic Piazza and Jeremy Brown made a site visit to the company’s Shady Grove manufacturing facility. They could literally see the difference between the manufacturing areas that had already undertaken transformation efforts and the areas that have yet to start the transformation. They likened the experience to visiting two altogether different companies. I’ve personally had experience with this type of lean transformation in the late 1980’s (often known at that time as “total quality control”), as we owned, benefitted from and witnessed a transformation at JLG Industries. In addition, the passion and belief in the transformation process they witnessed at Manitowoc from everyone they interacted with at the company was nothing short of extraordinary and probably a career-changing experience for both Jeremy and Dom (like it was for me at JLG).
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