22.07.2010

Orders slip at Terex Cranes

Terex Cranes has posted another profitable quarter and half year, although with a slimmer order book.

Revenues for the first half were down around six percent to $862.8 million, and down five percent for the quarter to $449.1 million. However the numbers are boosted by the acquisition of Fantuzzi, without its contribution revenues fell by 21 percent in the second quarter.

Terex said: “Lower capacity crane demand, including the lower end of the All-Terrain product category, continued to weaken in the second quarter of 2010 compared to the prior year, as commercial construction demand remained soft.”

“Customers continued to purchase high capacity crawler cranes during the second quarter of 2010, driven by global infrastructure and power projects. Tower crane and Rough Terrain crane demand remained stable, albeit at low levels.”
Operating profits at Terex Crane plunged almost 75 percent for the six months to $13.9 million, however the second quarter was stronger when profits slipped 30 percent to $17 million.

The Cranes order book was 37 percent lower on the year at $660 million and slipped 17.5 percent on the quarter (just 12% without currency factors).

Terex says that the majority of backlog is now composed of high capacity crawler cranes and high capacity All-Terrain cranes, along with port equipment.

“Demand for smaller capacity cranes remains soft, and smaller All-Terrain cranes continues to experience weakening demand, while demand for larger crawler cranes remains positive. Other smaller product lines, such as the
Franna pick-and-carry crane and the Chinese truck crane businesses, have shown improved demand in 2010 compared to last year.”

The Terex business as a whole recorded revenues for the six months of just over $2 billion an improvement of around six percent. While pre-tax losses of $149.5 before exceptions such as the $595 million gain on the sale of disposals such as the mining business- compared to a loss in the first half of 2009 of $275.1 million.

The loss in the second quarter was $35.3 million compared to $138.6 million last year.

Chief executive Ron DeFeo said: “We have just completed a challenging first half of 2010, but many of our businesses have seen their recent results show improvement off of trough levels experienced during 2009. We are cautious, but positive, about our prospects for continued improvement. Backlog in three of our four segments indicate slightly improved near-term prospects. Our factories have returned to more regular work schedules and production output. These improving business conditions are the basis for our cautious optimism about the balance of 2010 and lay the foundation for what we feel will be a positive business environment in 2011 for most of our product categories.”

“Operationally, we view our results as being consistent with previous guidance.
We continue to expect break-even operating profit for the full year 2010 before interest and taxes. Due to the divestiture of the Atlas business and the negative effect of currency exchange rate changes, we now expect full year 2010 sales to be in the range of $4.5 to $4.6 billion. While clearly a challenge, our objective remains to return to profitability in the fourth quarter of 2010. Longer term, we continue to view 2011 as a profitable growth year. Assuming a return to a more normalized economic environment, based on the historical performances of our businesses, we believe doubling our revenue, with net income of approximately $6 per share, is achievable by 2013.”

Chief financial officer Phil Widman, said: “In the second quarter, we invested approximately $28 million in financing receivables as part of our initiatives to provide solutions to our customers and help accelerate the growth of our businesses. We have indicated that acquisitions could be a likely use of cash; however, it remains difficult to predict the timing of potential transactions. Absent actionable near term acquisitions, we expect to repay some debt this year, while maintaining sufficient flexibility to capitalise on market opportunities.”

Vertikal Comment

These are still good numbers from Terex although the picture and trends would have looked quite different without the Fantuzzi business.

Terex has certainly benefited from the investment in big crawler cranes and larger All Terrains both areas where it has either had a leading position or a very strong position. Both Liebherr and Manitowoc are adding big crawler cranes which will challenge Terex at the top end of this market.

At the same time the Chinese manufacturers are entering the market for big crawlers all of which may well put some pricing pressure on this lucrative market.

The big All Terrain market is also seeing some excellent new products coming on stream and finally there is now more overall capacity in the market.

With crane rental companies beginning to see improvements in utilisation, this should eventually lead to better rates, profits and new investment. When it does though it will be slow and remain a buyers market for quite a while. New products, product support and brand strength will separate the men from the boys. Terex will need to up its investment in these areas if it is to keep pace.