20.10.2010

Terex Cranes remains in profit

Third quarter revenues at Terex cranes fell further than expected, dropping 15 percent although the company remained in the black both for the year and the quarter.

Nine month revenues to the end of September were down nine percent to $1.23 billion while the company’s operating income tumbled from $73.4 million last year to $17.3 million this year.

Looking at the third quarter revenues dropped over 15 percent to $368 million, while operating profits slipped to $3.4 million from $18.8 million in the same quarter last year.

The crane order book was $671 at the end of September - down 33 percent on a year ago, however it was up $10 million on the quarter.

The order book for the Company’s German crane business, largely All-Terrains and crawlers, remained flat over the last quarter, due to delivery delays. Increased backlog in the Chinese truck crane and North American crane businesses was partially offset by reduced demand for Australian built Franna pick and carry cranes.

Terex chief operating officer Tom Riordan said: “We had a number of early September order cancellations and delivery push-outs that caused a significant drop in European net sales in this past quarter. We feel we are at the trough in North America, growing in developing markets, but uncertain about the next few months in Europe. Our Port Equipment business has not been profitable, as we are still suffering from the net sales gap created before our acquisition and the longer lead times of this business. However, customers have increased their quotation activity, indicating there are better prospects for success ahead for this business.”

Terex Group

Terex as a whole saw revenues for the nine months increase almost nine percent to $3.09 billion while it more than halved its pre-tax loss to $201 million.
For the quarter revenues were up over 15 percent to $1.08 billion. While the pre-tax loss was $51.8 million compared to $133 million in the same quarter last year.

Terex chief executive Ron Defeo said: “Our third quarter operating results were mostly in line with our expectations, but with greater than anticipated Cranes weakness. Our Aerial Work Platforms and Materials Processing results were solid, with positive order and backlog trends. Construction had near breakeven operating profit, excluding unusual items, but the European Cranes business fell faster than anticipated."

"We expect the fourth quarter to reflect continued strengthening trends in AWP, Construction and MP, with a weaker Cranes business than we had previously anticipated. Consequently, we expect net sales to increase approximately 10-15 percent sequentially and to generate a consolidated operating profit of roughly $15 million in the fourth quarter, excluding unusual items, although this will not be sufficient to generate net income in the quarter.”

“The mid and longer term expectations for Terex remain unchanged. We are
building the business in each product category, both in developed and developing markets. AWP, Construction and MP customers are upbeat for 2011 and we expect the Cranes business to reach its low point in 2011. Although the new Port Equipment business has experienced increased quotation activity recently, we do not expect to see a positive impact from this business until 2012."

"We are not yet in a position to set overall expectations for 2011, but we do believe it will be a profitable year. In addition, we expect to reinvest our cash in the business, repay additional debt or a combination of both during 2011.”

Vertikal Comment

The crane business is, as is often the case, lagging the rest of the construction equipment industry. The fact that the crane business is still in positive territory is encouraging, particularly as it now includes the loss making Fantuzzi operations.

Whether the improvement in the backlog from the start of the quarter means anything is hard to say although probably not – the trend is still negative at the moment.

The underlying market though still has a lot of potential given the additional power and refining capacity requirements that the world still needs and which will quickly gather pace once the economy begins to get back on track.

While the result was worse that Terex and most analysts expected, it could easily have been worse and if the market does begin to pick up sometime in 2011 the Terex crane business will have come through the worst recession most of us can recall relatively well.

The challenge now will be to step up the pace of new crane development to help stimulate replacements of older models.