28.10.2004

Terex third quarter up 38 percent

The Terex group has unveiled a very strong third quarter performance, with sales for the group up 38 percent compared to third quarter 2003. Year to date sales for the nine months to September 30th rose by 26 percent.

The group’s net profit after tax rose by 210 percent for the quarter and for the nine months went from a loss of $25 million in 2003 to a profit of $107 million this year.

Crane sales in the third quarter were up 15 percent on last year, with the year to date revenues up only marginally, however, the crane division is on target to meet or exceed last years billion dollar sales revenues, against a plan of between 800 and $900,000 year end 2003 disposals and some non reoccurring business activities.

The Crane division saw operating profit slip by 38 percent in the third quarter and by eight percent for the nine months. Due to higher SGA costs combined with significant material cost increases particularly with steel and tyres

Steve Filipov, President Terex Cranes said.” While our tower crane business has demonstrated significant year over year growth in revenue and profit, our North American crane business remains difficult. We have seen demand in certain crane products begin to return, and are generally optimistic about the longer term prospects of the crane business”

“However, our near term challenge is to work through supplier issues, most notably with respect to steel and tires. In order to offset the pressure from vendor pricing, we will be initiating a four to six percent price increase (depending on make and model) effective November first for all product lines worldwide in order to offset these costs. In addition, we will be adding a surcharge for certain components such as unusual counterweights, where we have seen a 50 percent or more increase in prices from our vendors.

We will continue to focus on cost containment and are positioning our franchise to be a major participant in the future crane market recovery.” Filipov added,

Genie aerials saw revenues for the third quarter rise by an amazing 56 percent, with year to date sales up 37 percent and likely to reach around $900,000 for the full year.

Backlogs for both the cranes and the access divisions were up massively on 2003 reflecting the improving market

The aerial division which has in the last 12 months yielded the highest profits at Terex in terms of percentages of revenue, saw its gross margins hit by higher material costs, with gross margins for the third quarter dropping from 22.4 percent to 17.7 percent. However the significant jump in revenues combined with a tight hold on overheads yielded an almost 45 percent increase in operating profits.

Genie has recently announced a six percent price increase on all shipments from January first 2005. Unlike competitor JLG which has increased prices on at least two occasions since March, Genie has chosen to hold prices for the year.

"We continue to see strong demand for our products across the board", said Bob Wilkerson, President of Terex Aerial Work Platforms. "Our sales were up meaningfully compared to the third quarter of 2003. Again, we experienced cost pressures from many of our suppliers, particularly steel, which negatively impact our gross margin".

"We continue to look forward with optimism, and we expect our favorable performance trend to continue, especially given the continued strengthening of order backlog. Many of our customers have reported meaningful rental rate and utilisation increases, both key drivers for demand and a very positive backdrop for our optimistic outlook".
"We have honored our pricing agreements with our customers for 2004, prices that were negotiated in good faith back in the fall of 2003. We have announced our intention to initiate price increases of 6% for all products shipped on or after January 1, 2005. The industry as a whole is dealing with margin pressure as a result of the sharp increase in steel pricing, and we expect our relative pricing position to remain about the, same" he added.

Ronald M. DeFeo, Terex’s Chairman and Chief Executive Officer said "Many of our businesses are experiencing a sharp increase in demand, and we continue to tackle the challenges that arise in meeting this strong demand acceleration. That being said, we still have a sizable percentage of our businesses that have not yet actively participated in the economic recovery, as they are typically later-cycle businesses..Our road building, heavy construction, utility and North American cranes businesses, which account for approximately 35% of our revenues year to date, but very little of our profits, are poised to meaningfully contribute in 2005 and beyond...But as I have previously stated, these times are not without their challenges" added Mr. DeFeo. "Supplier issues, particularly steel, continue to have an impact on our business. We estimate that steel cost increases alone negatively affected our operating results by roughly $31 million in the third quarter. That equates to a margin impact of 2.5% overall".

"We are behind the curve in certain businesses from a pricing perspective, but we have aggressive plans to catch up. We are expecting to see the impact of some already announced increases in the near term, and between increased prices and better purchasing, we expect 2005 will be a more normal year where volume leverage can be turned into margin improvements"