26.04.2012

Modest lift at Terex Cranes

Terex Cranes has reported its first quarter results which show revenues were up over five percent as profits returned.

Total revenues for the quarter were $419.4 million, 5.3 percent higher than in the same quarter last year, largely due to strong Rough Terrain demand in North America and solid sales of Franna pick & carry cranes in Australia. Conversely European crawler crane sales, which are typically big ticket items, were slow.

Operating income for the period was $7.3 million, compared to a loss in the same quarter last year of $22.5 million. The company’s backlog at the end of March was $765 million, compared to just over a billion at this time last year, but seven percent higher than it was at the start of this year.

Terex as whole reported revenues of $1.82 billion – 45 percent higher than in the same quarter last year, although a significant part of this was the addition of Demag revenues – without this the increase would have been closer to 16 percent. Pre-tax profits were $23 million double that of last year when the company reported $11.7 million – most of the improvement came from existing operations.

The Demag business generated revenues of $367.5 million, with an operating profit of $2.9 million, the backlog as of the end of March was $468 million – five percent higher than it was at the start of the year.

Chief executive Rob DeFeo said: “We are pleased that 2012 is developing as planned. While we still have a significant amount of work ahead of us, we have taken a solid step towards our margin expansion and cash flow objectives for the year. In fact, this is the first time in almost 10 years that we have generated positive operating cash flow in the first quarter, excluding the tax payment made this quarter as a result of the divestiture of the Mining business. We have traditionally used cash in operations in the first quarter, but our improved profitability combined with progress in factory efficiency and inventory focus, helped deliver our improved cash flow.”

“Overall, net sales were consistent with our expectations. North America was a strong market for most product categories and we believe the global business environment continues to support growth and increased equipment sales. Although the Chinese market has softened somewhat, this was not unexpected and was built into our expectations for the year.”

“We continue to be cautious about European markets where economic activity has been strong in some areas and weak in others. In terms of segment performance, we are encouraged by the performances of our Aerial Work Platforms and Materials Processing businesses, both of which achieved operating margins in the high single digits giving us confidence that we will achieve our 2012 targets. Our Cranes business improved significantly versus the prior year, with a positive operating margin of approximately five percent in the quarter versus a negative four percent last year on similar sales levels. Our Material Handling and Port Services (Demag) segment’s operating results were in line with what we anticipated for the quarter.”

Vertikal Comment

Terex is probably doing as well as it can given the current economic climate in Europe. Its new All Terrain cranes appear to be getting a much more positive reception than some expected, and this should gather pace as the units start to appear on more job sites. It is also making a lot more ‘noise’ in the tower crane market which is beginning to emerge from a dreadful downturn in most parts of the world.

The company has an exceptionally strong position in the big lattice crane market and always benefits when demand for these cranes is strong. Recent uncertainties over the future of nuclear power and other major infrastructure developments, not to mention the economic situation which has had a lagging effect on larger cranes, have unquestionably affected its revenues and backlog, however this is likely to bounce back with a vengeance as wind turbine technology moves to larger and higher lifts, and delayed power station, petrochemical and other projects come on stream.

Terex cranes is not wasting time though, a great deal of lower level restructuring is going on under the new management team and while 2012 might not be the company’s strongest year on record, it should do reasonably well and come out of the year on a very strong upward trend.